UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38586
RUBIUS THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
46-2688109
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
399 Binney Street, Suite 300
Cambridge, Massachusetts
(Address of principal executive offices)
02139
(Zip code)
(617) 679-9600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per share
RUBY
The Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of common stock held by non-affiliates of the registrant computed by reference to the price of the registrant’s common stock as of June 30,
2021, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately (based on the last reported sale price on the NASDAQ Global
Select Market as of such date) was $851.6 million.
As of January 31, 2022 the registrant had 90,080,520 shares of common stock, $0.001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference certain information from the registrant’s definitive Proxy Statement for its 2021 annual
meeting of shareholders, which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the
registrant’s fiscal year end of December 31, 2021. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not
deemed to be filed as part of this Form 10-K.
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2
Rubius Therapeutics, Inc.
Table of Contents
Page No.
PART I
Item 1.
Business
7
Item 1A. Risk Factors
54
Item 1B. Unresolved Staff Comments
118
Item 2.
Properties
118
Item 3.
Legal Proceedings
118
Item 4.
Mine Safety Procedures
118
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
119
Item 6.
Reserved
120
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
121
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
140
Item 8.
Financial Statements and Supplementary Data
141
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
168
Item 9A. Controls and Procedures
168
Item 9B. Other Information
168
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
168
PART III
Item 10. Directors, Executive Officers and Corporate Governance
169
Item 11. Executive Compensation
169
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
169
Item 13. Certain Relationships and Related Transactions and Director Independence
169
Item 14. Principal Accountant Fees and Services
169
PART IV
Item 15. Exhibits and Financial Statement Schedules
170
Item 16. Form 10-K Summary
173
Signatures
174
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3
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements, which reflect our current views with respect
to, among other things, our operations and financial performance. We intend these forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions. All statements
other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our
strategy, future operations, future financial position, future revenue, projected costs, prospects, plan, objectives of
management, results of preclinical studies or clinical trials and expected market growth are forward-looking statements.
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 involve
various risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated in these
statements. Forward-looking statements in this Annual Report on Form 10-K include, but are not limited to, statements
about:
●
expectations regarding the success, cost and timing of our product development activities and clinical trials, including
statements regarding the timing of initiation, enrollment in and completion of studies or trials and related preparatory
work, the period during which the results of the trials will become available, and our research and development
programs;
●
plans to advance product candidates into or successfully complete any clinical trial;
●
beliefs about data results and analyses, including what early data demonstrates or suggests, as well as expectations
regarding the safety and efficacy, and overall potential and advantages, of our product candidates and our expected
timing for data;
●
beliefs that we have the potential to significantly expand our manufacturing capabilities and plan to stage additional
investments based on future needs and in preparation for potential pivotal trial and eventual commercialization;
●
beliefs that we can obtain or manufacture adequate and timely supply of our product candidates for clinical trials or for
commercial use, if approved;
●
expectations regarding the operation of our manufacturing facility and any plans for further renovation or expansion;
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beliefs regarding and plans for our identified research priorities to advance our technologies;
●
plans to license additional intellectual property relating to our product candidates and expectations that we will be able
to comply with our existing license agreements;
●
expectations that our cash will be sufficient to fund our operating expenses and capital expenditure requirements into
the second quarter of 2023 and that we will be able to obtain funding for our operations, including funding necessary
to complete further development, clinical trials and, if approved, commercialization of our product candidates;
●
beliefs about the intellectual property rights of others and our ability to commercialize our products in light of such
third-party rights;
●
beliefs about developments relating to cellular therapies, including red blood cell therapies;
●
expectations for competing therapies that are or become available;
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●
plans for the commercialization of, and expectations for the market for, our product candidates, if approved;
●
our plans to research, develop and commercialize our product candidates;
●
our plans to attract collaborators with development, regulatory and commercialization expertise;
●
expectations to enter into agreements with third parties in connection with the commercialization of our product
candidates and any other approved product;
●
beliefs about the size and growth potential of the markets for our product candidates, and our ability to serve those
markets;
●
expectations for the impact of global economic and political developments on our business and on our clinical trials,
including economic slowdowns or recessions that may result from the ongoing COVID-19 pandemic;
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expectations for the rate and degree of market acceptance of our product candidates, if approved;
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anticipated regulatory developments in the United States and foreign countries;
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expectations that we will be able to contract with third-party suppliers and manufacturers and their ability to perform
adequately;
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estimates for expenses, future revenue, capital requirements and needs for, and ability to obtain, additional financing;
●
the expected impact of laws and regulations and legislative and regulatory changes;
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our expectations regarding our ability to obtain and maintain intellectual property protection for our product
candidates; and
●
our expectations regarding our transition to a large accelerated filer and our loss of emerging growth company status.
All of our forward-looking statements are as of the date of this Annual Report on Form 10-K only. In each case, actual
results may differ materially from such forward-looking information. We can give no assurance that such expectations or
forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the
risk factors or risks and uncertainties referred to in this Annual Report on Form 10-K or included in our other public
disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and
Exchange Commission, or the SEC, could materially and adversely affect our business, prospects, financial condition and
results of operations. Therefore, you should not place undue reliance on forward-looking statements. Except as required by
law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes
in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring
after the date of this Annual Report on Form 10-K, even if such results, changes or circumstances make it clear that any
forward-looking information will not be realized. Any public statements or disclosures by us following this Annual Report
on Form 10-K that modify or impact any of the forward-looking statements contained in this Annual Report on Form 10-K
will be deemed to modify or supersede such statements in this Annual Report on Form 10-K.
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Summary of the Material Risks Associated with Our Business
Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These
risks include, but are not limited to, the following:
●
we have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in
the future;
●
we will require additional capital to fund our operations and if we fail to obtain necessary financing, we will not be
able to complete the development and commercialization of our product candidates;
●
we have a limited operating history, which may make it difficult to evaluate our technology and product development
capabilities and predict our future performance;
●
our business is highly dependent on the success of our initial product candidates targeting cancer and autoimmune
diseases. All of our product candidates will require significant additional nonclinical and clinical development before
we can seek regulatory approval for and launch a product commercially;
●
the successful development of cellular therapeutics, such as our investigational Red Cell Therapeutics, or RCTs, is
highly uncertain;
●
our RCT product candidates are based on a new technology, which makes it difficult to predict the time and cost of
development and of subsequently obtaining regulatory approval, if at all;
●
the FDA, the EMA and other regulatory authorities may implement additional regulations or restrictions on the
development and commercialization of our product candidates, which may be difficult to predict;
●
clinical development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional
costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization
of any product candidates;
●
our planned clinical trials or those of our future collaborators may reveal significant adverse events not seen in our
preclinical or nonclinical studies and may result in a safety profile that could inhibit regulatory approval or market
acceptance of any of our product candidates;
●
positive results from early preclinical studies or early clinical trials of our product candidates are not necessarily
predictive of the results of later preclinical studies and any future clinical trials of our product candidates;
●
if we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed
or otherwise adversely affected;
●
cellular therapies are a novel approach and negative perception of any product candidates that we develop could
adversely affect our ability to conduct our business or obtain regulatory approvals for such product candidates;
●
we are subject to numerous laws and regulations, noncompliance with which would subject us to possible legal or
regulatory action;
●
the effects of health epidemics like the ongoing COVID-19 pandemic, including recurring surges and waves of
infection and emergent variants of the coronavirus, in regions where we, or the third parties on which we rely, have
business operations could adversely impact our business, including our clinical supply, preclinical studies, ongoing
and planned clinical trials;
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6
●
if we are unable to obtain and maintain patent protection for any product candidates we develop or for our RED
PLATFORM, our competitors could develop and commercialize products or technology similar or identical to ours,
and our ability to successfully commercialize any product candidates we may develop, and our technology may be
adversely affected;
●
we intend to rely on patent rights and the status of our product candidates, if approved, as products eligible for
exclusivity under the Biologics Price Competition and Innovation Act (BPCIA). If we are unable to obtain or maintain
exclusivity from the combination of these approaches, we may not be able to compete effectively in our markets;
●
third-party claims of intellectual property infringement, misappropriation or other violation against us, our licensors or
our collaborators may prevent or delay the development and commercialization of our product candidates, RED
PLATFORM and other technologies;
●
our product candidates are uniquely manufactured. If we or any third-party manufacturers that we may engage
encounter difficulties in manufacturing our product candidates, our ability to provide supply of our product candidates
for clinical trials or our products for patients, if approved, could be delayed or stopped, or we may be unable to
maintain a commercially viable cost structure;
●
we have acquired and are establishing our own manufacturing facility and infrastructure in addition to or in lieu of
relying on contract manufacturing organizations for the manufacture of our product candidates, which is costly, time-
consuming, and which may not be successful; and
●
we do not have extensive experience as a company managing a manufacturing facility.
The summary risk factors described above should be read together with the text of the full risk factors below and in the
other information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the
related notes, as well as in other documents that we file with the SEC. If any such risks and uncertainties actually occur,
our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks
summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not
currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business,
prospects, financial condition and results of operations.
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7
PART I
Except where the context otherwise requires or where otherwise indicated, the terms “Rubius,” “Rubius Therapeutics,”
“we,” “us,” “our,” “our company,” “the company,” and “our business” refer to Rubius Therapeutics, Inc. and its
consolidated subsidiary.
Solely for convenience, the trademarks, service marks and trade names referred to in this annual report are listed without
the ®, (sm) and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the
applicable licensors to these trademarks, service marks and trade names.
Item 1. Business
Overview
Rubius Therapeutics is a clinical-stage biopharmaceutical company that is biologically engineering red blood cells, or
RBCs, to develop an entirely new class of cellular medicines called Red Cell Therapeutics, or RCTs, for the treatment of
cancer and autoimmune diseases. Our company was built upon the research and findings of Flagship Pioneering’s Venture
Labs innovation team along with the discoveries of Professors Harvey Lodish and Hidde Ploegh of the Whitehead Institute
for Biomedical Research at MIT. Based on our vision that human red blood cells are the foundation of the next significant
innovation in medicine, we have developed a programmable and highly versatile platform, which we call the RED
PLATFORM, to biologically engineer and culture allogeneic red blood cell therapies that enable multiple applications, or
modalities. We believe a key advantage of our platform is that, once a modality is validated, we increase the likelihood of
success for all the programs within that modality, underscoring the broad potential of the RED PLATFORM to help
patients.
2021 Highlights
In 2021, we demonstrated strong execution across our pipeline of RCTs, as highlighted below.
Broad Immune Stimulation for the Treatment of Cancer
RTX-240
In March 2021, we announced initial clinical data from the ongoing Phase 1/2 clinical trial of RTX-240 in advanced solid
tumors that we believe provides clinical validation of the RED PLATFORM’s potential ability to engineer red blood cells
to mimic the human immune system and stimulate adaptive and innate immunity to generate clinical responses in cancer
patients with refractory disease. RTX-240 is an allogeneic, off-the-shelf cellular therapy product candidate that is
engineered to simultaneously present hundreds of thousands of copies of the costimulatory molecule 4-1BB ligand (4-
1BBL) and IL-15TP (trans-presentation of IL-15 on IL-15Rα) in their native forms. RTX-240 is designed to broadly
stimulate the immune system by activating and expanding both NK and CD8+ memory T cells to generate a potent anti-
tumor response.
The data reported in March 2021 included initial safety (n=16) and efficacy (n=15) data from the RTX-240 Phase 1/2
clinical trial in relapsed/refractory or locally advanced solid tumors. These data were also presented at the American
Association for Cancer Research Virtual Annual Meeting in April 2021. Five dose cohorts were completed at the time of
the data cutoff on February 28, 2021, and the data analysis was based on RECIST v1.1. criteria. We observed the
following:
●
no treatment-related Grade 3 or Grade 4 adverse events or dose limiting toxicities;
●
most common treatment-related Grade 1/2 adverse events were fatigue, chills, nausea, decreased appetite and
arthralgias. There was a single Grade 1 event of liver toxicity;
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8
●
two responses were observed in the study including a confirmed partial response, or PR, in a patient with metastatic
anal cancer, and an unconfirmed PR in a patient with metastatic uveal melanoma. Both patients’ diseases had
progressed on prior anti PD-L1 and anti-PD-1 therapy, respectively;
●
stable disease, or SD, was observed in six patients, including four patients with stable disease for at least 12 weeks in
non-small cell lung cancer, soft tissue sarcoma, pancreatic cancer and prostate cancer; and
●
pharmacodynamic effects showed the activation and/or expansion of the key NK and/or T cells types in all patients
(n=16).
Further, preliminary data from the single agent solid tumor arm of our RTX-240 Phase 1/2 study that we reported in March
2021 showed early evidence of favorable immune-permissive changes in the tumor microenvironment, or TME, in three
out of four patient biopsies, including increased expression of PD-L1 and/or increased ratio of M1/M2 macrophages after
treatment with RTX-240, suggesting single-agent RTX-240 is able to induce changes in the TME that have been associated
with response to checkpoint inhibition.
As a result of no dose-limiting toxicities, or DLTs, and a clear NK cell number dose response and other pharmacodynamic
effects, we are continuing to dose escalate the single-agent RTX-240 solid tumor trial and expect to report updated clinical
results for this trial, along with an integrated clinical development plan that includes Phase 2 expansion cohorts, during the
first quarter of 2022.
In March 2021, we presented preliminary trafficking data from the first acute myeloid leukemia, or AML, patient in the
Phase 1 arm of the ongoing RTX-240 clinical trial for the treatment of relapsed/refractory AML, showing accumulation of
activated, granzyme B-positive NK and T cells in the bone marrow, which is the site of disease in AML. We plan to report
additional results from this arm of the ongoing RTX-240 clinical trial during the first quarter of 2022.
In June 2021, we began dosing patients in the arm of our RTX-240 clinical trial that is evaluating RTX-240 as a
combination therapy with pembrolizumab for the treatment of patients with relapsed/refractory or locally advanced solid
tumors. We believe that RTX-240, with its mechanism of action as a broad immune agonist, may have synergy with
immune checkpoint inhibition and could potentially overcome resistance to PD-1 inhibition. We expect to report initial
clinical results from this arm of the ongoing Phase 1/2 clinical of RTX-240 during the second half of 2022.
In July 2021, the paper entitled “Anti-Tumor Effects of RTX-240: An Engineered Red Blood Cell Expressing 4-1BB
Ligand and Interleukin-15” was published in the peer-reviewed journal Cancer Immunology, Immunotherapy. The
publication highlights preclinical findings and demonstrates that, consistent with the data reported in March 2021, RTX-
240 activates and expands CD8+ T cells and NK cells in vitro and in vivo generating potent anti-tumor activity in both a
colorectal and melanoma model.
RTX-224
RTX-224 is an allogeneic cellular therapy that is engineered to express hundreds of thousands of copies of 4-1BBL and
interleukin-12, or IL-12, on the cell surface. RTX-224 is designed as a broad immune agonist of both adaptive and innate
responses, designed to activate CD8+ and CD4+ T cells, activate and expand NK cells, and promote antigen presentation.
It is expected to produce a broad and potent anti-tumor T cell response and an innate immune response and have anti-tumor
activity in those tumor types with known sensitivity to T cell killing, including tumor types with high mutational burden,
PD-L1 expression and known responsiveness to checkpoint inhibitors. The combination of IL-12 and
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4-1BBL has the potential to broadly induce an immune response in patients with solid tumors and may serve as the bridge
between the innate and adaptive immune systems.
In November 2021, we presented preclinical data for RTX-224 at the Society for Immunotherapy of Cancer’s 36th Annual
Meeting, showing that RTX-224 activated immune cells in the spleen and blood, leading to their trafficking into the tumor
microenvironment to deliver an anti-tumor effect in our preclinical models.
The IND for RTX-224 was cleared in 2021, and, in January 2022, we began dosing patients in the Phase 1/2 clinical trial of
RTX-224 for the treatment of patients with certain relapsed/refractory or locally advanced solid tumors, including non-
small cell lung cancer, cutaneous melanoma, head and neck squamous cell carcinoma, urothelial (bladder) carcinoma and
triple-negative breast cancer.
Antigen-Specific Immune Stimulation for the Treatment of Cancer
RTX-321
RTX-321 is an allogeneic, off-the-shelf artificial antigen presenting cell, or aAPC, therapy product candidate that is
engineered to induce a tumor-specific immune response by expanding antigen-specific T cells. RTX-321 expresses
hundreds of thousands of copies of an HPV 16 peptide antigen bound to major histocompatibility complex class I proteins,
the costimulatory molecule 4-1BBL and the cytokine IL-12 on the cell surface to mimic human T cell-APC interactions. In
our Investigational New Drug, or IND, application filing, we included frozen drug substance for the first time as part of the
manufacturing process, allowing for a truly off-the-shelf cellular therapy product candidate with a potential shelf life of
several years.
In May 2021, a peer-reviewed manuscript about RTX-321 was published in Nature Communications, highlighting
preclinical findings demonstrating that the surrogate model of RTX-321 induced a broad immune response, epitope
spreading and memory formation in preclinical studies.
We began dosing patients in the Phase 1 clinical trial of RTX-321 in April 2021. As of January 2022, there have been no
DLTs observed and we are therefore continuing to dose escalate the trial. We expect to report initial results from the trial
during the second half of 2022.
Antigen-Specific Immune Tolerance for the Treatment of Autoimmune Diseases
RTX-T1D (Type 1 Diabetes)
In December 2021, we shared preclinical proof of concept data, demonstrating tolerance induction and the potential for
bystander suppression in two stringent type 1 diabetes preclinical models. Specifically, we established efficacy in the
BDC2.5 adoptive transfer model with data showing that an RTX-T1D surrogate reversed established inflammation and
induced two types of regulatory T cells, resulting in protection against re-challenge. Moreover, the data showed that
repeated dosing could extend duration of disease protection to 5 months (the endpoint of the study). We also showed early
efficacy in the non-obese diabetic mouse, or NOD, preclinical model. Results at 25 weeks showed that a mouse surrogate
of RTX-T1D that delivered only two antigens delayed disease. As disease in NOD mice is caused by many autoantigens,
these results demonstrate the potential for bystander suppression. These findings are potentially translatable beyond type 1
diabetes to multiple autoimmune diseases, including Rubius other high priority target indications such as multiple sclerosis
and celiac disease.
We intend to present these results in a peer-reviewed setting and expect to provide details of our development timeline later
in 2022.
Manufacturing
In 2021, we achieved the following manufacturing milestones:
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●
Increased cells produced per batch in 50L bioreactors by four times that of 2020, enabling uninterrupted clinical
supply for three Phase 1 arms of the RTX-240 clinical trial and for the Phase 1 RTX-321 trial; and
●
Introduced frozen drug substance for RTX-321 and RTX-224, potentially enabling inventory storage for more than two
years.
●
Additional accomplishments include:
o
Greater than 90% lot success rate for RTX-240 and RTX-321 clinical supply;
o
Hundreds of doses administered across all three arms of our RTX-240 Phase 1/2 trial and our RTX-321 Phase
1 trial;
o
High transduction efficiency, with greater than 90% of cells transduced with therapeutic proteins; and
o
Highly consistent protein expression (dual or triple).
We have the potential to significantly expand our manufacturing capabilities and plan to stage additional investments based
on future needs and in preparation for potential pivotal trials and eventual commercialization.
Our Approach
Utilizing Red Blood Cells to Create Cellular Therapies
RBCs represent the first example of a transformative cellular therapy as physicians have been administering blood to
patients since the early 1800s. We believe that RCTs have the potential to transform the cellular therapy landscape and may
avoid many of the complications and risks often associated with earlier generation cellular therapies since RCTs have low
levels of nucleated cells and therefore have a low risk of oncogenicity. Given the well-characterized and confined
biodistribution of RBCs to the vasculature and spleen, RCTs represent the ideal cell type to enable direct cell-cell
interaction with immune system cells also located in the vasculature and spleen.
The RED PLATFORM Enables Multiple Modalities in Cancer and Autoimmune Diseases
We currently have three modalities that we are actively developing – broad and antigen-specific immune system
stimulation for the treatment of cancer and immune modulation to induce antigen-specific tolerance for the treatment of
autoimmune diseases. We believe that once we create and validate a modality, it will allow for the creation of multiple
medicines within such modality.
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Cancer: RCTs are engineered to express combinations of co-stimulatory molecules, cytokines and/or other molecules on
the cell surface to activate and expand different components of the immune system. We believe our RCTs have the
potential to offer the following advantages:
Broad immune stimulation: Our RCT product candidates are engineered to broadly activate the adaptive and innate
immune systems through immune cell agonists to attack and kill tumors. RCTs can express combinations of co-
stimulatory ligands, cytokines and/or other molecules and are designed to replicate how the immune system naturally
activates effectors, for example, T and NK cells. Because red blood cells are largely restricted to the vasculature and
spleen, these product candidates may have limited side effects, as observed in our preclinical studies, with a potential
for a broad therapeutic window. We believe RCTs have the potential for wide therapeutic application across a range of
solid tumors and hematologic cancers. This approach has been de-risked with the initial results from the RTX-240
single-agent Phase 1 trial, and we believe the increased likelihood of success extends to our second broad immune
stimulation program, RTX-224, which entered the clinic in January 2022.
We are currently exploring several additional broad immune stimulation modalities in cancer. For example, we are
investigating additional payloads and proteins for enhanced potency and are evaluating how we can use our cells to
activate dendritic cells with or without an antigen.
Tumor antigen-specific immune activation via cell surface antigen presentation: We are also developing RCT
product candidates to simultaneously express three signals on the cell surface: (1) a tumor-specific antigen in the
context of major histocompatibility complex, or MHC, molecule, (2) a co-stimulatory ligand and (3) a cytokine. These
cells, termed artificial antigen presenting cells, or aAPCs, have a dual mechanism of action: they are designed to
induce both a tumor-specific immune response by expanding tumor antigen-specific T cells, as well as broad immune
activation capable of eliciting an anti-tumor response in vivo. RTX-321, our lead aAPC program, is engineered to
express an HPV 16-associated peptide bound to MHC class I, 4-1BBL and IL-12 on the cell surface to mimic human T
cell-APC interactions. We plan to follow RTX-321 with a range of programs that could target viral antigens, shared, or
over-expressed cancer-associated antigens and personalized neoantigens.
For our antigen-specific approach in cancer, we are also developing a next generation artificial antigen-presenting cell
approach with a loadable MHC Class I molecule that allows for presentation of multiple antigens on a single RCT and
creates a library of HLA types to broaden the number of patients we may reach with our aAPCs.
Our ability to modulate the immune system extends beyond oncology.
Autoimmune Diseases: RCT product candidates are engineered to express specific autoantigens that are the target of
immune responses which cause autoimmune disease. This approach takes advantage of the natural tolerogenic properties of
RBCs and enables us to potentially add further modifications to enhance the ability of the RCT to suppress, modulate or
eliminate disease-causing cells. We have generated data in two stringent preclinical models of Type 1 diabetes that
collectively demonstrate antigen-specific tolerance induction with the potential for bystander suppression. This proof of
concept can potentially be extended beyond Type 1 diabetes to other T cell-mediated diseases, such as multiple sclerosis
and celiac disease, as well as to the prevention of undesired immune responses to enzyme replacement therapy and gene
therapy.
Additionally, we are exploring how we can arm RCTs with other immunomodulators and targeting moieties to further
enhance their ability to induce tolerance.
Advantages of Our Proprietary RED PLATFORM
Our discoveries and innovations in genetic engineering and cell culture processes support our belief that RBCs have the
potential to serve as a foundation for the creation and development of a new class of cellular therapies. The RED
PLATFORM and RCTs are designed to confer desirable attributes for a next generation cellular therapy, including the
following:
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●
Broad therapeutic applications: We believe we can engineer hundreds of RCTs to have therapeutic potential across
many areas, including cancer and autoimmune diseases. RCTs can be engineered to express co-stimulatory molecules,
cytokines and other proteins for enhanced potency, on the cell surface, including combinations of proteins to activate
and expand T cells, NK cells or antigen-specific T cells for the potential treatment of cancer; or to express
autoimmune disease-associated antigens within or on the cell surface, along with proteins that suppress immune
responses, to induce immune tolerance for the potential treatment of autoimmune diseases. While the focus of our
RED PLATFORM is currently in cancer and autoimmune diseases, we believe the versatility of our platform can be
applied to other therapeutic areas.
●
Advantageous tolerability: RCTs have low levels of nucleated cells and do not divide following administration to
patients. As a result, we believe our RCT product candidates potentially pose less risk than other cellular therapies,
which have caused cytokine release syndrome, neurotoxicity and death. In addition, based on the low level of
nucleated cells in our product candidates, we believe the potential risk of inducing oncogenicity is low compared with
other nucleated cellular therapies.
●
Allogeneic: RCTs are produced from O negative donor blood stem cells, which can be administered to approximately
95% of the world’s population, and are therefore allogeneic, ready-to-use cellular therapies that we believe will be
tolerated by many patients.
●
Predictable biodistribution: RBCs normally reside in the vasculature and the spleen and do not extravasate in
appreciable numbers into other healthy tissues. Biodistribution into the spleen allows for RCTs designed to stimulate
the immune system to interact with the large number of immune cells that reside there and promote an attack against
cancer. Recent evidence published in scientific journals suggests that anti-tumor T cells with the potential to be
activated to attack tumors may primarily reside in the peripheral blood and spleen – the two locations of action of
RCTs as shown in our preclinical studies. Following RCT engagement with these anti-tumor T and NK cells, the
activated effector cells are expected to traffic to the tumor microenvironment. We anticipate that this predictable
biodistribution will allow RCTs to generate desired clinical activity as a result of the antitumor T and NK cell-
interactions in the peripheral blood and spleen, while avoiding off-tissue engagement in other organs that can lead to
toxicities.
●
Convenience: Our medicines are administered in an outpatient clinic and do not require pretreatment or
lymphodepletion and there are no required post-treatment hospitalizations.
●
Efficient product engine: Our programmable RED PLATFORM allows for repeated generation of product
candidates. We believe that once we create and validate a therapeutic modality, it will allow for the intentional
generation of multiple medicines in each modality. By modifying the gene or genes that encode biotherapeutic proteins
within the cell or on the cell surface of RCTs, we are able to rapidly develop new RCTs designed to treat different
diseases. Our uniform approach should also enable us to leverage common chemistry, manufacturing and controls, or
CMC, and toxicology data packages to shorten development timelines.
●
Scalable and flexible manufacturing: We manufacture RCTs in bioreactors that we intend to scale over time to
support multiple ongoing clinical trials and, ultimately, potential commercial production. A single donor is expected to
support the manufacturing of hundreds to thousands of doses, depending on the therapeutic application. As a result, we
expect the cost of goods sold for RCTs to eventually be significantly lower than existing cellular therapies, such as
CAR-T therapy. We manufacture RCTs using well-characterized lentiviral vectors. In the case of
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RTX-321 and RTX-224, with the introduction of frozen drug substance, the product candidate has a potential shelf life
of several years, making it a truly off-the-shelf cellular therapy.
Our Strategy
Our vision is to create life-changing, allogeneic cellular therapies for patients with severe diseases. To achieve our vision,
we are executing a strategy with the following key elements:
Establish RCTs as a new class of cellular medicines, demonstrating their potential across two initial product
categories: cancer and autoimmune diseases. We apply a rigorous and capital-efficient approach to prioritize our product
candidate pipeline, focusing on unmet need, feasibility, speed to proof-of-concept, cost to manufacture, validated endpoints
and commercial potential.
Pursue accelerated paths to marketing authorization. We are focusing on indications with high unmet needs that may
allow us to pursue accelerated paths to product registration.
Build a leading, fully integrated cellular therapy company. We have built a fully integrated platform company well-
positioned to advance our current pipeline of RCTs from discovery, research and platform innovation through clinical
development, which we believe will enable us to move with speed and incorporate new learnings as we advance the
platform, and to nimbly respond to emerging opportunities. We have built and customized each capability to deliver on our
entirely novel platform and modality approach.
Further strengthen our position as the pioneer of RCTs through continuous platform expansion and improvement.
Our proprietary RED PLATFORM enables rapid and repeatable parallel generation of therapeutic candidates. Since
platform inception, we have biologically engineered more than 1,000 different therapeutic proteins, underscoring the highly
versatile and programmable nature of the platform. In March 2021, we disclosed initial clinical results from the single-
agent RTX-240 Phase 1/2 clinical trial in advanced solid tumors, which we believe provide clinical validation of the RED
PLATFORM. We continue to invest in enhancing our platform and plan to explore new payloads and proteins on or within
our cells, introduce a loadable MHC platform to extend the benefit of an antigen-specific approach to more patients and
activate dendritic cells as an additional way to activate the immune system. In autoimmune diseases, we believe a T-cell
directed immune tolerance approach is possible with the RED PLATFORM as is adding different immune modulatory and
targeting moieties and preventing undesired immune responses to enzyme replacement therapy and gene therapy.
Expand patient access to RCTs through strategic partnerships. Given the breadth of therapeutic opportunities for
RCTs, we believe select strategic partnerships in a subset of therapeutic areas may provide an attractive avenue for
expanding patient access to RCTs. The global reach and operational expertise within certain pharmaceutical companies
may complement our growing organization in areas such as clinical development and commercialization.
Maintain a strong culture, continuously attract new talent and build the world’s leading center for red blood cell
biology research and engineering. Our headquarters are located in Cambridge, Massachusetts, one of the world’s leading
hubs for biopharmaceutical innovation, providing us access to world-class talent, leading academic investigators and key
opinion leaders. We have leveraged our location to attract scientific talent and experienced, innovative leaders and have
built a strong culture that is focused on realizing our vision. In recognition of this commitment, we were named a 2021 Top
Places to Work by the Boston Globe. In addition, we have a highly experienced cell therapy technical operations team at
our fully owned manufacturing site in Smithfield, Rhode Island, which was named among the 2021 Top 3 Places to Work
in Rhode Island by the Providence Business Journal. We have assembled a network of scientific advisors with deep
expertise in red blood cell biology, process development and manufacturing, as well as clinical experience across the
therapeutic areas that we are initially targeting. We will continue to build a team of employees, advisors and collaborators
with experience in the discovery, development, manufacture and commercialization of cellular therapies.
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Our Broad and Diverse Product Candidate Pipeline
Rubius Therapeutics is advancing a broad pipeline of RCT product candidates. Our current programs are investigating
applications across a range of cancer and autoimmune diseases.
Definitions: aAPC—artificial antigen presenting cell; AML—acute myeloid leukemia; HPV 16+—Human papillomavirus
16 positive; R/R —relapsed/refractory.
Cancer
We believe that RCTs may have broad therapeutic applicability across a range of both solid and hematological cancers and
are developing a pipeline of RCTs that target T cells, NK cells, dendritic cells or combinations thereof that are designed to
then lead to the killing of tumor cells. Our RCT oncology pipeline is noteworthy in the field of immuno-oncology as our
RCTs can be engineered to target cancer in both a non-specific manner (combining T cell agonists and cytokines on the cell
surface) for broad immune system stimulation or in an antigen-specific manner with our artificial antigen-presenting cells
to generate a tumor antigen-specific response. In addition to investigating the single-agent activity of each RCT product
candidate in the clinic, we plan to evaluate our RCTs in combination with other immuno-oncology agents, as well as
standard of care therapy (for example, chemotherapy or signaling inhibitors).
Broad Immune System Stimulation: RTX-240 and RTX-224
RTX-240 and RTX-224 are designed to broadly stimulate and expand adaptive and innate immunity to generate an
antitumor response by expressing agonist natural ligands on the surface of RCTs, replicating how the immune system
naturally functions. RTX-240 and RTX-224 represent two approaches to combination agonist therapy in the clinic.
RTX-240 is designed as a broad immune agonist engineered to express hundreds of thousands of copies of trimeric 4-
1BBL and of IL-15TP, a fusion of IL-15 and IL-15 receptor alpha, on the cell surface. This combination is synergistic and
designed to activate and expand both NK cells and CD8+ memory T cells. The potent activation of the NK cell subset by
RTX-240 leads to a mechanism of action that may target specific tumor types thought to be susceptible to this mechanism,
for example, those immunologically “cold” tumors, with low PD-L1 and low MHC class I expression. We are initially
studying RTX-240 across a range of solid tumor types and in patients with relapsed/refractory acute myeloid leukemia and
expect to utilize the specific biology of both NK and T cells to select appropriate indications for the further development of
RTX-240.
In contrast to RTX-240, RTX-224 is engineered to express hundreds of thousands of copies of 4-1BBL and IL-12 on the
cell surface. It has been designed as a broad immune agonist to induce both a potent anti-tumor T cell response and an
innate immune response and to have anti-tumor activity in those tumor types with known sensitivity to T cell killing,
including tumor types with high mutational burden, PD-L1 expression and known responsiveness to checkpoint
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inhibitors. The combination of IL-12 and 4-1-BBL signaling is designed to potently stimulate the proliferation and
activation of all subsets of effector T cells, as well as cells of the innate response, while limiting the activation of the
regulatory T cell population. IL-12 stimulation of immune cells drives the activation and proliferation of both CD8+ and
CD4+ T cells across the subsets, driving Th1 differentiation, and promotes antigen presentation through the effects of IL-
12 on the innate immune response.
Each of IL-15 and IL-12 has potentially potent effects that will guide the development plans for RTX-240 and RTX-224,
respectively. We believe the synergistic activity between the expression of 4-1BBL and these two key cytokines has the
potential to provide a number of therapeutic benefits:
●
Improved anti-tumor activity through broad and sustained activation of specific elements of the immune system:
Both RTX-240 and RTX-224 drive robust stimulation of the immune system as 4-1BBL and the cytokines (IL-15 or
IL-12) are simultaneously presented in high copy numbers to immune cells, thereby simulating a potent anti-tumor
response. The two cytokines target different cell types and different aspects of the immune system, and these
differential activities will help guide the development of each agent in the clinic. We believe the synergistic activity
between 4-1BBL and the respective cytokine has the potential to result in improved outcomes, either as monotherapy
or in combination with existing immunomodulatory therapies, such as checkpoint inhibitors.
●
Prevention or mitigation of resistance to checkpoint inhibitors: Checkpoint inhibitors block suppression of the
adaptive immune system in cancer patients, allowing activation of T cells to kill cancer cells. There are several
recognized mechanisms of tumor resistance to checkpoint inhibitors including the loss of MHC I expression, low
mutational burden and/or low tumor antigen expression that could be addressed by the NK-activating mechanisms of
action of the RCT product candidates. We therefore believe that both RTX-240 and RTX-224, used either alone or in
combination with other immunotherapies, could prevent the emergence of, or mitigate, resistance to T cell mediated
killing, and these mechanisms could assist in selecting those tumor types most sensitive to each mechanism of action.
●
Clinical potential in tumors that are resistant or refractory to immunotherapy: With both RTX-240 and RTX-224,
we believe that the combination of 4-1BBL and potent cytokine signaling has the potential to promote tumor killing
and provide therapeutic benefits to patients whose disease has progressed on standard immunotherapy approaches,
including checkpoint inhibitors. In addition to the immune effector cell activation effects with these RCTs, the
induction of antigen presentation with IL-12 (in the case of RTX-224) is likely important when addressing tumors that
do not respond to existing immunotherapies due to loss of tumor antigens or low mutational burden, where
augmenting antigen presentation may be an important means to promote anti-tumor immunity.
●
Tolerability: We expect both RTX-240 and RTX-224 to be largely confined to the vasculature and the spleen and thus
not reach specific organs where agonists have demonstrated toxicity (for example, the liver). We believe this makes
these product candidates less likely to have side effects and more likely to have a broad therapeutic window. In
contrast, direct systemic administration of cytokines, including IL-15, IL-12 and other interleukins, as well as 4-1BB
pathway agonism by monoclonal antibodies, has been limited by safety and tolerability concerns in the clinical
development of these approaches, resulting in a narrower therapeutic window. We believe that RTX-240 and RTX-224
may provide greater tolerability and the potential for anti-tumor activity without the toxicities observed with other
immune agonists.
We believe that both RTX-240 and RTX-224 provide potentially transformative approaches to treating patients with solid
or hematological tumors whose disease could respond to immunotherapy. Further, we believe that by demonstrating that
RTX-240 and RTX-224 are working as intended to induce antitumor innate and adaptive immune responses, we can unlock
the potential of the RED PLATFORM across our pipeline of cancer programs.
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RTX-240 in solid tumors
Current therapies and their limitations
Checkpoint inhibitors, such as anti-programmed death protein 1 antibodies, or anti-PD-1 antibodies, act by inhibiting
suppression of the adaptive immune system in cancer patients and have significantly extended survival in multiple solid
tumor types, particularly in patients with advanced cancers. The vast potential of checkpoint inhibitors is highlighted by
market projections that estimate sales for this class of drugs could reach $50 billion in 2024. Despite the encouraging
efficacy of checkpoint inhibition for some patients, overall response rates remain relatively low and range, on average,
from 25% to 50%. Unfortunately, even when a patient’s cancer does respond to treatment, the disease often progresses
within six to 12 months, depending on the cancer and the therapeutic intervention. Clinicians and biopharmaceutical
companies are increasingly evaluating combination therapies to improve response rates and to expand the size of the
population that may benefit. RTX-240 has the potential to overcome resistance to checkpoint inhibitors, given the biologic
effects observed with RTX-240.
Clinical Development of RTX-240 in solid tumors
We are currently enrolling adult patients in a Phase 1/2 clinical trial evaluating RTX-240 in patients with
relapsed/refractory or locally advanced solid tumors. The trial is an open-label, multicenter, multidose, first-in-human dose
escalation and expansion study to determine the safety and tolerability, recommended phase 2 dose and optimal dosing
interval, pharmacology, and antitumor activity of RTX-240. Primary outcome measures include: (1) safety as measured by
incidence of treatment emergent adverse events, or TEAEs; (2) dose limiting toxicities, or DLTs, as determined by
incidence and severity of adverse events; and (3) pharmacodynamic, or PD, effects which are evaluated through changes in
NK and T cell activation states and numbers relative to baseline in both peripheral blood, as well as in on-treatment tumor
biopsies. Secondary outcome measures include: (1) the pharmacokinetics, or PK, of RTX-240 as measured by the number
of RTX-240 cells positive for both 4-1BBL and IL-15 using flow cytometry; (2) determination of immunogenicity of RTX-
240 as measured by incidence of antibodies to RTX-240; (3) antitumor activity of RTX-240 as measured by clinical benefit
rate, or CBR, duration of response, or DoR, progression-free survival, or PFS, overall survival, or OS, time to response, or
TTR, and time to progression, or TTP; and (4) antitumor activity as measured by objective response rate. The study will
include an expansion phase in specified tumor types during the Phase 2 portion of the solid tumor arm.
Initial clinical data for RTX-240 in solid tumors
In March 2021, we reported initial clinical results from the ongoing Phase 1/2 clinical trial of RTX-240 in patients with
relapsed/refractory or locally advanced solid tumors.
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Patient Population
Initial Efficacy Data
Five dose cohorts were completed in the solid tumor trial at the time of the data cutoff on February 28, 2021 (n=16), with
16 patients evaluable for safety (primary outcome measure) and 15 patients evaluable for efficacy (secondary outcome
measure) based on RECIST v1.1.
RTX-240 generated:
●
A confirmed PR in a patient with metastatic anal cancer whose disease had progressed on anti-PD-L1 therapy, with a
54% reduction in the target lesions at the 1e8 dose administered every 4 weeks. Treatment of this patient was ongoing
eight months following the first dose at data cutoff;
●
An unconfirmed PR in a patient with metastatic uveal melanoma whose disease had progressed on anti-PD-1 therapy
with complete resolution of the target hepatic lesion and resolution of 14/15 hepatic lesions at the 1e10 dose
administered every 4 weeks. Treatment of this patient was ongoing 4 months following the first dose at data cutoff;
and
●
Stable disease for at least 12 weeks was observed in 4 additional patients:
o
Non-small cell lung cancer (disease stabilization for 12 weeks with treatment ongoing as of the data cutoff);
o
Soft tissue sarcoma (disease stabilization for 4 months);
o
Pancreatic cancer (disease stabilization for 3 months); and
o
Prostate cancer (disease stabilization for 4 months).
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Initial Safety Data
The most common treatment-related Grade 1/2 adverse events were fatigue (n=4), chills, nausea, decreased appetite and
arthralgias all reported in 3 patients each. There were no treatment-related Grade 3/4 adverse events, no dose-limiting
toxicities and a single Grade 1 event of liver toxicity.
Ten immune-related adverse events, or irAEs, were observed among 5 patients with no reported treatment-related Grade
3/4 irAEs. Grade 2 treatment-related irAEs included pneumonitis (n=1), adrenal insufficiency (n=1) and hypothyroidism
(n=1).
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We believe these data provide clinical validation of our RED PLATFORM and de-risk our oncology pipeline of RCTs. We
plan to report updated clinical results for this trial, along with an integrated clinical development plan that includes Phase 2
expansion cohorts during the first quarter of 2022.
RTX-240 in relapsed or refractory acute myeloid leukemia
Current therapies and their limitations
Acute myeloid leukemia, or AML, is characterized by the uncontrolled proliferation of myeloid blasts. These replace the
bone marrow so that there is minimal production of platelets, red blood cells and neutrophils. It is primarily a disease of the
elderly with a median age of diagnosis of 68 years. In 2017, there were more than 20,000 new cases of AML and more than
10,000 deaths caused by AML in the United States.
Standard first-line AML treatment has been unchanged for over 40 years: a regimen of intensive induction and
consolidation therapy. Some patients experience remission and then a return of the leukemia, which is referred to as
relapsed AML. Refractory AML occurs when patients have received treatment, typically two rounds of chemotherapy, but
the disease does not go into remission. The overall outcome for patients with relapsed/refractory AML remains poor, with
5-year overall survival of approximately 10 percent. Limited therapeutic options currently exist for these patients.
Therefore, many younger patients with AML undergo allogeneic hematopoietic stem cell transplant, or HSCT, which can
be curative if the transplant is successful, but which is associated with notable morbidity and mortality. In 2016, more than
3,500 AML patients underwent allogeneic HSCT in the United States and over 6,200 underwent the procedure in Europe.
Recently, additional therapies have been approved for the treatment of AML, such as venetoclax, gemtuzumab ozogamicin,
CPX-351, and, for patients with specific mutations, midostaurin and enasidenib. Although these therapies improve
response rates and enable more patients to bridge to transplant, overall survival rates remain low.
Clinical development of RTX-240 in AML
Myeloid malignancies like AML have been noted to inhibit NK cell differentiation and cytotoxic potential. The resulting
NK cell dysfunction is thought to contribute to disease progression in AML. Further, treatment response and outcome in
AML is correlated with NK cell function during and after treatment, suggesting that NK cells play a key role in this
setting.
In addition to the general effects of NK cells in AML, the effectiveness of allogeneic HSCT depends on both the killing of
residual tumor by high-dose chemotherapy and on graft versus leukemia effects. NK cells are a critical component of the
graft versus leukemia effect. After bone marrow ablation and allogeneic transplantation, NK cells are the first lymphocyte
population to recover, but their killing and cytokine-secreting functions are limited when compared to the NK cells of
healthy donors. The rate of return and function of NK cells are correlated with treatment outcome post-allogeneic HSCT,
so increasing the number and function of NK cells post-allogeneic HSCT to stimulate the graft versus leukemia effect has
the potential to increase survival in patients receiving allogeneic HSCT for the treatment of AML. As discussed above, 4-
1BBL and IL-15TP induce proliferation and maturation of NK cells, supporting the testing of RTX-240 in both the
relapsed or refractory transplant-ineligible populations, as well as the post-allogeneic HSCT setting. We believe that the
biology of RTX-240 makes it particularly well-suited to the post-allogeneic HSCT setting and also that, given its
preliminary favorable safety profile seen to date and mechanism of action, RTX-240 could provide benefit as a
maintenance therapy for AML patients in remission following chemotherapy or transplantation.
We are currently dosing patients with relapsed or refractory AML in a Phase 1 arm of the RTX-240 clinical trial which
includes patients post-transplant or those who are not eligible for an allogeneic transplant. This Phase 1 clinical trial is an
open-label, multicenter, multidose, first-in-human dose escalation and expansion to determine the safety and tolerability,
recommended phase 2 dose and optimal dosing interval, pharmacology, and antitumor activity of RTX-240. Primary
outcome measures include: (1) safety as measured by incidence of TEAEs; (2) DLTs as determined by incidence and
severity of adverse events; and (3) PD effects which are evaluated through changes in NK and T cell numbers relative to
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baseline. Secondary outcome measures include (1) the PK of RTX-240 as measured by the number of RTX-240 cells
positive for both 4-1BBL and IL-15 using flow cytometry; (2) determination of immunogenicity of RTX-240 as measured
by incidence of antibodies to RTX-240; (3) antitumor activity of RTX-240 as measured by CBR, DoR, PFS, OS, TTR and
TTP; and (4) antitumor activity as measured by overall response rate.
In March 2021, we presented preliminary trafficking data from the first AML patient in the trial, indicating strong
accumulation of activated, granzyme B-positive NK and T cells in the bone marrow, which is the site of disease in AML.
We plan to report additional results from the Phase 1 arm of the ongoing RTX-240 clinical trial for the treatment of
relapsed/refractory AML during the first quarter of 2022.
RTX-240 in combination with pembrolizumab in solid tumors
Clinical development of RTX-240 in combination with pembrolizumab
Combining an immune agonist with a PD-1 checkpoint inhibitor has the potential to prevent a cancer from evading an
immune response. We believe that RTX-240, with its mechanism of action as a broad immune agonist, may act
synergistically with the checkpoint inhibitor pembrolizumab to drive activated T cells and NK cells into the TME and
potentially overcome resistance to PD-1 inhibition. Once activated cells enter the TME, pembrolizumab may enhance their
activity by delaying or preventing T cell exhaustion.
Given the favorable emerging safety profile and promising initial clinical activity reported as part of our initial clinical
results from the ongoing Phase 1/2 monotherapy trial of RTX-240 in advanced solid tumors, we believe that the
combination of RTX-240 with pembrolizumab has the potential to provide significant benefit to patients with disease that
is relapsed or refractory to prior anti-PD-1 or PD-L1 therapy.
We are currently dosing patients in a Phase 1 arm of our ongoing Phase 1/2 clinical trial of RTX-240 in combination with
pembrolizumab for the treatment of patients with relapsed/refractory or locally advanced solid tumors. This Phase 1 arm is
an open label, multicenter, multidose, first-in-human dose-escalation and expansion study designed to determine the safety
and tolerability, pharmacokinetics, maximum tolerated dose and a recommended Phase 2 dose and dosing regimen of RTX-
240 in combination with pembrolizumab in adults with relapsed/refractory or locally advanced solid tumors.
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RTX-224 in solid tumors
Preclinical data for RTX-224
RTX-224 has been shown to drive both T cell and NK cell activation and expansion by simultaneously and proximately co-
expressing IL-12 and 4-1BBL.
Our in vivo studies of a murine surrogate of RTX-224, or mRBC-224, administered subcutaneously in an MC38 colon
cancer mouse model provided evidence in support of RTX-224’s immune activation and tumor control. In this model,
tumor cells were injected to establish growing tumors and then mice were treated with a control mRBC (mRBC-CTRL)
alone, mRBC-224 alone, an anti-PD-1 antibody in combination with mRBC-CTRL, or with mRBC-224 in combination
with an anti-PD-1 antibody. mRBC-224 administered as a monotherapy reduced tumor burden in mice compared to those
treated with mRBC-CTRL with or without an anti-PD-1 antibody. mRBC-224 administered alone resulted in 5/11 tumor
regressions, while mRBC-224 administered in combination with an anti-PD-1 antibody induced 9/11 tumor regressions.
These results are depicted below.
Activity of mRBC-224 in an MC38 Colon Cancer Mouse Model
Dugast, et. al., American Association for Cancer Research; Poster #3256, 2019.
Current therapies and their limitations
While checkpoint inhibitors have revolutionized cancer treatment, their limitations are becoming increasingly evident.
Responses are confined to certain tumor types and only a limited portion of patients are cured. Currently, the challenge in
immunotherapy is to induce responses in refractory tumors, as well as to increase the rate and duration of response.
IL-12 is known to promote antigen presentation on dendritic cells through the effects of IL-12 on the innate responses and
drive the activation and proliferation of all subsets of T cells. This antigen presentation may enable us to target formerly
non-immunogenic tumors by enhancing their immune signature and activating a broader T cell response against the tumor,
potentially leading to a more effective immunotherapy approach. Additionally, by stimulating a broad T cell response
across both CD8+ and CD4+ T cells, RTX-224 could be combined with checkpoint inhibitors with the potential to both
improve and extend responses.
Clinical development of RTX-224
We are enrolling patients in a Phase 1/2 open label, multicenter, multidose, first-in-human dose-escalation and expansion
study to determine the safety and tolerability, pharmacokinetics, maximum tolerated dose and a recommended Phase 2 dose
and dosing regimen of RTX-224 in adult patients with certain relapsed/refractory or locally advanced solid tumors
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including non-small cell lung cancer, cutaneous melanoma, head and neck squamous cell carcinoma, urothelial (bladder)
carcinoma and triple-negative breast cancer. The trial will also assess pharmacodynamic changes in immune cell
populations relative to baseline and anti-tumor activity. The study will include a monotherapy dose escalation phase
followed by an expansion phase in specified tumor types during the Phase 2 portion of the trial.
Tumor antigen-specific immune stimulation
Current therapies and their limitations
Immuno-oncologists are pursuing multiple approaches to target antigens for the purpose of killing cancer cells. CAR-T cell
therapies are an autologous approach that engineers a patient’s own T cells ex vivo to target a specific antigen. However,
CAR-T therapies have shown efficacy in only a limited number of hematological malignancies, can have significant
toxicity and have challenges with manufacturing and scaleup. CAR-NK cells are an alternative approach utilizing the
innate killing properties of allogeneic NK cells expressing antigen receptors by companies such as Nkarta Therapeutics.
Other companies are using different therapeutic modalities to try to expand the number of T cells targeting a particular
antigen in vivo, such as BioNTech SE using RNA and Inovio Pharmaceuticals, Inc. using DNA-based therapy. Despite
these multiple approaches, there remains a need for more effective therapies that target cancer, or cancer-associated
antigens.
We believe our approach to engineering red blood cells as artificial antigen presenting cells has the potential to represent a
significant improvement over previous approaches by increasing the quality and quantity of T cell response through direct
antigen presentation, as well as enabling antigen spread to other tumor antigens through broad anti-tumor immune
stimulation.
RTX-321 for HPV 16-positive tumors
HPV 16 is associated with approximately 70% of cervical cancers, approximately 40% of head and neck squamous cell
carcinoma, or HNSCC, arising in the oropharynx, approximately 25% to 40% of HNSCC arising in other locations and
approximately 80% to 85% of anal cancers. A critical need exists for better treatment options for advanced HPV 16-
positive cancers. The prognosis remains poor for patients with metastatic disease with few treatment options beyond the
first-line setting.
RTX-321 is an allogeneic aAPC therapy product candidate that is engineered to induce a tumor antigen-specific immune
response by expanding tumor antigen-specific T cells. RTX-321 expresses hundreds of thousands of copies of an HPV 16
peptide antigen bound to MHC class I proteins, the costimulatory molecule 4-1BBL and the cytokine IL-12 on the cell
surface to mimic human T cell-APC interactions.
Preclinical data for RTX-321
In May 2021, a peer-reviewed manuscript for RTX-321 was published in Nature Communications, highlighting preclinical
findings demonstrating that the surrogate of RTX-321 induced a broad immune response, epitope spreading and memory
formation in preclinical models. As supported by the data shown in our preclinical studies, RTX-321 has a dual mechanism
of action by not only functioning as an antigen-presenting cell to boost HPV 16 antigen-specific T cell responses, but also
promoting broad immune system stimulation of both innate and adaptive immunity. The ability to engage both arms of the
immune system is expected to provide a robust anti-tumor response by both T cells and innate immune cells, making it
harder for the tumor to escape by immune evasion.
This dual mechanism of action is a key part of the development of epitope spreading, suggesting that RTX-321 may induce
the expansion of an immune response to secondary epitopes, or antigens, that are not expressed on RTX-321, as well as the
development of a potent memory response, potentially enabling the body to remember a cancer’s identity, which is critical
to providing long-term protection from recurrence of the tumor. As shown below, in the experiment on the left, animals that
were cured of their tumor by mRBC-OVA-4-1BBL-IL-12 were immune to rechallenge with the tumor. On the right,
animals that were cured of their tumor by mRBC-OVA-4-1BBL-IL-12 were rechallenged with the
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tumor lacking the original antigen. Here, 6/7 mice had delayed tumor growth and three were cured, indicating the
development of epitope spreading.
Clinical Development of RTX-321
The RTX-321 Phase 1 clinical trial, which we initiated in April 2021, is an open-label, multicenter, multiple-ascending
dose, first-in-human study of RTX-321 for the treatment of adult patients with HPV 16-positive cancers. Patients eligible
for this study include those that are HLA-A*02:01 positive with persistent, recurrent, or metastatic, unresectable, HPV 16-
positive cancers, including unresectable cervical cancer (squamous, adeno, or adenosquamous histology), HNSCC or
squamous cell cancer of the anal canal that is not amenable to curative therapy. The purpose of the trial is to determine the
safety and tolerability, recommended phase 2 dose and pharmacology, and antitumor activity of RTX-321. Prior to study
screening, all patients must be confirmed to be HLA-A*02:01 positive. Documentation of an HPV 16-positive tumor is
required at prescreening for patients with cervical cancer and HNSCC. The study will include a monotherapy dose
escalation phase followed by an expansion phase.
As a result of no DLTs observed as of January 2022, we are continuing to dose escalate the Phase 1 clinical trial of RTX-
321 for the treatment of patients with HPV 16-positive cancers. The primary outcome measures are safety as measured by
incidence of TEAEs and DLTs as determined by incidence of severity of adverse events. Secondary outcome measures
include 1) PDs, which are measured through changes in immune cell populations in the periphery relative to baseline; 2)
PKs as measured by detection of the number of RTX-321 cells using flow cytometry; and 3) antitumor activity of RTX-321
as measured by PFS and overall response rate.
Autoimmune diseases
RCT product candidates for the induction of antigen-specific tolerance
Current therapies and their limitations
Over the past two decades, considerable progress has been made in the treatment of a range of autoimmune disorders with
many patients enjoying an improvement in quality of life as a result. Despite their success, current therapeutic approaches
to autoimmune diseases are non-specifically immunosuppressive and expose patients to an increased risk of opportunistic
infection and cancers, as is the case with calcineurin inhibitors, JAK inhibitors and anti-TNF antibodies. In up to one third
of cases, patients with autoimmune diseases fail to respond to treatment, and even with most responding patients, the
disease ultimately loses responsiveness over time.
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While the triggers of most autoimmune diseases remain unknown, it is generally understood that disease is the result of a
loss of tolerance to one’s own cells. The accepted model of disease assumes an inherent genetic susceptibility followed by
an environmental trigger, which leads to a breakdown of T cell-mediated immune regulation. In principle, restoration of
peripheral tolerance should provide patients with a partial response or a complete cure.
A range of competitive approaches to peripheral tolerance restoration have been investigated over the last few decades.
These include the oral administration and direct injection of a protein or peptide with or without immunosuppression, the
creation of peptide bearing nanoparticles and the adoptive transfer of engineered regulatory T cells. Thus far, these
approaches have not proven to be successful in late-stage clinical trials, but the field continues to progress. Direct
administration of peptides and nanoparticles suffer biodistribution, stability, presentation and orientation challenges which
limit the effectiveness of cell-cell signaling. To date, adoptive transfer approaches are all autologous and are hampered by
some of the same handling and scalability issues that limit the application of other cellular therapies. By contrast, we
believe presentation of antigens in or on RCTs has the potential to recapitulate the normal process of self/non-self
recognition that would lead to tolerance induction. When compared with contemporary and historical approaches of
tolerance induction, RCTs could represent a clinically meaningful step forward.
Tolerance Induction
We believe our programmable platform is versatile enough to enable us to develop a number of modalities for autoimmune
diseases. We can engineer our RCTs to express specific autoimmune disease-associated antigens either within the cell or on
the cell surface to take advantage of how the body normally maintains self-tolerance, thereby retraining the immune system
to no longer see self-antigens as foreign.
In addition, we have the ability to express immune modulating cytokines, enzymes or inhibitory signals, which may have
the potential to enhance the tolerogenic effects of our RCTs.
We believe RCTs can be designed to more specifically modulate complex counter-regulatory immune responses and enable
greater efficacy with lower toxicity, potentially providing treatments for a number of diseases, and, in some cases,
potentially even cures.
We are also exploring how we can generate T cell-directed immune tolerance as well as arming RCTs with other
immunomodulators and targeting moieties to induce tolerance. Using this approach, we believe that we can engineer our
RCTs to prevent immunogenicity to enzyme replacement therapy and gene therapy.
Type 1 Diabetes
Type 1 diabetes is a T-cell driven autoimmune disease with well-defined antigens, making it an ideal disease indication for
our antigen-specific tolerance approach.
We generated durable efficacy in two stringent preclinical models of Type 1 diabetes and demonstrated that the mechanism
of action includes the induction of two different types of regulatory T cells, which provides proof of mechanism and is
important for the potential success of this therapy in the clinic. This proof of concept can potentially be extended beyond
Type 1 diabetes to other T cell-mediated diseases, such as multiple sclerosis and celiac disease.
Preclinical Data for RTX-T1D
In the BDC2.5 adoptive cell transfer preclinical model, we established efficacy with data supporting that we prevented
diabetes with a single dose and repeated dosing extended duration of disease protection. In this experiment, we transferred
activated T cells, the T cells that cause diabetes, into mice and one-day later dosed these mice with our mouse RBCs.
Animals treated with control red blood cells rapidly developed diabetes and animals treated with mRBCs containing the
target antigen (mRBC-p31) remained healthy. We prevented diabetes for 12 weeks in this model with a single dose of
mRBCs.
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Additionally in another experiment, on day 42 we rechallenged the mice with a second adoptive transfer of BDC2.5 cells,
the disease-causing T cells, without any further administration of mRBC-p31. We observed that the animals were protected
from rechallenge, even when no further mRBC therapy was administered, meaning the established tolerance was robust
and not broken by new inflammatory cells, suggesting the emergence of regulatory T cells as a mechanism.
We used a single cell RNAseq to trace the fate of the BDC2.5 T cells that were given to mice. When the animals were
treated with mRBC control cells, most of the BDC2.5 T cells remained inflammatory. In contrast, when the animals were
treated with mRBC-p31 (mRBCs expressing the antigen), the BDC2.5 cells were no longer inflammatory, but instead we
saw a dramatic increase in two types of regulatory T cells, Tregs and Tr1 cells which are important to suppress immune
system function, and anergic cells which cannot respond to the antigen. This is expected to be important in the clinic since
regulatory T cells prevent effector cells from mounting an immune response in patients with diabetes.
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In a second diabetes model, the non-obese diabetes model, or NOD model, mice spontaneously develop diabetes. In this
model, we showed that a mouse red blood cell that contains only two of the relevant antigens delayed the development of
diabetes over the course of the experiment. This result not only demonstrates early efficacy in a predictive model, but,
since disease in this model is driven by many antigens, also shows the potential for bystander suppression, or the ability to
suppress the immune response to multiple antigens by delivering only a limited number of antigens. We believe this could
be an important preclinical mechanism of action finding for potential translation in the clinic.
We intend to present these results in a peer-reviewed setting and provide details of our development timeline later in 2022.
Manufacturing
To more efficiently develop new RCTs designed to treat different diseases, we have modified one of our initial
manufacturing steps in which we add a gene or genes of interest that encode biotherapeutic proteins within the cell or on
the cell surface. Using this approach, we have expressed more than 1,000 different therapeutic proteins since platform
inception. This programmable process allows for the repeated generation of product candidates and enables us to leverage
common CMC and toxicology data packages across our therapies.
We have industrialized the production of RCTs by developing and scaling up a manufacturing process by which
hematopoietic progenitor cells are expanded, then biologically engineered and subsequently differentiated into erythroid
cells (RCTs) that express biotherapeutic proteins within the cell or on the cell surface. The RED PLATFORM allows us to
generate a wide variety of allogeneic, ready-to-use RCT product candidates with a universal and proprietary process
through the following steps:
(1) Donors are screened for infectious diseases according to regulatory guidelines and are typed for major blood group
antigens. O negative blood donors are selected and administered granulocyte colony stimulating factor to mobilize
CD34+ hematopoietic progenitor cells from their bone marrow.
(2) CD34+ hematopoietic progenitor cells are collected by apheresis of universal donor blood, isolated and purified.
(3) These progenitor cells are transduced using a lentiviral vector encoding one or more chosen biotherapeutic proteins.
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(4) The cells are then exposed to a defined media formulation in a bioreactor to promote further expansion and
differentiation until they become erythroid cells. At this stage, the erythroid RCTs express one or more biotherapeutic
proteins in the cytosol or on the cell surface.
(5) For RTX-240, the RCTs are purified, formulated and supplied at 4°C for clinical use. For RTX-321 and RTX-224, bulk
formulated drug substance is frozen. Frozen drug substance can be thawed and formulated ‘on demand’ as liquid drug
product, supplied at 4°C for clinical use.
A single donor is expected to allow us to manufacture up to thousands of doses when we reach full manufacturing capacity.
With approximately 7% of the U.S. population having an O negative blood type, we believe that there is ample supply of
CD34+ hematopoietic progenitor cells needed to produce our RCTs. Additionally, due to the inherent properties of RBCs,
RCTs can be manufactured in large bioreactors using our proprietary manufacturing processes, which could result in the
cost of goods sold being significantly lower than other cellular therapies.
In connection with our IND applications for RTX-240, RTX-321 and RTX-224, the FDA has reviewed our established
manufacturing process capable of producing product candidates for clinical use in accordance with cGMP operations. We
expect to be able to use the same or similar manufacturing processes for all our future RCT product candidates, which
could enable us to bring RCTs into clinical development in an accelerated manner.
Based on our expertise in red blood cell biology and advice from leading hematologists and blood transfusion experts, we
have developed RCT product release criteria to determine the purity, viability, red blood cell identity and potency of each
RCT batch. These release criteria have been reviewed and accepted for clinical use by the FDA.
We manufacture RCTs in bioreactors, which enable us to control critical process parameters and thereby produce consistent
RCTs that meet the established product release criteria. We are currently working to further increase yields and plan to
scale into larger bioreactors for eventual commercialization. We currently use external suppliers for lentiviral vector
production.
In addition to the standard RCT manufacturing process, we have developed alternative proprietary processes for
engineering hematopoietic progenitor cells and maturing these into RCTs. These processes may be utilized in the
production of future RCTs.
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Expanding our manufacturing capacity and supply chain
To enable us to produce consistent and reproducible product at greater scale, in July 2018, we acquired and began
renovating a 135,000 square foot cGMP manufacturing facility in Smithfield, RI. This manufacturing facility has been
operational since January 2020 and is currently providing cGMP clinical supply for our ongoing RTX-240, RTX-321 and
RTX-224 clinical trials.
In 2021, we achieved the following milestones:
●
Increased cells produced per batch in 50L bioreactors by four times that of 2020, enabling uninterrupted clinical
supply for three Phase 1 arms of the RTX-240 clinical trial and for the Phase 1 RTX-321 trial; and
●
Introduced frozen drug substance for RTX-321 and RTX-224, potentially enabling inventory storage of greater than
two years.
●
Additional accomplishments include:
o
Greater than 90% lot success rate for RTX-240 and RTX-321 clinical supply in 2021;
o
Hundreds of doses administered across all three arms of our RTX-240 Phase 1/2 trial and our RTX-321 Phase
1 trial;
o
High transduction efficiency, with greater than 90% of cells transduced with therapeutic proteins; and
o
Highly consistent protein expression (dual or triple).
As we look to the future, we are in the process of:
●
Scaling to 200L bioreactors by mid-2022 to support potential pivotal trials and eventual commercialization;
●
Developing frozen drug product to further simplify supply chain with the goal of making our therapies, if approved,
available around the world;
●
Bringing product testing in-house to strengthen supply chain and reduce time-to-product release; and
●
Continuing to invest in the platform to improve productivity and efficiency.
We have the potential to significantly expand our manufacturing capabilities and plan to stage additional investments based
on future needs and in preparation for potential pivotal trials and eventual commercialization.
Suppliers
We have entered into agreements with a supplier of cGMP grade plasmids for lentiviral production, as well as a supplier of
lentiviral vector. We have secured cGMP lentiviral vector production slots in support of our ongoing RTX-240, RTX-321
and RTX-224 clinical trials, and we are continually securing additional lentiviral production slots for the additional RCT
product candidates that are projected to enter clinical trials.
Intellectual property
We have and continue to build a broad portfolio of patent applications, know how, trade secrets, and other intellectual
property that covers our platform technologies as well as our product discoveries. We believe the breadth and depth of our
intellectual property is a strategic asset that has the potential to provide us with a significant competitive advantage.
We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important
to our business, including seeking, maintaining and defending patent rights, whether developed internally or licensed from
our collaborators or other third parties. Our policy is to seek to protect our proprietary position by, among other methods,
filing patent applications in the United States and in jurisdictions outside of the United States related to
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our proprietary technology, inventions, improvements and product candidates that are important to the development and
implementation of our business. We also rely on trade secrets and know-how relating to our proprietary technology and
product candidates, continuing innovation and in-licensing opportunities to develop, strengthen and maintain our
proprietary position in the field of engineered red blood cell therapeutics. We additionally rely on data exclusivity, market
exclusivity and patent term extensions when available and plan to seek and rely on regulatory protection afforded through
orphan drug designations. Our commercial success may depend in part on our ability to obtain and maintain patent and
other proprietary protection for our technology, inventions and improvements; to preserve the confidentiality of our trade
secrets; to maintain our licenses to use intellectual property owned by third parties; to defend and enforce our proprietary
rights, including our patents; and to operate without infringing on the valid and enforceable patents and other proprietary
rights of third parties.
We believe that we have a strong global intellectual property position and possess substantial know-how and trade secrets
relating to our proprietary product candidates, technology and platform, including related manufacturing processes and
technology. As for our product candidates, platform, and the processes we develop and commercialize, in the normal
course of business, we pursue, as appropriate, patent protection or trade secret protection relating to compositions, methods
of use, treatment of indications, dosing, formulations and methods of manufacturing. Our lead product candidates – RTX-
240, RTX-321 and RTX-224 – are covered by three varieties of U.S. patent claims: (1) composition of matter; (2) method
of treatment; and (3) method of making. As of January 31, 2022, our patent portfolio consists of 24 patent families (not
including provisional applications), including 14 issued U.S. patents, 13 patents issued outside the United States, 40 owned
or in-licensed pending U.S. utility patent applications, and more than 160 owned or in-licensed pending patent applications
in jurisdictions outside of the United States (including Patent Cooperation Treaty, or PCT, applications) that, in many cases,
are counterparts to the foregoing U.S. patents and patent applications. Our objective is to continue to expand our portfolio
of patents and patent applications in order to protect our product candidates and certain aspects of our RED PLATFORM
and our manufacturing processes. Examples of the products and technology areas covered by our intellectual property
portfolio are described below.
Disease-related intellectual property
The disease-related patent rights in our intellectual property portfolio relate to pathological conditions and disorders and
provide coverage for RCT product candidates to specifically address those conditions and the associated disease states. The
disease-related patent applications for our lead programs include those described below. Each of the disease-related patent
rights and applications described below are owned by us and are not licensed from any third party:
RTX-240 and RTX-224 for certain oncology indications
We have developed RTX-240, an RCT product candidate that is engineered to express 4-1BBL and IL-15TP (a fusion of
the cytokine IL-15 and IL-15 receptor alpha), for the treatment of patients suffering from hematological or solid cancers
that have lost response to conventional therapies, including anti-PD-1 therapies or other immune-oncology therapies, and
to prevent the emergence of resistance to checkpoint inhibitors and other immune-oncology therapies. RTX-240 induces
the proliferation and activation of two key target cells, the NK cell and CD8+ memory T cell. Our development strategy for
RTX-240 is focused on identifying those patient populations where the tumor would be susceptible to such a mechanism
utilizing the biology of the NK response, as well as the memory T cells.
We have developed RTX-224, an RCT product candidate that is engineered to co-express 4-1BBL and IL-12, for the
treatment of patients suffering from solid tumors where a T cell mechanism of action is critical. The introduction of
membrane-bound IL-12 is thought to have very broad T cell-based activation, including all subsets of CD8+ and CD4+ T
cells, while sparing the induction of the CD4+ regulatory T cells.
●
This aspect of our patent portfolio relates to RCTs that express 4-1BBL, RCTs that express IL-15 or IL-15TP, RCTs
that express IL-12, RCTs that co-express 4-1BBL and IL-15TP, RCTs that co-express 4-1BBL and IL-12, methods of
activating CD8+ T cells and NK cells, methods of treating cancer, methods of making RCTs that express 4-1BBL and
IL-15TP, including RTX-240, and methods of making RCTs that express 4-1BBL and IL-12, including RTX-224.
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●
As of January 31, 2022, the patent rights relating to this technology includes five issued U.S. patents, two pending
U.S. utility patent applications, and 25 pending foreign patent applications derived from National Stage entries,
relating to RCT compositions of matter, methods of activating immune cells, methods of treatment, and methods of
making RTX-240 and RTX-224. We expect the issued patents and patent applications in this portfolio, if issued, to
expire between 2037 and 2039, without taking into account any patent term adjustments or extensions we may obtain.
RTX-321, an artificial antigen presenting cell for the treatment of HPV-positive tumors
We have developed RTX-321, an artificial antigen presenting cell RCT, that is engineered to express an HPV 16 peptide
antigen bound to MHC class I, 4-1BBL and IL-12 on the cell surface to mimic human T cell-APC interactions. RTX-321 is
in development for the treatment of HPV 16-positive tumors.
●
This aspect of our patent portfolio relates to RCTs that express 4-1BBL, RCTs that express IL-12, RCTs that co-
express 4-1BBL and IL-12, RCTs that express an HPV 16 peptide antigen bound to MHC class I, 4-1BBL, and IL-12,
methods of treating cancer, and methods of making RCTs that express an HPV 16 peptide antigen bound to MHC class
I, 4-1BBL and/or IL-12, including RTX-321.
●
As of January 31, 2022, the patent rights relating to this technology includes three issued U.S. patents, three pending
U.S. patent applications, and 36 pending foreign patent applications derived from National Stage entries, relating to
RCT compositions of matter, methods of treatment and methods of making RTX-321. We expect the issued patents
and patent applications in this portfolio, if issued, to expire between 2037 and 2039, without taking into account any
patent term adjustments or extensions we may obtain.
Additional oncology intellectual property
We own disease-related patent applications directed to RCTs for use in oncology, including immuno-oncology. These
patent applications relate to RCT compositions that comprise a variety of agents, including anti-tumor antibodies, tumor
starvation enzymes, pro-apoptotic proteins, costimulatory molecules, immune checkpoint inhibitors, tumor antigens, MHC
molecules and numerous combinations thereof. These patent applications also cover the use of RCTs to treat cancer,
including lung cancer, melanoma, renal cancer, bladder cancer, gastric cancer, squamous cell carcinoma, Hodgkin
lymphoma, hepatocellular carcinoma, Merkel cell carcinoma, colorectal cancer, and acute myeloid leukemia, as well as
various relapsed or refractory cancers.
We expect the patent applications in this portfolio, if issued, to expire between 2034 and 2040, without taking into account
any patent term adjustments or extensions we may obtain.
Autoimmune disease intellectual property
We own disease-related patent applications directed to RCTs for use in treating autoimmune diseases. These patent
applications relate to RCT compositions having autoimmune antigens, anti-cytokine antibodies, agents for cleaving
autoimmune antibodies and numerous combinations thereof. The RCTs covered by these patent applications operate
through various mechanisms, including through induction of tolerance to self-antigens, clearance of autoimmune
antibodies from the bloodstream, clearance of cytokines from the bloodstream and inactivation of autoimmune antibodies.
The patent applications also cover the use of these RCTs to treat a number of diseases, such as Type 1 diabetes,
membranous nephropathy, autoimmune hepatitis, myasthenia gravis, celiac disease and neuromyelitis optica.
We expect the patent applications in this portfolio, if issued, to expire between 2034 and 2040, without taking into account
any patent term adjustments or extensions we may obtain.
Cardio-metabolic disorders intellectual property
We own disease-related patent applications directed to RCT compositions and their use in treating cardiac disorders and
metabolic disorders, including diabetes, obesity heart failure, atherosclerosis and hemophilia. We expect the patent
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applications in this portfolio, if issued, to expire in 2037, without taking into account any patent term adjustments or
extensions we may obtain.
Infectious disease intellectual property
We own disease-related patent applications directed to RCT compositions and their use in treating infectious diseases, such
as a viral infection (e.g., cytomegalovirus or HIV) or a bacterial infection (e.g., bacteremia). We expect the patent
applications in this portfolio, if issued, to expire between 2034 and 2040 without taking into account any patent term
adjustments or extensions we may obtain.
Platform-related intellectual property
In addition to the disease-related intellectual property, our intellectual property portfolio also includes know-how and
patent applications directed to the RED PLATFORM and other technologies developed internally and exclusively in-
licensed from the Whitehead Institute for Biomedical Research, or WIBR, that relate to the engineering and culturing of
RCTs. Exemplary platform technologies that are the subject of such patent applications include:
●
methods related to the in vitro production of enucleated red blood cells;
●
gene editing and transcriptional modulation systems for engineering RCTs;
●
targeted lipid nanoparticle compositions and RNA delivery techniques;
●
amplifiable nucleic acid constructs for optimizing protein production;
●
methods for chemically conjugating biotherapeutic proteins to cell surfaces; and
●
methods for increasing percent enucleation during RCT production.
These platform technologies, and our intellectual property protection related thereto, are broadly applicable to our RCT
product candidates.
We continually assess and refine our intellectual property strategy as we develop new platform technologies and product
candidates. To that end, we are prepared to file additional patent applications if our intellectual property strategy requires
such filings, or where we seek to adapt to competition or seize business opportunities. Further, we are prepared to file
patent applications, as we consider appropriate under the circumstances, relating to the new technologies that we develop.
In addition to filing and prosecuting patent applications in the United States, we often file counterpart patent applications in
additional jurisdictions where we believe such foreign filing is likely to be beneficial, including but not limited to
Australia, Brazil, Canada, China, Europe, Hong Kong, India, Israel, and Japan.
Individual patent terms extend for varying periods of time, depending upon the date of filing of the patent application, the
date of patent issuance and the legal term of patents in the countries in which they are obtained. Generally, patents issued
from applications filed in the United States are effective for 20 years from the earliest effective filing date. In addition, in
certain instances, a patent term can be extended to recapture a portion of the term effectively lost as a result of the FDA
regulatory review period. The restoration period cannot be longer than five years and the total patent term, including the
restoration period, must not exceed 14 years following FDA approval. The duration of patents outside of the United States
varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing
date. However, the actual protection afforded by a patent varies on a product-by-product basis, from country-to-country,
and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-
related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.
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Trademark protection
As of January 31, 2022, our trademark portfolio contains approximately 59 registrations and pending applications. For the
RUBIUS THERAPEUTICS mark, we have issued registrations in the U.S., Argentina, Canada, Brazil, the United
Kingdom, and Hong Kong, and an International Registration designating Australia, China, the E.U., India, Indonesia,
Israel, Japan, Mexico, New Zealand, Norway, Russia, Singapore, South Korea, and Switzerland. In addition, we have two
U.S. trademark registrations for the RUBIUS mark. For the RCT mark, we have a U.S. registration, as well as an
International Registration designating China, the E.U., India, and Japan. Under this International Registration, the mark is
registered in all listed countries. In addition, we have issued registrations for the RCT mark in the United Kingdom and
Canada. We also have issued U.S. registrations for the RED CELL THERAPEUTICS mark, as well as an International
Registration designating Japan. Under this International Registration, the mark is registered in Japan. In addition, we have
a pending application in Singapore for the RED CELL THERAPEUTICS mark. We have issued registrations for the RED
PLATFORM mark in the U.S. and the United Kingdom, as well as an International Registration designating China, the
E.U., India, Japan and Russia. Under this International Registration, the mark is registered in all listed countries. In
addition, we have a registration for this mark in Canada. We have issued registrations for the REALIZING THE POWER
OF RED mark in the U.S. and the United Kingdom, as well as an International Registration designating Canada, China, the
E.U., India, Japan, and Russia. Under this International Registration, the mark is pending in Canada only and is registered
in all other listed countries. Finally, we have a U.S. registration for the RTX mark.
Trade secrets
We may also rely, in some circumstances, on trade secrets to protect our technology and aspects of our platform. However,
trade secrets are difficult to protect. We seek to protect our technology and product candidates, in part, by entering into
confidentiality agreements with those who have access to our confidential information, including our employees,
contractors, consultants, collaborators and advisors. We also seek to preserve the integrity and confidentiality of our
proprietary technology and processes by maintaining physical security of our premises and physical and electronic security
of our information technology systems. Although we have confidence in these individuals, organizations and systems,
agreements or security measures may be breached and we may not have adequate remedies for any breach. In addition, our
trade secrets may otherwise become known or may be independently discovered by competitors. To the extent that our
employees, contractors, consultants, collaborators and advisors use intellectual property owned by others in their work for
us, disputes may arise as to the rights in related or resulting know-how and inventions. For this and more comprehensive
risks related to our proprietary technology, inventions, improvements and products, please see the section on “Risk factors
—Risks related to intellectual property.”
Licenses
In January 2016, we entered into an exclusive license with WIBR that grants us an exclusive, worldwide, sublicensable
license under patent rights comprising two patent families to research, develop, make and commercialize products and
processes covered by such patent rights for all uses, or the WIBR License. The WIBR License was amended in December
2017 to grant us an exclusive license to the commercialization rights under a third patent family jointly owned by WIBR
and Tufts University, or Tufts. The WIBR License was amended in July 2018 to grant us an exclusive license to the
commercialization rights under a fourth patent family owned by WIBR. As of January 31, 2022, the patent portfolio
licensed from WIBR includes two issued U.S. patents, and over 20 pending U.S. and foreign patent applications and issued
foreign patents. We expect these WIBR-licensed patent applications, if issued, to expire between 2034 and 2038, without
taking into account any patent term adjustments or extensions that may be obtained.
The patent rights licensed to us under the WIBR License are directed, in part, to the in vitro production of RBCs and the
use of the enzyme sortase to conjugate a protein of interest to the cell surface. We have certain diligence obligations under
the WIBR License, which include using commercially reasonable efforts to develop and commercialize any products under
the patents and achieving certain milestones as further described in the WIBR License. Additionally, under certain
circumstances, we may in the future be obligated to negotiate in good faith field-limited, non-exclusive sublicenses to
allow third parties to exploit the patent rights licensed to us under the WIBR License to develop and commercialize
products that are not competitive with our products or product candidates.
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WIBR retains the right with respect to all four patent families licensed to us to (i) practice the patent rights licensed under
the agreement for research, teaching and educational purposes, including sponsored research and collaboration, and
(ii) grant non-exclusive licenses to academic and not-for-profit research institutes to practice under the patent rights for
research, teaching and educational purposes (excluding sponsored research), while Tufts retains such rights only with
respect to the patent family that it co-owns. Pursuant to a Defense Advanced Research Projects Agency agreement between
WIBR and a global biopharmaceutical company, the biopharmaceutical company funded research resulting in one of the
licensed patent families and WIBR granted the biopharmaceutical company the right to retain a worldwide, irrevocable,
non-exclusive, royalty-free right to use this patent family for research and development purposes. In addition, under the
WIBR agreement, the U.S. federal government retains a royalty-free, non-exclusive, non-transferable license to practice
any government-funded invention claimed in the patent rights, as set forth in 35 U.S.C. §§ 201-211 and Executive Order
12591.
As partial consideration for the license, we issued 366,667 shares of our common stock to WIBR. In addition, we paid
WIBR an upfront payment and are required to pay annual license maintenance fees, creditable against royalties and
milestone payments. We are obligated to pay to WIBR low single-digit royalties based on annual net sales by us, our
affiliates and our sublicensees of licensed products and licensed services that are covered by a valid claim of the licensed
patent rights at the time and in the country of sale. On a country-by-country basis, upon expiration of the last valid claim of
the licensed patent rights covering such licensed product or licensed service in such country, our license becomes royalty-
free, perpetual and irrevocable with respect to such country. Based on the progress we make in the advancement of
products covered by the licensed patent rights, we are required to make aggregate milestone payments of up to $1.6 million
upon the achievement of specified preclinical, clinical and regulatory milestones. In addition, we are required to pay to
WIBR a percentage of the non-royalty payments that we receive from sublicensees of the patent rights licensed to us by
WIBR. This percentage varies from low single digits to low double digits and will be based upon the clinical stage of the
product at the time of the sublicense.
Under the WIBR License, WIBR controls the prosecution and maintenance of the patent rights licensed to us and we have
the right to review and comment on such prosecution and maintenance. We have the first right to enforce the patent rights
licensed to us against third party infringers. We may terminate the WIBR License for convenience upon three months prior
written notice to WIBR. WIBR may terminate the WIBR License upon written notice to us if we, along with our affiliates
and sublicensees, cease to carry on business related to the WIBR License for more than six months. WIBR may terminate
the WIBR License for our material breach that remains uncured for sixty days after receiving notice thereof, if we fail to
pay amounts due under the agreement within thirty days after receiving notice of such failure, or if we challenge the
validity or enforceability of any of the licensed patent rights.
Competition
In addition to the product specific competitors for each of the initial targets we are pursuing that are described elsewhere in
this Annual Report, we have identified at least two companies that are leveraging the RBC as a platform: Erytech Pharma
SA and SQZ Biotechnologies Company.
Erytech Pharma SA is using reversible hypotonic and hypertonic osmotic stress to encapsulate drug substances inside of
red blood cells to create product candidates for use in cancer and orphan diseases.
SQZ Biotechnologies Company is pursuing applications in cancer, infectious diseases and autoimmune diseases using a
variety of cell-based approaches, including red blood cells. The company’s red blood cell approach for cancer is to deliver
antigens, as well as adjuvants inside of red blood cells to drive an immune response against target antigens. For
autoimmune diseases, SQZ delivers antigens inside of red blood cells to be processed and induce tolerance.
Erytech Pharma SA and SQZ Biotechnologies Company are both developing product candidates using red blood cells
loaded with agents inside the cells. In contrast, our flexible RED PLATFORM allows for expression of multiple proteins,
for example, cytokines and other agents, inside or on the cell surface of red blood cells.
Outside of RBC-based competition, there are a number of companies competing in our target therapeutic areas. Within
oncology, multiple large and small companies are developing novel immune stimulatory agents, such as Nektar
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Therapeutics, which is developing a polymer-conjugated IL-15, and Genmab, which is developing a bispecific antibody
targeting PD-L1 and 4-1BB. Others are developing activated and engineered NK cell product candidates as cancer
therapeutics against both hematologic and solid tumor malignancies, such as Fate Therapeutics. Many companies are
developing therapies to generate antigen-specific immune responses against HPV-positive cancers, such as BioNTech SE
using RNA and Inovio Pharmaceuticals, Inc. using DNA-based therapy. Finally, multiple companies are developing novel
approaches to restore immune tolerance, such as Anokion SA, which is developing engineered proteins for the treatment of
celiac disease, Type 1 diabetes and multiple sclerosis, Cour Pharmaceuticals, which is developing nanoparticle technology
for the treatment of celiac disease, and Cellerys AG, which is developing a peptide-coupled cell therapy for the treatment
of multiple sclerosis.
In addition to the companies described above, we anticipate competing with the largest biopharmaceutical companies in the
world, such as Novartis AG, Gilead Sciences, Inc., Amgen, Inc., F. Hoffman-La Roche AG (Roche), Johnson & Johnson,
and Pfizer, Inc.
Government regulation
Government authorities in the United States at the federal, state and local level and in other countries regulate, among other
things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-
keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of
drug and biological products, such as RTX-240, RTX-321 and RTX-224, and any future product candidates. Generally,
before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be
obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the
regulatory authority.
U.S. biological product development
In the United States, the FDA regulates biological products under the Federal Food, Drug, and Cosmetic Act, or FDCA, the
Public Health Service Act, or PHSA, and regulations thereunder. Biologics are also subject to other federal, state and local
statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate
federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources. Failure
to comply with the applicable U.S. requirements at any time during the product development process, approval process or
post-market may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other
actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning
letters, product recalls or market withdrawals, product seizures, total or partial suspension of production or distribution,
injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties. Any agency
or judicial enforcement action could have a material adverse effect on us.
The FDA categorizes human cell- or tissue-based products as either minimally manipulated or more than minimally
manipulated and has determined that more than minimally manipulated products must be approved by the FDA through the
biologics license application, or BLA, process before they may be legally marketed in the United States. The process
required by the FDA before a biologic may be marketed in the United States generally involves the following:
●
completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in
accordance with good laboratory practice, or GLP, requirements;
●
submission to the FDA of an IND, which must become effective before human clinical trials may begin;
●
approval by an institutional review board, or IRB, or independent ethics committee at each clinical trial site before
each trial may be initiated;
●
performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations,
good clinical practice, or GCP, requirements and other clinical trial-related regulations to establish the safety and
efficacy of the investigational product for each proposed indication;
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●
submission to the FDA of a BLA;
●
a determination by the FDA within 60 days of its receipt of a BLA to accept the filing for review;
●
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the
biologic will be produced to assess compliance with cGMP requirements and, if applicable, current good tissue
practices, or cGTP, to assure that the facilities, methods and controls are adequate to preserve the drug or biologic’s
identity, strength, quality and purity;
●
potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the BLA; and
●
FDA review and approval of the BLA, potentially including consideration of the views of an FDA advisory
committee, prior to any commercial marketing or sale of the biological product in the United States.
The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we
cannot be certain that any approvals for RTX-240, RTX-321, RTX-224 and any future product candidates will be granted
on a timely basis, or at all.
Preclinical studies and IND
Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal
studies to assess safety and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is
subject to federal regulations and requirements, including GLP regulations for safety and toxicology studies.
An IND is a request for authorization from the FDA to administer an investigational product to humans and must become
effective before human clinical trials may begin. An IND sponsor must submit the results of the preclinical tests, together
with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies,
among other things, to the FDA as part of an IND. An IND automatically becomes effective 30 days after receipt by the
FDA, unless the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on
clinical hold before such time. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before
the clinical trial can begin. If the FDA’s concerns are not resolved, submission of an IND may result in the FDA not
allowing clinical trials to commence.
Clinical trials
The clinical stage of development involves the administration of the investigational product to healthy volunteers or
patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s
control, in accordance with GCP requirements, which include the requirement that all research subjects provide their
informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among
other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the
parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the
protocol, must be submitted to the FDA as part of the IND. Each clinical trial of investigational cell and gene therapies
must be reviewed and approved by the Institutional Biosafety Committee, or IBC, for each clinical site. IBCs were
established under the National Institute of Health, or NIH, Guidelines for Research Involving Recombinant or Synthetic
Nucleic Acid Molecules to provide local review and oversight of nearly all forms of research utilizing recombinant or
synthetic nucleic acid molecules. In its review, the IBC assesses biosafety issues, specifically, safety practices and
containment procedures, related to the investigational product and clinical study. Compliance with the NIH Guidelines is
mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA, however many
companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Such trials remain
subject to FDA and other clinical trial regulations, and only after FDA, IBC, and other relevant approvals are in place can
these protocols proceed. Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at
which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are
minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that
must be provided to each clinical trial subject or his or her legal representative and must
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monitor the clinical trial until completed. There also are requirements governing the reporting of ongoing clinical trials and
completed clinical trial results to public registries.
A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization
to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit
data from the clinical trial to the FDA in support of a BLA. The FDA will accept a well-designed and well-conducted
foreign clinical trial not conducted under an IND if the trial was conducted in accordance with GCP requirements, and the
FDA is able to validate the data through an onsite inspection if deemed necessary.
Clinical trials generally are conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3, and may be
combined or overlap.
●
Phase 1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are
initially exposed to a single dose and then multiple doses of the product candidate. The primary purpose of these
clinical trials is to assess the metabolism, pharmacologic action, side effect tolerability and safety of the drug.
●
Phase 2 clinical trials involve studies in disease-affected patients to determine the dose required to produce the desired
benefits. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected,
possible adverse effects and safety risks are identified and a preliminary evaluation of efficacy is conducted.
●
Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the
data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the
overall benefit and risk relationship of the product and provide an adequate basis for product labeling.
Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval.
These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In
certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of a BLA.
Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to
the FDA and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected
suspected adverse events, findings from other studies or animal or in vitro testing that suggest a significant risk for human
subjects and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the
protocol or investigator brochure.
Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The
FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the
research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate
approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s
requirements or if the drug or biologic has been associated with unexpected serious harm to patients. Additionally, some
clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a
data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at
designated check points based on access to certain data from the trial. Concurrent with clinical trials, companies usually
complete additional animal studies and also must develop additional information about the chemistry and physical
characteristics of the drug or biologic, as well as finalize a process for manufacturing the product in commercial quantities
in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality
batches of the product and companies must develop methods for testing the identity, strength, quality and purity of the final
product, among other things. Additionally, appropriate packaging must be selected and tested and stability studies must be
conducted to demonstrate that the product candidates do not undergo unacceptable deterioration over their shelf life.
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BLA and FDA review process
Following completion of the clinical trials, data are analyzed to assess whether the investigational product is safe and
effective for the proposed indicated use or uses. The results of preclinical studies and clinical trials are then submitted to
the FDA as part of a BLA, a request for approval to market the biological product for one or more specified indications,
along with proposed labeling, chemistry and manufacturing information to ensure product quality and other relevant data.
The application may include both negative and ambiguous results of preclinical studies and clinical trials, as well as
positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a
product’s use or from a number of alternative sources, including studies initiated by investigators. To support marketing
approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the
investigational product to the satisfaction of the FDA. FDA approval of a BLA must be obtained before a biologic may be
marketed in the United States.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a user fee. The
FDA adjusts the PDUFA user fees on an annual basis. According to the FDA’s fee schedule, the fiscal year 2022
application fee for an application requiring clinical data, such as a BLA, is $3,117,218. The sponsor of an approved BLA is
also subject to an annual prescription drug program fee, which for fiscal year 2022 is $369,413. Fee waivers or reductions
are available in certain circumstances, including a waiver of the application fee for the first application filed by a small
business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product also
includes a non-orphan indication.
The FDA reviews all submitted BLAs before it accepts them for filing and may request additional information or issue a
refuse to file letter, rather than accepting the BLA for filing. The FDA must make a decision on accepting a BLA for filing
within 60 days of receipt. Once the submission is accepted for filing, the FDA begins an in-depth review of the BLA.
Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months, from the filing date, in which
to complete its initial review of an original BLA and respond to the applicant, and six months from the filing date of an
original BLA designated for priority review. The FDA does not always meet its PDUFA goal dates for standard and
priority BLAs, and the review process is often extended by the FDA requests for additional information or clarification.
Before approving a BLA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new
product to determine whether they comply with cGMP requirements and, if applicable, cGTP requirements. cGTP
requirements are FDA regulations that govern the methods used in, and the facilities and controls used for, the manufacture
of human cells, tissues, and cellular and tissue-based products, which are human cells or tissue intended for implantation,
transplant, infusion, or transfer into a human recipient. The primary intent of the cGTP requirements is to ensure that cell
and tissue-based products are manufactured in a manner designed to prevent the introduction, transmission and spread of
communicable disease. FDA regulations also require tissue establishments to register and list their products with the FDA
and, when applicable, to evaluate donors through screening and testing. The FDA will not approve the product unless it
determines that the manufacturing processes and facilities are in compliance with cGMP and cGTP requirements and
adequate to assure consistent production of the product within required specifications. The FDA also may audit data from
clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel
products or products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that
includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be
approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it
considers such recommendations when making decisions on approval. The FDA likely will reanalyze the clinical trial data
as part of the review process, which could result in extensive discussions between the FDA and the applicant during the
process.
After the FDA evaluates a BLA, it will issue an approval letter or a Complete Response Letter, or CRL. An approval letter
authorizes commercial marketing of the drug or biologic with specific prescribing information for specific indications. A
CRL indicates that the review cycle of the application is complete and the application will not be approved in its present
form. A CRL usually describes all of the specific deficiencies in the BLA identified by the FDA. The CRL may require
additional clinical data, additional pivotal Phase 3 clinical trial(s) or other significant and time-consuming requirements
related to clinical trials, preclinical studies or manufacturing. If a CRL is issued, the applicant
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may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if
the BLA is resubmitted, the FDA may decide that the BLA does not satisfy the criteria for approval. Data obtained from
clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.
If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail
limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the BLA
with a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A
REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to
have continued access to such medicines by managing their safe use, and could include medication guides, physician
communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk
minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the
development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if
compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the
marketplace. The FDA may require one or more Phase 4 post-market studies or surveillance to further assess and monitor
the product’s safety and effectiveness after commercialization and may limit further marketing of the product based on the
results of these post-marketing studies. In addition, new government requirements, including those resulting from new
legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory approval
or otherwise impact ongoing development programs.
Orphan drug designation
Under the Orphan Drug Act, the FDA may grant orphan drug designation to a biological product intended to treat a rare
disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United
States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost
of developing and making the product available in the United States for this type of disease or condition will be recovered
from sales of the product.
Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the
identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation
does not convey any advantage in or shorten the duration of the regulatory review and approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for the disease or condition for
which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not
approve any other applications to market the same drug for the same indication for seven years from the date of such
approval, except in limited circumstances. A product will not be considered the “same drug” if it is clinically superior to a
product that has orphan drug exclusivity. Moreover, competitors may receive approval of either a different product for the
same indication or the same product for a different indication, but which could be used off-label in the orphan indication.
Orphan drug exclusivity also could block the approval of one of our products for seven years if a competitor obtains
approval before we do for the same product, as defined by the FDA, for the same indication we are seeking approval, or if
our product is determined to be contained within the scope of the competitor’s product for the same indication or disease. If
one of our products designated as an orphan drug receives marketing approval for an indication broader than that which is
designated, it may not be entitled to orphan drug exclusivity.
Expedited development and review programs
The FDA has several programs that are intended to expedite or facilitate the process for developing and reviewing new
drugs and biologics that address serious and life-threatening conditions and meet certain other criteria. For example, new
biologics are eligible for fast-track designation if they are intended to treat a serious or life-threatening condition and
preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track
designation applies to both the product and the specific indication for which it is being studied. The sponsor can request the
FDA to designate the product for fast-track status any time before receiving BLA approval, but ideally no later than the
pre-BLA meeting.
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Any product submitted to the FDA for marketing, including under a fast-track program, may be eligible for other types of
FDA programs intended to expedite development and review, such as priority review and accelerated approval. A product
may be eligible for priority review if it treats a serious or life-threatening condition and, if approved, would provide a
significant improvement in safety and effectiveness compared to available therapies. The FDA will attempt to direct
additional resources to the evaluation of an application for a new drug or biologic designated for priority review in an effort
to facilitate the review within six months of accepting the application for filing, rather than the standard 10-month review
clock.
A product may also be eligible for accelerated approval if it treats a serious or life-threatening condition and generally
provides a meaningful advantage over available therapies. In addition, it must demonstrate an effect on a surrogate
endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than
irreversible morbidity or mortality, or IMM, that is reasonably likely to predict an effect on IMM or other clinical benefit.
As a condition of approval, a sponsor of a drug or biologic receiving accelerated approval must perform confirmatory
clinical trials to verify and describe the anticipated effect on IMM or other clinical benefit. If the FDA concludes that a
drug or biologic shown to be effective can be safely used only if distribution or use is restricted, it will require such post-
marketing restrictions, as it deems necessary to assure safe use of the product.
Additionally, a drug or biologic may be eligible for designation as a breakthrough therapy if the product is intended, alone
or in combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and preliminary
clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on
one or more clinically significant endpoints. The benefits of breakthrough therapy designation include the same benefits as
fast-track designation, plus intensive interaction and guidance from the FDA. The breakthrough therapy designation is a
distinct status from both accelerated approval and priority review, but these can also be granted to the same product
candidate if the relevant criteria are met. The FDA must take certain actions, such as holding timely meetings and
providing advice, intended to expedite the development and review of an application for approval of a breakthrough
therapy. All requests for breakthrough therapy designation will be reviewed within 60 days of receipt, and the FDA will
either grant or deny the request.
Fast track designation, priority review, accelerated approval and breakthrough therapy designation do not change the
standards for approval, but may expedite the development or approval process.
Regenerative medicine advanced therapy designation
As part of the 21st Century Cures Act, Congress amended the FDCA to create a pathway for expedited development and
review of certain regenerative medicine therapies, which include cell therapies, therapeutic tissue engineering products,
human cell and tissue products, and combination products using any such therapies or products. Regenerative medicine
therapies do not include those human cells, tissues and cellular and tissue-based products regulated solely under section
361 of the PHSA and 21 CFR Part 1271. The program is intended to facilitate efficient development and expedite review of
regenerative medicine advanced therapies, or RMATs, which are intended to treat, modify, reverse, or cure a serious or life-
threatening disease or condition.
A sponsor may request that the FDA designate a drug as an RMAT concurrently with or at any time after submission of an
IND. The FDA has 60 calendar days to determine whether the drug meets the criteria, including whether there is
preliminary clinical evidence indicating that the product has the potential to address unmet medical needs for a serious or
life-threatening disease or condition. The FDA generally expects preliminary clinical evidence to be obtained from clinical
investigations specifically conducted to assess the effects of the therapy on a serious condition, which could include well-
designed retrospective studies or clinical case series, as appropriate, but the RMAT designation does not require evidence
to indicate that the drug may offer a substantial improvement over existing therapies. Advantages of RMAT designation
include all of the benefits of the fast track and breakthrough therapy designation programs, including early interactions
with the FDA. In addition, a product that receives RMAT designation may be eligible for priority review, and the FDA may
grant accelerated approval to products that have RMAT designation based on (1) previously agreed-upon surrogate or
intermediate endpoints that are reasonably likely to predict long-term clinical benefit; or (2) reliance upon data obtained
from a meaningful number of sites, including through expansion to additional sites, as appropriate. Another benefit of
RMAT designation is that may enable to the sponsor to meet post-approval requirements
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beyond the completion of traditional confirmatory clinical trials. The FDA has indicated that post-approval requirements
for RMATs receiving accelerated approval can potentially be met through:
●
clinical evidence, clinical studies, patient registries or other sources of real-world evidence, such as electronic health
records;
●
the collection of larger confirmatory data sets; or
●
post-approval monitoring of all patients treated with such therapy prior to approval of the therapy.
As with breakthrough designation, an RMAT designation is not the same as an approval and does not change the statutory
standards for demonstration of safety and effectiveness needed for marketing approval.
Pediatric information
Under the Pediatric Research Equity Act, certain BLAs and certain supplements to a BLA must contain data to assess the
safety and efficacy of the drug 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. The FDA may grant deferrals
for submission of pediatric data or full or partial waivers. The Food and Drug Administration Safety and Innovation Act
amended the FDCA to require that a sponsor who is planning to submit a marketing application for a drug that includes a
new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an
initial Pediatric Study Plan, or PSP, within 60 days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as
practicable before the initiation of the Phase 3 or Phase 2/3 trial. The initial PSP must include an outline of the pediatric
trial or trials that the sponsor plans to conduct, including trial objectives and design, age groups, relevant endpoints and
statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric
assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting
information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an
agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from
preclinical studies, early-phase clinical trials and/or other clinical development programs.
Post-marketing requirements
Following approval of a new product, the manufacturer and the approved product are subject to continuing regulation by
the FDA, including, among other things, monitoring and record-keeping activities, reporting of adverse experiences,
complying with promotion and advertising requirements, which include restrictions on promoting drugs for unapproved
uses or patient populations (known as “off-label use”) and limitations on industry-sponsored scientific and educational
activities. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or
promote such uses. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first
use. Further, if there are any modifications to the drug or biologic, including changes in indications, labeling or
manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new BLA or
BLA supplement, which may require the development of additional data or preclinical studies and clinical trials.
The FDA may also place other conditions on approvals including the requirement for a Risk Evaluation and Mitigation
Strategy to assure the safe use of the product. If the FDA concludes a REMS is needed, the sponsor of the BLA must
submit a proposed REMS. The FDA will not approve the BLA without an approved REMS, if required. A REMS could
include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could
restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be
withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing.
FDA regulations require that biological products be manufactured in specific approved facilities and in accordance with
cGMP regulations and, in some cases, cGTP regulations. We rely, and expect to continue to rely, on third parties for certain
aspects of the production of clinical and, if approved, commercial quantities of our product candidates in
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accordance with cGMP and cGTP regulations. We and these manufacturers must comply with cGMP and cGTP regulations
that require, among other things, quality control and quality assurance, the maintenance of records and documentation and
the obligation to investigate and correct any deviations from cGMP or cGTP. Manufacturers and other entities involved in
the manufacture and distribution of approved drugs or biologics are required to register their establishments with the FDA
and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for
compliance with cGMP and, if applicable, cGTP requirements and other laws. Accordingly, manufacturers must continue
to expend time, money and effort in the area of production and quality control to maintain cGMP and cGTP compliance.
Other post-approval requirements applicable to biological products include reporting of cGMP deviations that may affect
the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse
effects, reporting updated safety and efficacy information, and complying with electronic record and signature
requirements.
After a BLA is approved, the product also may be subject to official lot release. 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 lot release by the FDA, the manufacturer submits samples of each lot of product to the FDA
together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the
manufacturer’s tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products,
such as viral vaccines, 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.
To help reduce the increased risk of the introduction of adventitious agents, the PHS Act emphasizes the importance of
manufacturing controls for products whose attributes cannot be precisely defined. The PHS Act also provides authority to
the FDA to immediately suspend biologics 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 within the United States.
Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result
in restrictions on the marketing of a product or withdrawal of the product from the market, restrictions on the manufacturer
or holder of the BLA for the product, as well as possible civil or criminal sanctions. Failure to comply with the applicable
U.S. requirements at any time during the product development process, approval process or after approval, may subject an
applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions
could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters,
product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of
government contracts, mandated corrective advertising or communications with doctors, debarment, restitution,
disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action could have a material
adverse effect on us.
Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an
approved BLA, including withdrawal of the product from the market.
U.S. patent term restoration and marketing exclusivity
Depending upon the timing, duration and specifics of FDA approval, if any, of RTX-240, RTX-321, RTX-224 and any
future product candidates should such approval be obtained, some of our U.S. patents may be eligible for limited patent
term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the
Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit restoration of the patent term of up to five years as
compensation for patent term lost during product development and the FDA regulatory review process. Patent-term
restoration, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval
date. The patent term restoration period is generally one-half the time between the effective date of an IND and the
submission date of a BLA plus the time between the submission date of a BLA and the approval of that application, except
that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent
applicable to an approved product is eligible for the extension and the application for the extension must be submitted prior
to the expiration of the patent. The United States Patent and Trademark Office, in consultation with the
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FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for
restoration of patent term for our currently owned or licensed patents to add patent life beyond its current expiration date,
depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA.
An abbreviated approval pathway for biological products shown to be similar to, or interchangeable with, an FDA-licensed
reference biological product was created by the Biologics Price Competition and Innovation Act of 2009 as part of the
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or
the ACA. This amendment to the PHSA, in part, attempts to minimize duplicative testing. Biosimilarity, which requires
that the biological product be highly similar to the reference product notwithstanding minor differences in clinically
inactive components and that there be no clinically meaningful differences between the product and the reference product
in terms of safety, purity and potency, can be shown through analytical studies, animal studies and a clinical trial or trials.
Interchangeability requires that a biological product be biosimilar to the reference product and that the product can be
expected to produce the same clinical results as the reference product in any given patient and, for products administered
multiple times to an individual, that the product and the reference product may be alternated or switched after one has been
previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the
reference biological product without such alternation or switch. Complexities associated with the larger, and often more
complex, structure of biological products as compared to small molecule drugs, as well as the processes by which such
products are manufactured, pose significant hurdles to implementation that are still being worked out by the FDA.
A reference biological product is granted four- and twelve-year exclusivity periods from the time of first licensure of the
product. The FDA will not accept an application for a biosimilar or interchangeable product based on the reference
biological product until four years after the date of first licensure of the reference product, and the FDA will not approve an
application for a biosimilar or interchangeable product based on the reference biological product until twelve years after
the date of first licensure of the reference product. “First licensure” typically means the initial date the particular product at
issue was licensed in the United States. Date of first licensure does not include the date of licensure of (and a new period of
exclusivity is not available for) a biological product if the licensure is for a supplement for the biological product or for a
subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest,
or other related entity) for a change (not including a modification to the structure of the biological product) that results in a
new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength, or for a
modification to the structure of the biological product that does not result in a change in safety, purity or potency.
Therefore, one must determine whether a new product includes a modification to the structure of a previously licensed
product that results in a change in safety, purity or potency to assess whether the licensure of the new product is a first
licensure that triggers its own period of exclusivity. Whether a subsequent application, if approved, warrants exclusivity as
the “first licensure” of a biological product is determined on a case-by-case basis with data submitted by the sponsor.
Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted,
adds six months to existing regulatory exclusivity periods. This six-month exclusivity may be granted based on the
voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.
European Union drug development
In the E.U., our future products also may be subject to extensive regulatory requirements. As in the United States,
medicinal products can be marketed only if a marketing authorization from the competent regulatory agencies has been
obtained.
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Similar to the United States, the various phases of preclinical and clinical research in the E.U. are subject to significant
regulatory controls.
In April 2014, the E.U. adopted the new Clinical Trials Regulation (E.U.) No 536/2014, or Regulation, which replaced the
Clinical Trials Directive 2001/20/EC, or Directive, on January 31, 2022. The transitory provisions of the new Regulation
offer sponsors the possibility to choose between the requirements of the previous Directive and the new Regulation if the
request for authorization of a clinical trial is submitted in the year after the new Regulation became applicable. If the
sponsor chooses to submit under the previous Directive, the clinical trial continues to be governed by the Directive until
three years after the new Regulation became applicable. If a clinical trial continues for more than three years after the
Regulation became applicable, the new Regulation will at that time begin to apply to the clinical trial.
The new Regulation overhauls the current system of approvals for clinical trials in the E.U. Specifically, the new
Regulation, which will be directly applicable in all Member States (meaning no national implementing legislation in each
E.U. Member State is required), aims at simplifying and streamlining the approval of clinical trials in the E.U. The main
characteristics of the regulation include: a streamlined application procedure via a single-entry point through the Clinical
Trials Information System, or CTIS; a single set of documents to be prepared and submitted for the application as well as
simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications
for clinical trials, which is divided in two parts (Part I contains scientific and medicinal product documentation and Part II
contains the national and patient-level documentation). Part I is assessed by a coordinated review by the competent
authorities of all E.U. Member States in which an application for authorization of a clinical trial has been submitted
(Member States concerned) of a draft report prepared by a Reference Member State. Part II is assessed separately by each
Member State concerned. Strict deadlines have been established for the assessment of clinical trial applications. The role of
the relevant ethics committees in the assessment procedure will continue to be governed by the national law of the
concerned E.U. Member State. However, overall related timelines will be defined by the Clinical Trials Regulation.
European Union drug review and approval
In the E.U., medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are
two types of marketing authorizations.
●
The centralized MA is issued by the European Commission through the Centralized Procedure, based on the opinion
of the Committee for Medicinal Products for Human Use of the European Medicines Agency, or EMA, and is valid
throughout the entire territory of the E.U., and the additional Member States of the European Economic Area, or EEA
(Norway, Iceland and Liechtenstein). The Centralized Procedure is mandatory for certain types of products, including
biotechnology medicinal products, orphan medicinal products, advanced-therapy medicines, (i.e. gene therapy,
somatic cell therapy or tissue-engineered medicines and medicinal products containing a new active substance
indicated for the treatment of HIV, AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune and other
immune dysfunctions and viral diseases. The Centralized Procedure is optional for products containing a new active
substance not yet authorized in the EU, or for products that constitute a significant therapeutic, scientific or technical
innovation or which are in the interest of public health in the E.U. Under the centralized procedure, the EMA’s
Committee for Medicinal Products for Human use, or CHMP, is responsible for conducting the initial assessment of a
product and for several post-authorization and maintenance activities, such as the assessment of modifications or
extensions to an existing MA. Under the centralized procedure in the E.U., the maximum timeframe for the evaluation
of a marketing authorization application, or MAA, by the EMA is 210 days, excluding clock stops, when additional
written or oral information is to be provided by the applicant in response to questions asked by the CHMP. Clock stops
may extend the timeframe of evaluation of an MAA considerably beyond 210 days. Where the CHMP gives a positive
opinion, it provides the opinion together with supporting documentation to the European Commission, who makes the
final decision to grant an MA, which is issued within 67 days of receipt of the EMA’s recommendation. Accelerated
assessment might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of major
public health interest, particularly from the point of view of therapeutic innovation. If the CHMP accepts such request,
the time limit of 210 days will be reduced to 150 days,
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excluding clock stops,, but it is possible that the CHMP may revert to the standard time limit for the centralized
procedure if it determines that the application is no longer appropriate to conduct an accelerated assessment.
●
National MAs, which are issued by the competent authorities of the E.U. Member States of the EEA and only cover
their respective territory, are available for products not falling within the mandatory scope of the Centralized
Procedure. Where a product has already been authorized for marketing in a Member State of the EU, this National MA
can be recognized in another Member States through the Mutual Recognition Procedure. If the product has not
received a National MA in any Member State at the time of application, it can be approved simultaneously in various
Member States through the Decentralized Procedure. Under the Decentralized Procedure, an identical dossier is
submitted to the competent authorities of each of the Member States in which the MA is sought, one of which is
selected by the applicant as the Reference Member State, or RMS. The competent authority of the RMS prepares a
draft assessment report, a draft summary of the product characteristics, or SmPC, and a draft of the labeling and
package leaflet, which are sent to the other Member States (referred to as the Concerned Member States) for their
approval. If the Concerned Member States raise no objections, based on a potential serious risk to public health, to the
assessment, SmPC, labeling, or packaging proposed by the RMS, the product is subsequently granted a national MA in
all the Member States (i.e., in the RMS and the Concerned Member States).
Under the above-described procedures, before granting the MA, the EMA or the competent authorities of the E.U. Member
States make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality,
safety and efficacy.
Now that the United Kingdom (which comprises Great Britain and Northern Ireland) has left the E.U., Great Britain will no
longer be covered by centralized MAs (under the Northern Ireland Protocol, centralized MAs will continue to be
recognized in Northern Ireland). All medicinal products with a current centralized MA were automatically converted to
Great Britain MAs on January, 1 2021. For a period of two years from January 1, 2021, the Medicines and Healthcare
products Regulatory Agency, or MHRA, the UK medicines regulator, may rely on a decision taken by the European
Commission on the approval of a new MA in the centralized procedure, in order to more quickly grant a new Great Britain
MA. A separate application will, however, still be required. The MHRA also has the power to have regard to MAs
approved in E.U. Member States through decentralized or mutual recognition procedures with a view to more quickly
granting an MA in the United Kingdom or Great Britain.
European Union new chemical entity exclusivity
In the E.U., innovative medicinal products approved on the basis of a complete independent data package new chemical
entities, sometimes referred to as new active substances, qualify for eight years of data exclusivity upon marketing
authorization and an additional two years of market exclusivity. The data exclusivity, if granted, prevents generic or
biosimilar applicants from referencing the innovator’s preclinical and clinical trial data contained in the dossier of the
reference product when applying for a generic or biosimilar MA in the E.U., during a period of eight years from the date on
which the reference product was first authorized in the E.U. During the additional two-year period of market exclusivity, a
generic or biosimilar MAA can be submitted, and the innovator’s data may be referenced, but no generic or biosimilar
product can be placed on the E.U. market until the expiration of the market exclusivity. The overall ten-year period will be
extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder
obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their
authorization, are determined to bring a significant clinical benefit in comparison with currently approved therapies. There
is no guarantee that a product will be considered by the EMA to be an innovative medicinal product, and products may not
qualify for data exclusivity. Even if a product is considered to be an innovative medicinal product so that the innovator
gains the prescribed period of data exclusivity, however, another company could nevertheless also market another version
of the product if such company obtained an MA based on an MAA with a complete independent data package of
pharmaceutical tests, preclinical tests and clinical trials.
European Union orphan drug designation and exclusivity
In the E.U., the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the
development of products that (1) are intended for the diagnosis, prevention or treatment of life-threatening or chronically
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debilitating conditions; (2) either (i) such condition affects not more than 5 in 10,000 persons in the E.U. or (ii) where it is
unlikely that the marketing of the medicine, without the benefit derived from orphan status, would generate sufficient
return to justify the necessary investment in its development and (3) there exists no satisfactory method of diagnosis,
prevention or treatment has been authorized for marketing in the E.U., or, if such a method exists, the product would be a
significant benefit to those affected by the condition.
In the E.U., orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten
years of market exclusivity is granted following medicinal product approval. During this market exclusivity period, neither
the EMA nor the European Commission nor any of the competent authorities in the E.U. Members States can accept an
application or grant a marketing authorization for a “similar medicinal product.” A “similar medicinal product” is defined
as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal
product, and which is intended for the same therapeutic indication. This period may be reduced to six years if the orphan
drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to
justify maintenance of market exclusivity. Market exclusivity may also be revoked in very select cases, such as if (i) it is
established that a similar medicinal product is safer, more effective or otherwise clinically superior to the authorized
product; (ii) the marketing authorization holder consents to such revocation; or (iii) the marketing authorization holder
cannot supply enough orphan medicinal product. Orphan drug designation must be requested before submitting an
application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of,
the regulatory review and approval process.
European Union drug marketing
Much like the Anti-Kickback Statute prohibition in the United States discussed below, the provision of benefits or
advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or
use of medicinal products is also prohibited in the European Union. The provision of benefits or advantages to physicians
is governed by the national anti-bribery laws of E.U. Member States, such as the UK Bribery Act 2010. Infringement of
these laws could result in substantial fines and imprisonment.
Payments made to physicians in certain E.U. Member States must be publicly disclosed. Moreover, agreements with
physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent
professional organization and the regulatory authorities of the individual E.U. Member States. These requirements are
provided in the national laws, industry codes or professional codes of conduct, applicable in the E.U. Member States.
Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties,
fines or imprisonment.
The aforementioned E.U. rules are generally applicable in the EEA.
European data collection
The collection, use, storage, disclosure, transfer, or other processing of personal data, including personal health data, in the
E.U. is governed by, as of May 2018, the General Data Protection Regulation, or the GDPR. The GDPR imposes strict
rules on the transfer of personal data out of the EEA to the United States. Failure to comply with the requirements of the
Data Protection Directive, the GDPR, and the related national data protection laws of the E.U. Member States may result in
fines and other administrative penalties. The GDPR introduces data protection requirements in the E.U. and substantial
fines for breaches of the data protection rules. The GDPR regulations may impose additional responsibility and liability in
relation to personal data that we process, and we may be required to put in place additional mechanisms ensuring
compliance with the data protection rules. This may be onerous and adversely affect our business, financial condition,
results of operations and prospects.
In addition, further to the United Kingdom’s, or the UK’s, exit from the E.U. on January 31, 2020, the GDPR ceased to
apply in the UK at the end of the transition period on December 31, 2020. However, as of January 1, 2021, the UK’s
European Union (Withdrawal) Act 2018 incorporated the GDPR (as it existed on December 31, 2020, but subject to certain
UK specific amendments) into UK law (referred to as the 'UK GDPR'). The UK GDPR and the UK Data Protection Act
2018 set out the UK’s data protection regime, which is independent from but aligned to the E.U.’s data
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protection regime. Non-compliance with the UK GDPR may result in monetary penalties of up to £17.5 million or 4% of
worldwide revenue, whichever is higher. Although the UK is regarded as a third country under the European Union’s
GDPR, the European Commission has now issued a decision recognizing the UK as providing adequate protection under
the E.U. GDPR and, therefore, transfers of personal data originating in the E.U. to the UK remain unrestricted. Like the
E.U. GDPR, the UK GDPR restricts personal data transfers outside the UK to countries not regarded by the UK as
providing adequate protection. The UK government has confirmed that personal data transfers from the UK to the EEA
remain free flowing).
For more information related to GDPR, please see “Risk Factors—Risks related to government regulation—European data
collection is governed by restrictive regulations governing the use, processing, and cross-border transfer of personal
information.”
Brexit and the Regulatory Framework in the United Kingdom
On June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union (commonly referred
to as Brexit), and the UK formally left the E.U. on January 31, 2020. There was a transition period during which E.U.
pharmaceutical laws continued to apply to the UK, which expired on December 31, 2020. However, the E.U. and the UK
have concluded a trade and cooperation agreement, or TCA, which was provisionally applicable since January 1, 2021 and
has been formally applicable since May 1, 2021. The TCA includes specific provisions concerning pharmaceuticals, which
include the mutual recognition of GMP, inspections of manufacturing facilities for medicinal products and GMP documents
issued, but does not foresee wholesale mutual recognition of UK and E.U. pharmaceutical regulations. At present, Great
Britain has implemented E.U. legislation on the marketing, promotion and sale of medicinal products through the Human
Medicines Regulations 2012 (as amended) (under the Northern Ireland Protocol, the E.U. regulatory framework will
continue to apply in Northern Ireland). The regulatory regime in Great Britain therefore largely aligns with current E.U.
regulations, however it is possible that these regimes will diverge in future now that Great Britain’s regulatory system is
independent from the E.U. and the TCA does not provide for mutual recognition of UK and E.U. pharmaceutical
legislation.
Rest of the world regulation
For other countries outside of the E.U., U.K. and the United States, the requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary from country to country. Additionally, the clinical trials must be
conducted in accordance with GCP requirements and the applicable regulatory requirements and the ethical principles that
have their origin in the Declaration of Helsinki.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines,
suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal
prosecution.
Additional laws and regulations governing international operations
If we further expand our operations outside of the United States, we must dedicate additional resources to comply with
numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or
FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering of anything of
value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or
decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also
obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring
the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including
international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international
operations.
Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized
problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries,
hospitals are operated by the government, and doctors and other hospital employees are considered foreign
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officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper
payments to government officials and have led to FCPA enforcement actions.
Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the
sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products
and technical data relating to those products. If we expand our presence outside of the United States, it will require us to
dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing,
or selling certain products and product candidates outside of the United States, which could limit our growth potential and
increase our development costs.
The failure to comply with laws governing international business practices may result in substantial civil and criminal
penalties and suspension or debarment from government contracting. The Securities and Exchange Commission also may
suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.
Coverage and reimbursement
Successful commercialization of new drug and biologic products depends in part on the extent to which reimbursement for
those drug and biologic products will be available from government health administration authorities, private health
insurers and other organizations.
In the United States and markets in other countries, patients generally rely on third-party payors to reimburse all, or part, of
the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs,
such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Our ability to successfully
commercialize our product candidates will depend in part on the extent to which coverage and adequate reimbursement for
these products and related treatments will be available from government health administration authorities, private health
insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health
maintenance organizations, decide which medications they will pay for and establish reimbursement levels. The
availability of coverage and extent of reimbursement by governmental and private payors is essential for most patients to
be able to afford many treatments. Sales of these or other product candidates that we may identify will depend
substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by
health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by
government health administration authorities, private health coverage insurers and other third-party payors. If coverage and
adequate reimbursement is not available, or is available only to limited levels, we may not be able to successfully
commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high
enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.
In the United States, the important decisions about reimbursement for new drug and biologic products are made by the
Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services,
or HHS, as well as major health insurers. CMS decides whether and to what extent a new product will be covered and
reimbursed under Medicare, and private payors tend to follow CMS to a substantial degree. However, no uniform policy of
coverage and reimbursement for drug and biologic products exists among third-party payors and coverage and
reimbursement levels for drug and biologic products can differ significantly from payor to payor. Factors payors consider
in determining reimbursement are based on whether the product is:
●
a covered benefit under its health plan;
●
safe, effective and medically necessary;
●
appropriate for the specific patient;
●
cost-effective; and
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●
neither experimental nor investigational.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the Medicare Modernization
Act, or the MMA, established the Medicare Part D program to provide a voluntary prescription drug and biologic benefit to
Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private
entities that provide coverage of outpatient prescription drugs and biologics. Unlike Medicare Parts A and B, Part D
coverage is not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs
and biologics, and each drug plan can develop its own formulary that identifies which drugs and biologics it will cover, and
at what tier or level. However, Part D prescription drug formularies must include products within each therapeutic category
and class of covered Part D drugs, though not necessarily all the drugs and biologics in each category or class. Any
formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic
committee. Government payment for some of the costs of prescription drugs and biologics may increase demand for
products for which we obtain marketing approval. Any negotiated prices for any of our products covered by a Part D
prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while the MMA applies
only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment
limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar
reduction in payments from non-governmental payors.
For a drug or biologic product to receive federal reimbursement under the Medicaid or Medicare Part B programs or to be
sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the
340B drug pricing program. The required 340B discount on a given product is calculated based on the average
manufacturer price, or AMP, and Medicaid rebate amounts reported by the manufacturer. As of 2010, the ACA expanded
the types of entities eligible to receive discounted 340B pricing, although under the current state of the law these newly
eligible entities (with the exception of children’s hospitals) will not be eligible to receive discounted 340B pricing on
orphan drugs. As 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid
rebate formula and AMP definition described above could cause the required 340B discount to increase. Further, on
December 27, 2018, the District Court for the District of Columbia invalidated a recent reimbursement formula change
instituted by CMS under the 340B program. The HHS appealed the lower court’s decision to the D.C. Circuit Court of
Appeals on July 15, 2019. On July 31, 2020, the U.S. Court of Appeals for the District of Columbia Circuit overturned the
district court’s decision and found that the changes were within the Secretary’s authority. On September 14, 2020, the
plaintiffs-appellees filed a Petition for Rehearing En Banc (i.e., before the full court), but was denied on October 16, 2020.
On Friday July 2, 2021, the Supreme Court granted the petition. It is unclear how these developments could affect covered
hospitals who might purchase our future products and affect the rates we may charge such facilities for our approved
products in the future, if any. The American Recovery and Reinvestment Act of 2009 provides funding for the federal
government to compare the effectiveness of different treatments for the same illness. The plan for the research was
published in 2012 by HHS, the Agency for Healthcare Research and Quality and the NIH, and periodic reports on the
status of the research and related expenditures are made to Congress. Although the results of the comparative effectiveness
studies are not intended to mandate coverage policies for public or private payors, it is not clear what effect, if any, the
research will have on the sales of our product candidates. It is also possible that comparative effectiveness research
demonstrating benefits in a competitor’s drug could adversely affect the sales of our product candidates. If third-party
payors do not consider our products to be cost-effective compared to other available therapies, they may not cover our
products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to
sell our drugs on a profitable basis.
These current laws and state and federal healthcare reform measures that may be adopted in the future may result in
additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any
product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is
prescribed or used.
Outside of the United States, the pricing of pharmaceutical products is subject to governmental control as part of national
health systems in many countries. In general, the prices of drug and biologic products under such systems are substantially
lower than in the United States. Other countries allow companies to fix their own prices for drug and biologic products but
monitor and control company profits. Efforts to control prices and utilization of pharmaceutical products and medical
devices will likely continue as countries attempt to manage healthcare expenditures. Accordingly,
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in markets outside the United States the reimbursement for our products may be reduced compared with the United States.
Other healthcare laws
Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of
any products for which we obtain marketing approval. Arrangements with third party payors, healthcare providers and
physicians may expose a pharmaceutical or biologics manufacturer to broadly applicable fraud and abuse and other
healthcare laws and regulations. In the United States, these laws include, without limitation, state and federal anti-
kickback, false claims, physician transparency and patient data privacy and security laws and regulations, including but not
limited to those described below:
●
the federal Anti-Kickback Statute makes it illegal for any person, including a prescription drug or biologic
manufacturer (or a party acting on its behalf) to knowingly and willfully solicit receive, offer, provide or pay any
remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind,
that is intended to induce or reward either referrals of individuals for, or the purchase, recommendation, arrangement,
order or prescription of any good or service, including any particular drug, for which payment may be made under a
federal healthcare program, such as the Medicare and Medicaid programs. Violation of the statute does not require
actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that a claim,
including items or services resulting from a violation of the federal Anti-Kickback Statute, constitutes a false or
fraudulent claim for purposes of the False Claims Act;
●
the federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act,
impose criminal and civil penalties, including through civil “qui tam” or “whistleblower” actions, against individuals
or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment or approval
from Medicare, Medicaid, or other federal healthcare programs that are false, fictitious or fraudulent; knowingly
making or causing a false statement material to a false or fraudulent claim or an obligation to pay or transmit money to
the federal government; or knowingly concealing or knowingly and improperly avoiding or decreasing such an
obligation. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of
these statutes or specific intent to violate them in order to have committed a violation;
●
the federal anti-inducement law, prohibits, among other things, the offering or giving of remuneration, which includes,
without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions),
to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s
selection of a particular supplier of items or services reimbursable by a federal or state governmental program;
●
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal
statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare
benefit program or 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, any healthcare benefit program, regardless of the payor
(e.g., public or private) 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;
●
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or
HITECH, and their respective implementing regulations, impose requirements on certain covered healthcare providers,
health plans and healthcare clearinghouses, as well as their respective business associates that perform services for
them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security
and transmission of individually identifiable health information;
●
the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical
devices;
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●
federal government price reporting laws, which require us to calculate and report complex pricing metrics in an
accurate and timely manner to government programs;
●
the federal Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which require
manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare,
Medicaid or the Children’s Health Insurance Program to report annually to the HHS under the Open Payments
Program, information related to payments or other transfers of value made to physicians (defined to include doctors,
dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment
interests held by physicians and their immediate family members. Effective January 1, 2022, these reporting
obligations extend to include transfers of value made to certain non-physician providers such as physician assistants
and nurse practitioners; and
●
analogous state and foreign laws and regulations, such as state and foreign anti-kickback, false claims, consumer
protection and unfair competition laws which may apply to our business practices, including but not limited to,
research, distribution, sales and marketing arrangements, as well as submitting claims involving healthcare items or
services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical
and biologics manufacturers to comply with the pharmaceutical industry’s voluntary compliance guidelines and the
relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be
made to healthcare providers and other potential referral sources; state laws that require drug and biologic
manufacturers to file reports with states regarding pricing and marketing information, such as the tracking and
reporting of gifts, compensations and other remuneration and items of value provided to healthcare professionals and
entities; state and local laws requiring the registration of pharmaceutical sales representatives; and state and foreign
laws governing the privacy and security of health information in certain circumstances, many of which differ from
each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it
is possible that some of our business activities could be subject to challenge under one or more of such laws. Efforts to
ensure that business arrangements comply with applicable healthcare laws involve substantial costs. It is possible that
governmental and enforcement authorities will conclude that our business practices do not comply with current or future
statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any
such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions
could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties,
damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal
healthcare programs, integrity and oversight agreements to resolve allegations of non-compliance, contractual damages,
reputational harm, individual imprisonment, diminished profits and future earnings, and curtailment of operations, any of
which could adversely affect our ability to operate our business. In addition, commercialization of any of our products
outside the United States will also likely be subject to foreign equivalents of the healthcare laws mentioned above, among
other foreign laws.
Current and future healthcare reform legislation
In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes
to the healthcare system. In particular, in 2010 the ACA was enacted, which, among other things, increased the minimum
Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug
Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected
manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs
that increase the federal government’s comparative effectiveness research.
Since its enactment, there have been numerous judicial, administrative, executive and legislative challenges to certain
aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA
brought by several states without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court's
decision, President Biden issued an Executive Order to initiate a special enrollment period from February 15, 2021 through
August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The Executive Order
also instructed certain governmental agencies to review and reconsider their existing policies and rules
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that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs
that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance
coverage through Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administrations or
other efforts, if any, to challenge repeal or replace the ACA, will impact our business.
The Bipartisan Budget Act of 2018 also amends the ACA, effective January 1, 2019, by increasing the point-of-sale
discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in
most Medicare drug plans, commonly referred to as the “donut hole,” which will shift costs for name brand drugs away
from Part D participants back to the manufacturers, which could have a negative effect on our profits in the event any of
our products receive FDA approval and CMS reimbursement.
In addition, other legislative and regulatory changes have been proposed and adopted in the United States since the ACA
was enacted:
●
On August 2, 2011, the U.S. Budget Control Act of 2011, among other things, included aggregate reductions of
Medicare payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to
subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a
temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic. Following the
temporary suspension, a 1% payment reduction will occur beginning April 1, 2022 through June 30, 2022, and the 2%
payment reduction will resume on July 1, 2022.
●
On January 2, 2013, the U.S. American Taxpayer Relief Act of 2012 was signed into law, which, among other things,
further reduced Medicare payments to several types of providers.
●
On April 13, 2017, CMS published a final rule that gives states greater flexibility in setting benchmarks for insurers in
the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits
required under the ACA for plans sold through such marketplaces.
●
On May 30, 2018, the Right to Try Act, was signed into law. The law, among other things, provides a federal
framework for certain patients to access certain investigational new drug products that have completed a Phase 1
clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients
can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded
access program. There is no obligation for a pharmaceutical manufacturer to make its drug products available to
eligible patients as a result of the Right to Try Act.
●
On May 23, 2019, CMS published a final rule to allow Medicare Advantage Plans the option of using step therapy for
Part B drugs beginning January 1, 2020.
●
On December 20, 2019, former President Trump signed into law the Further Consolidated Appropriations Act (H.R.
1865), which repealed the Cadillac tax, the health insurance provider tax, and the medical device excise tax. It is
impossible to determine whether similar taxes could be instated in the future.
There has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the
rising cost of prescription drugs and biologics. At a federal level, President Biden signed an Executive Order on July 9,
2021 affirming the administration’s policy to (i) support legislative reforms that would lower the prices of prescription
drugs and biologics, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and, by
supporting the development and market entry of lower-cost generic drugs and biosimilars; and (ii) support the enactment of
a public health insurance option. Among other things, the Executive Order also directs HHS to provide a report on actions
to combat excessive pricing of prescription drugs, enhance the domestic drug supply chain, reduce the price that the
Federal government pays for drugs, and address price gouging in the industry; and directs the FDA to work with states and
Indian Tribes that propose to develop section 804 Importation Programs in accordance with the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003, and the FDA’s implementing regulations. For biological products in
particular, the Executive Order also directs FDA to: continue to clarify and improve the approval framework for
biosimilars, including the standards for interchangeability of biological products; facilitate the
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development and approval of biosimilar and interchangeable products; clarify existing requirements and procedures related
to the review and submission of BLAs; and identify and address any efforts to impede biosimilar competition. The FDA
released such implementing regulations on September 24, 2020, which went into effect on November 30, 2020, providing
guidance for states to build and submit importation plans for drugs from Canada. On September 25, 2020, CMS stated
drugs imported by states under this rule will not be eligible for federal rebates under Section 1927 of the Social Security
Act and manufacturers would not report these drugs for “best price” or Average Manufacturer Price purposes. Since these
drugs are not considered covered outpatient drugs, CMS further stated it will not publish a National Average Drug
Acquisition Cost for these drugs. If implemented, importation of drugs from Canada may materially and adversely affect
the price we receive for any of our product candidates. Further, on November 20, 2020 CMS issued an Interim Final Rule
implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates will be
calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for
Economic Cooperation and Development countries with a similar gross domestic product per capita. However, on
December 29, 2021, CMS announced rescinded the MFN Model. Additionally, on December 2, 2020, HHS published a
regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under
Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also
creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee
arrangements between pharmacy benefit managers and manufacturers. On December 2, 2020, HHS published a regulation
removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D,
either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a
new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee
arrangements between pharmacy benefit managers and manufacturers. Further, implementation of this change and new safe
harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager
service fees are currently under review by the Biden administration and may be amended or repealed. Although a number
of these and other proposed measures may require authorization through additional legislation to become effective, and the
Biden administration may reverse or otherwise change these measures, both the Biden administration and Congress have
indicated that it will continue to seek new legislative measures to control drug costs.
Individual states in the United States have also increasingly passed legislation and implemented regulations designed to
control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on
certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage
importation from other countries and bulk purchasing. Legislative and regulatory proposals, and enactment of laws, at the
foreign, federal and state levels, directed at containing or lowering the cost of healthcare, will continue into the future.
Other Regulations
We are subject to numerous foreign, federal, state and local environmental, health and safety laws and regulations,
including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous
materials and wastes. In addition, our leasing and operation of real property may subject us to liability pursuant to certain
U.S. environmental laws and regulations, under which current or previous owners or operators of real property and entities
that disposed or arranged for the disposal of hazardous substances may be held strictly, jointly and severally liable for the
cost of investigating or remediating contamination caused by hazardous substance releases, even if they did not know of
and were not responsible for the releases.
Human Capital Resources
As of January 31, 2022, we had 269 full-time employees, all of whom are in the United States, and 225 of whom are
engaged in research and development activities. None of our employees are represented by labor unions or covered by
collective bargaining agreements. We consider our employee relations to be positive.
We believe that our future success largely depends upon our continued ability to attract and retain highly skilled
employees. We provide our employees with competitive salaries and bonuses, opportunities for equity ownership,
development programs that enable continued learning and growth and a robust employment package that promotes well-
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being across all aspects of their lives, including health care, retirement planning and paid time off. As part of our promotion
and retention efforts, we also invest in ongoing leadership development programs. In addition, we regularly conduct an
employee survey to gauge employee engagement and identify areas of focus.
Much of our success is rooted in the diversity of our teams and our commitment to inclusion. We value diversity at all
levels and continue to focus on extending our diversity and inclusion initiatives across our entire workforce, from working
with managers to develop strategies for building diverse teams to promoting the advancement of leaders from different
backgrounds.
Facilities
Our corporate headquarters is located in approximately 85,000 square feet of office and laboratory space at 399 Binney
Street, Cambridge, Massachusetts. The lease term for approximately 48,000 square feet expires in January 2027 and the
lease term for the remaining 37,000 square feet expires in August 2028.
We own a 135,000 square foot clinical manufacturing facility located in Smithfield, Rhode Island.
Legal proceedings
We are not currently a party to any material legal proceedings.
Corporate Information
Rubius was incorporated in April 2013 as VL26, Inc. under the laws of the State of Delaware. In January 2015, the
Company changed its name to Rubius Therapeutics, Inc. Our principal executive office is located at 399 Binney Street, 3rd
Floor, Cambridge, Massachusetts, and our telephone number is (617) 679-9600.
Financial Information and Segments
The financial information required under this Item 1 is incorporated herein by reference to the section of this Annual
Report titled “Part II—Item 8—Consolidated Financial Statements and Supplementary Data. The company manages its
operations as a single segment for the purposes of assessing performance and making operating decisions. The company is
developing RCTs for the treatment of patients with severe diseases. All of the company’s tangible assets are held in the
United States. See Note 2 to our consolidated audited financial statements included in this Annual Report on Form 10-K.
For financial information regarding our business, see “Part II—Item 7—Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of this Annual Report on Form 10-K and our consolidated audited financial
statements and related notes included elsewhere in this Annual Report on Form 10-K.
Available Information
Our Internet address is www.rubiustx.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, including exhibits, proxy and information statements and amendments to those reports filed or
furnished pursuant to Sections 13(a), 14, and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange
Act, are available through the “Investors and Media” portion of our website free of charge as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. Information on our website is not to be
deemed to be incorporated by reference in, and is not part of, this Annual Report on Form 10-K or any of our other
securities filings, unless specifically incorporated herein by reference, and should not be relied upon in making a decision
as to whether or not to purchase our common stock. Our filings with the SEC may be accessed through the SEC’s
Interactive Data Electronic Applications system at http://www.sec.gov. All statements made in any of our securities filings,
including all forward-looking statements or information, are made as of the date of the document in which the statement is
included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are
required to do so by law.
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Item 1A. Risk Factors
Our business is subject to numerous risks. You should carefully consider the risks described below, as well as the other
information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and
“Management’s discussion and analysis of financial condition and results of operations,” and in our other filings with the
Securities and Exchange Commission. The occurrence of any of the events or developments described below could harm
our business, financial condition, results of operations and growth prospects. In such an event, the market price of our
common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial also may impair our business operations.
Risks related to our financial condition and capital requirements
We have incurred net losses in every year since our inception and anticipate that we will continue to incur net losses in
the future.
We are a clinical-stage biopharmaceutical company with a limited operating history. 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 effect or an acceptable safety profile, gain regulatory
approval and become commercially viable. 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. As a result, we are not profitable and have incurred losses in each period since our
inception in 2013. For the years ended December 31, 2021, 2020, and 2019, we reported net losses of $196.5 million,
$167.7 million, and $163.5 million, respectively. As of December 31, 2021, we had an accumulated deficit of $677.0
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 regulatory approvals for, our product candidates. We anticipate
that our expenses will increase substantially if, and as, we:
●
conduct preclinical studies and clinical trials for our product candidates and if we continue to experience delays,
setbacks or disruptions to our preclinical studies, clinical trials or our clinical supply due to the ongoing COVID-19
pandemic, including from any subsequent outbreak whether or not due to emerging variants thereof;
●
further develop our RED PLATFORM;
●
continue to discover and develop additional product candidates;
●
maintain, expand and protect our intellectual property portfolio;
●
hire additional clinical, scientific, manufacturing and commercial personnel;
●
expand in-house manufacturing capabilities, including through the renovation, customization and operation of our
manufacturing facility;
●
establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial
quantities of any product candidates for which we may obtain regulatory approval;
●
acquire or in-license other product candidates and technologies;
●
seek regulatory approvals for any product candidates that successfully complete clinical trials;
●
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain
regulatory approval; and
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●
add operational, regulatory, financial and management information systems and personnel, including personnel to
support our product development and planned future commercialization efforts, as well as any additional infrastructure
necessary to function as a public company.
To become and remain profitable, we or any potential future collaborator must develop and eventually commercialize
products with significant market potential at an adequate profit margin after cost of goods sold and other expenses. This
will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical
trials, obtaining marketing approval for product candidates, obtaining adequate reimbursement for product candidates,
manufacturing, marketing and selling products for which we may obtain marketing approval and satisfying any post-
marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate
revenue that is significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease
the value of our company and could impair our ability to raise capital, maintain our research and development efforts,
expand our business or continue our operations. A decline in the value of our company also could cause our stockholders to
lose all or part of their investment.
Even if we succeed in commercializing one or more of our product candidates, we will continue to incur substantial
research and development and other expenditures to develop and market additional product candidates. 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 will require additional capital to fund our operations and if we fail to obtain necessary financing, we will not be able
to complete the development and commercialization of our product candidates.
Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial
amounts to conduct further research and development and preclinical or nonclinical testing and studies and clinical trials of
our current and future programs, to build a supply chain, including through operating our own manufacturing facility, to
seek regulatory approvals for our product candidates and to launch and commercialize any products for which we receive
regulatory approval, including potentially building our own commercial organization. As of December 31, 2021, we had
$225.8 million of cash and investments. Before consideration of management’s plans described below, based on our current
operating plan, we believe that our existing cash and investments, will enable us to fund our operating expenses and capital
expenditure requirements into the second quarter of 2023. However, our future capital requirements and the period for
which our existing resources will support our operations may vary significantly from what we expect, and we will in any
event require additional capital in order to complete clinical development of any of our current programs. Our monthly
spending levels will vary based on new and ongoing development and corporate activities. Because the length of time and
activities associated with development of our product candidates is highly uncertain, we are unable to estimate the actual
funds we will require for development and any approved marketing and commercialization activities. Our future funding
requirements will depend on and could increase significantly as a result of many factors, including:
●
the initiation, progress, timing, costs and results of preclinical or nonclinical testing and studies and clinical trials for
our product candidates;
●
the preclinical and clinical development plans we establish for our product candidates;
●
the number and characteristics of product candidates that we develop or may in-license;
●
the terms of any collaboration agreements we may choose to conclude;
●
the outcome, timing and cost of meeting regulatory requirements established by the U.S. Food and Drug
Administration, or FDA, the European Medicines Agency, or EMA, and other comparable foreign regulatory
authorities;
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●
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
●
the cost of defending intellectual property disputes, including patent infringement actions brought by third parties
against us or our product candidates;
●
the effect of competing technological and market developments;
●
the costs of establishing and maintaining a supply chain for the development and manufacture of our product
candidates;
●
the cost and timing of establishing, expanding and scaling manufacturing capabilities; and
●
the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may
receive regulatory approval in regions where we choose to commercialize our products on our own.
Accordingly, until we can generate sufficient product or royalty revenue to finance our cash requirements, which we may
never do, we will need to seek additional funding in connection with our continuing operations and business objectives and
expect to finance our operations through a combination of public and private equity financings, debt financings,
borrowings under credit facilities, collaborations, strategic alliances and marketing, distribution and licensing
arrangements. Any additional fundraising efforts may divert our management from their day-to-day activities, which may
adversely affect our ability to develop and commercialize any of our approved drugs or drug candidates. We cannot
guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the
terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional
securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to
decline. If we are unable to obtain funding, we will implement an operating plan that scales back our operations and
focuses our available capital on a reduced number of activities and programs, which we believe will enable the continued
advancement of certain of our research and development programs and the preservation of our technology platform. These
actions could significantly harm our business, prospects, financial condition and results of operations and cause the price of
our common stock to decline. After considering management’s plans described above, we have the ability to fund our
operating costs and working capital needs into the middle of 2023.
Raising additional capital may cause dilution to our existing stockholders or require us to relinquish rights to our
technologies or product candidates.
We may seek additional capital through a combination of public and private equity financings, debt financings, borrowings
under credit facilities, collaborations, strategic alliances and marketing, distribution and licensing arrangements. To the
extent that we raise additional capital through the sale of common stock or securities convertible into, or exchangeable for,
common stock, our stockholders’ ownership interest will be diluted, and the terms may include liquidation or other
preferences that adversely affect their rights as a stockholder.
If we raise additional funds through licensing, marketing or distribution arrangements or other collaborations or strategic
alliances with third parties, we may have to relinquish valuable rights to our technologies or product candidates, future
revenue streams or research programs or grant licenses on terms unfavorable to us. We also could be required to seek
collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be
desirable.
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We have an effective shelf registration statement on Form S-3 on file with the Securities and Exchange Commission, or the
SEC, pursuant to which we may, from time to time, sell up to an aggregate of $250.0 million (as of December 31, 2021) of
our common stock, preferred stock, debt securities, warrants or units. Future sales of securities under the registration
statement (or otherwise) would result in dilution of our stockholders and could have a negative impact on our stock price.
The terms of our debt facility place restrictions on our operating and financial flexibility, and failure to comply with
covenants or to satisfy certain conditions of the agreement governing the debt facility may result in acceleration of our
repayment obligations and foreclosure on our pledged assets, which could significantly harm our liquidity, financial
condition, operating results, business and prospects and cause the price of our common stock to decline.
Our loan and security agreement with SLR Investment Corp. (formerly Solar Capital Ltd.), or the Loan Agreement, is
collateralized by a lien covering substantially all of our assets, excluding intellectual property, but including proceeds from
the sale, license, or disposition of our intellectual property, under which, as of December 31, 2021, we have borrowed
$75.0 million.
The Loan Agreement requires us to comply with a number of covenants (affirmative and negative), including restrictive
covenants that limit our ability, subject to certain exceptions, to: incur additional indebtedness; encumber the collateral
securing the loan; acquire, own or make investments; repurchase or redeem any class of stock or other equity interest;
declare or pay any cash dividend or make a cash distribution on any class of stock or other equity interest; transfer a
material portion of our assets; acquire other businesses; and merge or consolidate with or into any other organization or
otherwise suffer a change in control.
Although we extended the repayment date under the Loan Agreement to 2024 pursuant to the amendment to the Loan
Agreement entered into in June 2021, there is no guarantee that we will have sufficient funds available to repay the
amounts outstanding when due. If we default under the facility, the lenders may accelerate all of our repayment obligations
and, if we are unable to access funds to meet those obligations or to renegotiate our agreement, the lenders could take
control of the collateral securing such obligations and, as a result, we may need to cease operations. If we were to
renegotiate our agreement under such circumstances, the terms may be significantly less favorable to us. If we were
liquidated, the lender’s right to repayment would be senior to the rights of our stockholders to receive any proceeds from
the liquidation. Any declaration of the Collateral Agent of an event of default could significantly harm our liquidity,
financial condition, operating results, business, and prospects and cause the price of our common stock to decline.
The incurrence of additional indebtedness, if available and permitted, would increase our fixed payment obligations and
could subject us to additional, more burdensome covenants restricting or limiting our ability to take specific actions, such
as incurring additional debt, making capital expenditures, declaring dividends, or acquiring or licensing intellectual
property rights. We may also be required to secure any such debt obligations with some or all of our assets. For example,
our Loan Agreement is secured by substantially all of our property and assets, except for intellectual property.
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition
and stock price.
Our results of operations and general business strategy could be adversely affected by general conditions in the global
economy and in the global financial markets. In the past several years, global credit and financial markets have experienced
volatility, instability and disruptions, including as a result of the ongoing COVID-19 pandemic. From time to time, this
volatility, instability and disruption has caused, and may cause in the future, severely diminished liquidity and credit
availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and
uncertainty about economic stability. For example, since early 2020, the coronavirus, or COVID-19, pandemic has caused
disruption in the financial markets both globally and in the United States. While certain negative effects of the ongoing
COVID-19 pandemic have lessened as vaccines are distributed and administered and prevention and treatment methods
improve, there have been and may continue to be resurgences of cases, including as a result of the emergence of variants
that may be more contagious or more resistant to the vaccine and treatment options available, placing renewed and
prolonged strain on both health care facilities and our workforce. Given the inter-connectivity of the global
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economy, pandemic disease and health events have the potential to continue to negatively impact economic activities in
many countries, including the United States. The ongoing spread of the coronavirus, including variants thereof and
resurgences in geographies experiencing some relief, could have a negative material impact on our business, prospects,
financial condition and results of operations of the Company.
In addition, our general business strategy may be adversely affected by any such economic downturn, volatile business
environment or continued unpredictable and unstable market conditions. If the current equity and credit markets
deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more
dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse
effect on our growth strategy, financial performance and stock price and could require us to delay, scale back or abandon
the development or commercialization of one or more of our product candidates or one or more of our other research and
development initiatives. In addition, there is a risk that one or more of our current service providers, manufacturers or other
partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals
on schedule and on budget.
Political development can also lead to uncertainty to regulations and rules that may materially affect our business. For
example, Brexit could result in the United Kingdom or the European Union significantly altering its regulations affecting
the clearance or approval of our drug or drug candidates that are developed in the United Kingdom. Any new regulations
could add time and expense to the conduct of our business, as well as the process by which our drug candidates receive
regulatory approval in the United Kingdom, the European Union and elsewhere. In addition, the announcement of Brexit
and the withdrawal of the United Kingdom from the European Union have had and may continue to have a material
adverse effect on global economic conditions and the stability of global financial markets and may significantly reduce
global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of
these effects of Brexit, among others, could adversely affect our business, our results of operations, liquidity and financial
condition.
As of December 31, 2021, we had cash and cash equivalents of $225.8 million. While we are not aware of any
downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents since December 31,
2021, no assurance can be given that further deterioration of the global credit and financial markets would not negatively
impact our current portfolio of cash equivalents 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 the general economic downturn.
Changes in tax law could adversely affect our business and financial condition.
The rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the
legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which
changes may have retroactive application) could adversely affect our business. In recent years, many such changes have
been made and changes are likely to continue to occur in the future. Future changes in tax laws could have a material
adverse effect on our business, cash flow, financial condition or results of operations. We urge investors to consult with
their legal and tax advisers regarding the implications of potential changes in tax laws on an investment in our common
stock.
The amount of and our ability to use net operating losses and research and development credits to offset future taxable
income may be subject to certain limitations and uncertainty.
As of December 31, 2021, we had federal and state net operating loss, or NOL, carryforwards of $534.2 million and
$534.8 million, respectively, which may be available to offset future taxable income. The federal NOLs include $37.2
million which expire at various dates through 2037 and $497.0 million which carryforward indefinitely. The state NOLs
expire at various dates through 2041. As of December 31, 2021, we also had federal and state research and development
tax credit carryforwards of $22.7 million and $15.6 million, respectively, which may be available to offset future tax
liabilities and begin to expire in 2034 and 2026, respectively.
Federal NOLs generated in taxable years after December 31, 2017 generally may not be carried back to prior taxable years,
and while such federal NOLs generated in taxable years beginning after December 31, 2017 will not be subject to
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expiration, the deduction for such NOL in any taxable year will be limited to 80% of our taxable income in such year,
where taxable income is determined without regard to the NOL deduction itself. However, the Coronavirus Aid, Relief and
Economic Security Act repeals the 80% limitation on the utilization of such federal NOLs generated in taxable years
beginning after December 31, 2017 and beginning before January 1, 2021 and allows for federal NOLs generated in
taxable years beginning after December 31, 2017 and before January 1, 2021, to be carried back to each of the five taxable
years preceding the taxable year in which the loss arises. It is uncertain whether this change in law temporarily allowing for
the carryback of federal NOLs will produce any material benefit for our business.
In addition, in general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, a
corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs or
tax credits, or NOLs or credits (including federal research and development tax credits), to offset future taxable income or
taxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more
stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than
50 percentage points over its lowest ownership percentage within a specified testing period. Our existing NOLs or credits
may be subject to limitations arising from previous ownership changes, including in connection with our earlier private
placements, IPO, our recent underwritten offering and other transactions. In addition, future changes in our stock
ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of
the Code and limit our ability to utilize our NOLs and our credits. Our NOLs or credits may also be impaired under state
law. Accordingly, we may not be able to utilize a material portion of our NOLs or credits. Furthermore, our ability to utilize
our NOLs or credits is conditioned upon our attaining profitability and generating U. S. federal and state taxable income.
As described above under this section captioned “Risk factors—Risks related to our financial condition and capital
requirements,” we have incurred significant net losses since our inception and anticipate that we will continue to incur
significant losses for the foreseeable future; and therefore, we do not know whether or when we will generate the U.S.
federal or state taxable income necessary to utilize our NOLs or credits that are subject to limitation by Sections 382 and
383 of the Code.
Risks related to future performance
We have a limited operating history, which may make it difficult to evaluate our technology and product development
capabilities and predict our future performance.
We are early in our development efforts for our lead oncology product candidates, RTX-240 and RTX-224, and our lead
aAPC therapy product candidate, RTX-321, each in Phase 1 clinical trials. We were formed in 2013, have no products
approved for commercial sale and have not generated any revenue from product sales. All of our programs require
additional preclinical research and development, clinical development, regulatory approval in multiple jurisdictions,
obtaining manufacturing supply, capacity and expertise, building of a commercial organization, substantial investment and
significant marketing efforts before we generate any revenue from product sales. In addition, our product candidates must
be approved for marketing by the FDA or certain other health regulatory agencies, such as the EMA, before we may
commercialize any product. Our ability to generate product revenue or profits, which we do not expect will occur for many
years, if ever, will depend on the successful development and eventual commercialization of our product candidates, which
may never occur.
Our limited operating history, particularly in light of the rapidly evolving cellular therapeutics field, may make it difficult
to evaluate our technology and industry and predict our future performance. Our short history as an operating company
makes any assessment of our future success or viability subject to significant uncertainty. We will encounter risks and
difficulties frequently experienced by early-stage companies in rapidly evolving fields. If we do not address these risks
successfully, our business will suffer. Similarly, we expect that our financial condition and operating results will fluctuate
significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. As
a result, our shareholders should not rely upon the results of any quarterly or annual period as an indicator of future
operating performance.
In addition, as an early-stage company, we have encountered unforeseen expenses, difficulties, complications, delays and
other known and unknown circumstances, including, for example, the manufacturing and enrollment challenges we faced
in connection with our Phase 1b clinical trial for RTX-134, which we discontinued in March 2020.
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Our business is highly dependent on the success of our initial product candidates targeting cancer and autoimmune
diseases. All of our product candidates will require significant additional nonclinical and clinical development before
we can seek regulatory approval for and launch a product commercially.
Our business and future success depends on our ability to obtain regulatory approval of and then successfully launch and
commercialize our initial product candidates targeting cancer and autoimmune diseases, including RTX-240, RTX-321,
RTX-224 and others that may be selected from our preclinical programs. We are currently dosing patients in the ongoing
Phase 1/2 trial of RTX-240 in advanced solid tumors (including the Phase 1 arm of RTX-240 in combination with
pembrolizumab), the Phase 1 trial of RTX-240 in relapsed/refractory AML, the Phase 1 trial of RTX-321 for the treatment
of advanced human papillomavirus, or HPV, 16-positive cancers and the Phase 1/2 trial of RTX-224 for the treatment of
advanced solid tumors. However, we may experience delays or setbacks in advancing these product candidates. In
particular, RTX-240, RTX-321 and RTX-224, as our first oncology clinical programs, may experience preliminary
complications surrounding trial execution, such as complexities surrounding trial design, establishing trial protocols and
interpretability of results, clinical site access and initiation, patient recruitment and enrollment, quality and supply of
clinical doses, safety issues, or a lack of clinically relevant activity. For example, we encountered manufacturing and
enrollment challenges in connection with our Phase 1b clinical trial for our discontinued product candidate, RTX-134.
All of our product candidates are in the early stages of development and will require additional nonclinical and clinical
development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient
commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product
sales. In addition, because RTX-240, RTX-321 and RTX-224 are our most advanced current product candidates, if any such
product candidates encounter safety, efficacy, supply or manufacturing problems, developmental or unexpected delays,
regulatory or commercialization issues or other problems, our development plans and business would be significantly
harmed.
The successful development of cellular therapeutics, such as our investigational RCTs, is highly uncertain.
Successful development of cellular therapeutics, such as our RCTs, is highly uncertain and is dependent on numerous
factors, many of which are beyond our control. Cellular therapeutics that appear promising in the early phases of
development may fail to reach the market for several reasons, including:
●
nonclinical or preclinical testing or study results may show our RCTs to be less effective than desired or to have
harmful or problematic side effects or toxicities;
●
clinical trial results may show our RCTs to be less effective than expected (e.g., a clinical trial could fail to meet its
primary endpoint(s)) or to have unacceptable side effects or toxicities;
●
clinical trial results may show that our RCTs may not have the circulating time we expect based on preclinical studies
and models, which may negatively affect the activity observed in clinical trials;
●
failure to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such
delays may be caused by slow enrollment in clinical trials, manufacturing delays, patients dropping out of trials, length
of time to achieve trial endpoints, additional time requirements for data analysis, or biologics license application, or
BLA, preparation, discussions with the FDA, an FDA request for additional nonclinical or clinical data, including
bridging studies, or unexpected safety or manufacturing issues;
●
manufacturing issues and costs, formulation issues, dosage requirements, pricing or reimbursement issues, or other
factors that make our RCT therapies uneconomical; and
●
proprietary rights of others and their competing products and technologies that may prevent our RCT therapies from
being commercialized.
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The length of time necessary to complete clinical trials and to submit an application for marketing approval for a final
decision by a regulatory authority may be difficult to predict for cellular therapies, in large part because of the limited
regulatory history.
Even if we are successful in obtaining market approval, commercial success of any approved products will also depend in
large part on the availability of insurance coverage and adequate reimbursement from third-party payors, including
government payors, such as the Medicare and Medicaid programs, and managed care organizations, which may be affected
by existing and future healthcare reform measures designed to reduce the cost of healthcare. Even if coverage is provided,
the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to
realize a sufficient return on our investment. Government authorities and third-party payors may decide which medications
to pay for and establish their own reimbursement levels, limit the definition of the target treatment population to one
smaller than that implied in the label granted by regulatory authorities, and could require us to conduct additional studies,
including post-marketing studies related to the cost-effectiveness of a product, to qualify for reimbursement, which could
be costly and divert our resources. If government and other healthcare payors were not to provide adequate insurance
coverage and reimbursement levels for one any of our products once approved, market acceptance and commercial success
would be reduced.
In addition, if any of our products are approved for marketing, we will be subject to significant regulatory obligations
regarding the submission of safety and other post-marketing information and reports and registration and will need to
continue to comply (or ensure that our third-party providers comply) with current good manufacturing practices, or
cGMPs, and good clinical practices, or GCPs, for any clinical trials that we conduct post-approval. In addition, there is
always the risk that we or a regulatory authority might identify previously unknown problems with a product post-
approval, such as adverse events of unanticipated severity or frequency. Compliance with these requirements is costly and
any failure to comply or other issues with our product candidates post-approval could have a material adverse effect on our
business, financial condition and results of operations.
Our RCT product candidates are based on a new technology, which makes it difficult to predict the time and cost of
development and of subsequently obtaining regulatory approval, if at all.
Our RCT technology is relatively new and no products based on biologically engineered red blood cells have been
approved to date in the United States or the European Union. As such, it is difficult to accurately predict the challenges we
may experience with our product candidates as they proceed through product discovery or identification, preclinical studies
and clinical trials.
In addition, because we have not completed any clinical trials, we have not yet been able to meaningfully assess safety of
our RCT technology in humans, and there may be short-term or long-term effects from treatment with any product
candidates that we develop that we cannot predict at this time. Further, animal models may not exist for some of the
diseases we choose to pursue in our programs. Cellular therapies, such as our RCT product candidates, have a limited
circulating time in animals as they are recognized as foreign by the host animal and therefore cleared by the complement-
mediated reticuloendothelial system, which limits the safety and toxicology assessments that we can conduct in preclinical
studies.
As a result of these factors, it is more difficult for us to predict the time and cost of product candidate development, and we
cannot predict whether the application of our RED PLATFORM, or any similar or competitive cellular technologies, will
result in the successful identification, development, and regulatory approval of any product candidates. Any development
problems we experience in the future related to our RED PLATFORM or any of our research programs could cause
significant delays or unanticipated costs and may be challenging or impossible to resolve. Any of these factors may prevent
us from completing our preclinical studies or any clinical trials that we have initiated or may in the future initiate or
commercializing any product candidates we may develop on a timely or profitable basis, if at all.
The clinical trial requirements of the FDA, the EMA and other 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 product candidate. Because no product based on biologically engineered red blood cells has
been approved to date by regulators, the regulatory approval process and timeline for product candidates such
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as ours are uncertain and may be more expensive and take longer than the approval process and timeline for product
candidates based on other, better known or more extensively studied technologies. It is difficult to determine how long it
will take or how much it will cost to obtain regulatory approvals for our product candidates in either the United States or
the European Union or other regions of the world or how long it will take to commercialize our product candidates. Delay
or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product
candidate to market could result in increased costs and decrease our ability to generate sufficient product revenue, and our
business, financial condition, results of operations and prospects may be harmed.
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 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, directors and non-employee
consultants based on the fair value of the award on either the grant date or service completion date, and we recognize the
cost as an expense over the recipient’s service period. Because the variables that we use as a basis for valuing stock-based
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:
●
the 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;
●
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 FDA
guidelines and requirements, the quantity of production and the terms of our agreements with any third-party
manufacturers we may engage;
●
the costs associated with our plans to renovate, customize and operate the manufacturing facility we own may be
greater than we anticipate;
●
expenditures that we may incur to acquire or develop additional product candidates and technologies;
●
the timing and outcomes of preclinical studies and clinical trials for our current product candidates and any future
product candidates or competing product candidates;
●
competition from existing and potential future products that compete with our current product candidates and any
future 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 our current product candidates or any future product candidates;
●
the level of demand for our current product candidates and any future product candidates, if approved, which may
fluctuate significantly and be difficult to predict;
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●
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 our current product candidates and any other future product
candidates;
●
our ability to commercialize our current product candidates and any future product candidates, if approved, inside and
outside of the United States, either independently or working with third parties;
●
our ability to adequately support future growth;
●
potential unforeseen business disruptions that increase our costs or expenses;
●
future accounting pronouncements or changes in our accounting policies; and
●
the changing and volatile global economic environment.
The cumulative effect of 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.
Risks related to product development and clinical trials
The FDA, the EMA and other regulatory authorities may implement additional regulations or restrictions on the
development and commercialization of our product candidates, which may be difficult to predict.
The FDA, the EMA and regulatory authorities in other countries have each expressed interest in further regulating
biotechnology products, such as cellular therapies. Agencies at both the federal and state level in the United States, as well
as the U.S. Congressional committees and other governments or governing agencies, have also expressed interest in further
regulating the biotechnology industry. Such action may delay or prevent commercialization of some or all of our product
candidates. Adverse developments in clinical trials of cellular therapy products conducted by others may cause the FDA or
other oversight bodies to change the requirements for approval of any of our product candidates. Similarly, the EMA
governs the development of cellular therapies in the European Union and may issue new guidelines concerning the
development and marketing authorization for cellular therapy products and require that we comply with these new
guidelines. These regulatory review agencies and committees and the new requirements or guidelines they promulgate may
lengthen the regulatory review process, require us to perform additional studies or trials, increase our development costs,
lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product
candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be
required to consult with these regulatory agencies and comply with applicable requirements and guidelines. If we fail to do
so, we may be required to delay or discontinue development of such product candidates. These additional processes may
result in a review and approval process that is longer than we otherwise would have expected. Regulatory authorities in
different jurisdictions do not always agree on required nonclinical or clinical data or other requirements for product
development and approval and may provide contradictory guidance, thus potentially further complicating or delaying
product development or approval. Additionally, any delays in the regulatory approval process resulting from the ongoing
COVID-19 pandemic could increase our costs and negatively impact our ability to complete clinical trials and
commercialize our current and future product candidates in a timely manner, if at all.
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Clinical development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional
costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of
any product candidates.
To obtain the requisite regulatory approvals to commercialize any product candidates, we must demonstrate through
extensive preclinical studies and clinical trials that our products are safe and effective in humans. Clinical testing is
expensive, difficult to design and implement and can take many years to complete, and its outcome is inherently uncertain.
We may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically
meaningful, and a clinical trial can fail at any stage of testing. The outcome of nonclinical studies and early clinical trials
may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict
final results. Differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to
extrapolate the results of earlier clinical trials to later clinical trials. Moreover, nonclinical and clinical data are often
susceptible to varying interpretations and analyses, and many companies that have believed their product candidates
performed satisfactorily in nonclinical studies and clinical trials have nonetheless failed to obtain marketing approval of
their products.
Successful completion of clinical trials is a prerequisite to submitting a BLA to the FDA, a marketing authorization
application, or MAA, to the EMA, and similar marketing applications to comparable foreign regulatory authorities, for
each product candidate and, consequently, the ultimate approval and commercial marketing of any product candidates. We
do not know whether any of our planned clinical trials will begin or, if any clinical trials we have commenced or will
commence in the future will be completed on schedule, if at all.
In addition, certain of our product candidate development programs contemplate the development of companion
diagnostics, which are assays or tests to identify an appropriate patient population. Companion diagnostics are subject to
regulation as medical devices and must themselves be cleared or approved for marketing by the FDA or certain other
foreign regulatory agencies before we may commercialize our products. We may experience numerous unforeseen events
that could delay or prevent our ability to initiate or complete our preclinical or nonclinical testing and studies or our clinical
trials, receive marketing approval or launch and commercialize our product candidates, including:
●
we may be unable to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation
of clinical trials;
●
regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to
commence a clinical trial or conduct a clinical trial at a prospective trial site;
●
we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and
prospective contract research organizations, or CROs, the terms of which can be subject to extensive negotiation and
may vary significantly among different CROs and trial sites;
●
clinical trials of any product candidates may fail to show safety, purity or potency, or produce negative or inconclusive
results and we may decide, or regulators may require us, to conduct additional nonclinical studies or clinical trials,
such as bridging studies, or revise our trial design or testing protocols, which could adversely affect the approvability
and commercial viability of our product candidates, or we may decide to abandon product development programs;
●
the number of patients required for clinical trials of any product candidates may be larger than we anticipate,
enrollment in these clinical trials may be slower than we anticipate, as was the case in our Phase 1b trial for our
discontinued product candidate, RTX-134, or participants may drop out of these clinical trials or fail to return for post-
treatment follow-up at a higher rate than we anticipate, and patient enrollment and participation may continue to be
affected by the ongoing COVID-19 pandemic;
●
we may need to add new or additional clinical trial sites;
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●
we may not be successful in developing, clearing or obtaining approval of companion diagnostics for use with certain
of our product candidates;
●
our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us
in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require
that we add new clinical trial sites or investigators;
●
the cost of preclinical or nonclinical testing and studies and clinical trials of any product candidates may be greater
than we anticipate or greater than our available financial resources;
●
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product
candidates, including raw materials, may be untimely, insufficient or inadequate and we or our suppliers, contract
manufacturing organizations, or CMOs, and CROs may experience interruptions or delays, including on account of
man-made or natural disasters, medical epidemics or pandemics, including the ongoing COVID-19 pandemic,
shortages in the donor blood supply chain, and the U.S. government’s utilization of its Defense Production Act
authority and the resulting impact on the biologic supply chain;
●
RCTs may circulate longer or shorter in humans than anticipated;
●
if we cannot successfully enforce and defend our intellectual property rights and claims;
●
our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our
investigators, regulators or IRBs or ethics committees to suspend or terminate the trials, or reports may arise from
preclinical or clinical testing of other therapies for cancer and autoimmune diseases or additional diseases that we
target that raise safety or efficacy concerns about our product candidates;
●
unforeseen global instability, including political instability or instability from an outbreak of pandemic or contagious
disease, such as COVID-19 and variants thereof, in or around the cities and countries in which we conduct our clinical
trials or where our third-party contractors operate; and
●
the FDA or other regulatory authorities may require us to submit additional data, such as long-term toxicology studies,
or impose other requirements before permitting us to initiate a clinical trial and, as seen with gene therapies, could
impose long-term safety follow-up for any of our clinical trials.
We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the institutions in which
such trials are being conducted, or the FDA or other regulatory authorities, or recommended for suspension or termination
by the Data Safety Monitoring Board, or DSMB, for such trial. A suspension or termination may be imposed due to a
number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical
protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the
imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a
product or treatment, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental
regulations or administrative actions or lack of adequate funding to continue the clinical trial. Many of the factors that
cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of
regulatory approval of our product candidates. Further, the FDA or other regulatory authorities may disagree with our
clinical trial design and our interpretation of data from clinical trials or may change the requirements for approval even
after they have reviewed and commented on the design for our clinical trials.
Additionally, some of the clinical trials we conduct may be open label in study design and may be conducted at a limited
number of clinical sites on a limited number of patients. An “open-label” clinical trial is one where both the patient and
investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug
or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do
so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic
effect as patients in open-label clinical trials are aware when they are receiving treatment. Open-label clinical
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trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their
awareness of receiving an experimental treatment. Moreover, patients selected for early clinical studies often include the
most severe sufferers and their symptoms may have been bound to improve notwithstanding the new treatment. In addition,
open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological
outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the
treated group more favorably given this knowledge. Given that our studies of RTX-240, RTX-321 and RTX-224 include an
open-label dosing design, the results from these clinical trials may not be predictive of future clinical trial results with these
or other product candidates for which we conduct an open-label clinical trial when studied in a controlled environment with
a placebo or active control.
Our product development costs will increase if we experience delays in clinical testing or marketing approvals. We do not
know whether any of our preclinical or nonclinical testing and studies or clinical trials will begin as planned, will need to
be restructured or will be completed on schedule, or at all. Significant preclinical or nonclinical testing and studies or
clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our
product candidates and may allow our competitors to bring products to market before we do, potentially impairing our
ability to successfully commercialize our product candidates and harming our business and results of operations. Any
delays in our nonclinical or future clinical development programs may harm our business, financial condition and prospects
significantly.
Preclinical development is uncertain. Our preclinical programs may experience delays or may never advance to clinical
trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a
timely basis or at all, which would have an adverse effect on our business.
All but three of our current product candidates are still in the preclinical stage, and their risk of failure is high. Before we
can commence clinical trials for a product candidate, we must complete extensive preclinical testing and studies that
support our planned INDs in the United States, or similar applications in other jurisdictions. We cannot be certain of the
timely completion or outcome of our preclinical testing and studies and cannot predict if the FDA or other regulatory
authorities will accept our proposed clinical programs or if the outcome of our preclinical testing and studies will
ultimately support the further development of our programs. As a result, we cannot be sure that we will be able to submit
INDs or similar applications, or subsequent protocol amendments, for our preclinical programs on the timelines we expect,
if at all, and we cannot be sure that submission of INDs or similar applications will result in the FDA or other regulatory
authorities allowing testing and clinical trials to begin or proceed, or that, once begun, issues will not arise that lead to the
suspension or termination of such clinical trials. Additionally, even if such regulatory authorities agree with the design and
implementation of the clinical trials set forth in an IND or similar application, we cannot guarantee that such regulatory
authorities will not change their requirements in the future.
Our ongoing and planned clinical trials or those of our future collaborators may reveal significant adverse events not
seen in our preclinical or nonclinical studies and may result in a safety profile that could inhibit regulatory approval or
market acceptance of any of our product candidates.
Before obtaining regulatory approvals for the commercial sale of any products, we must demonstrate through lengthy,
complex and expensive preclinical studies and clinical trials that our product candidates are both safe and effective for use
in each target indication. Clinical testing is expensive and can take many years to complete, and its outcome is inherently
uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical
trials of our product candidates may not be predictive of the results of later-stage clinical trials. In addition, initial success
in clinical trials may not be indicative of results obtained when such trials are completed. There is typically an extremely
high rate of attrition from the failure of product candidates proceeding through clinical trials. As is the case with many
treatments for cancer and autoimmune diseases, it is likely that there may be side effects associated with their use. For
example, our RCTs are produced from O negative donor blood stem cells and we believe can therefore be used as
allogeneic therapies in approximately 95% of patients. However, following repeated dosing, some patients may develop
antibodies to blood antigens on our RCTs. These antibodies could reduce the efficacy of our RCTs or result in undesirable
side effects.
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Product candidates in later stages of clinical trials also may fail to show the desired safety and efficacy profile despite
having progressed through nonclinical studies and earlier clinical trials. A number of companies in the biopharmaceutical
industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety issues,
notwithstanding promising results in earlier trials. Most product candidates that commence clinical trials are never
approved as products and there can be no assurance that any of our current or future clinical trials will ultimately be
successful or support further clinical development of any of our product candidates.
We intend to develop RTX-240, RTX-321 and RTX-224, and may develop future product candidates, alone and in
combination with one or more cancer therapies. The uncertainty resulting from the use of our product candidates in
combination with other cancer therapies may make it difficult to accurately predict side effects in future clinical trials.
Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. Further, if
significant adverse events or other side effects are observed in any of our current or future clinical trials, we may have
difficulty recruiting patients to our clinical trials, patients may drop out of our trials, or the FDA or comparable foreign
regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or
all targeted indications, or interrupt, delay or halt the trials or our development efforts of one or more product candidates.
Although our RCTs are designed to be enucleated, a small percentage of cells in our product candidates may retain nuclei,
which could result in unexpected or undesirable side effects. We, the FDA or other applicable regulatory authorities, or an
IRB may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in
such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in
the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side
effects that prevented their further development. Even if the side effects do not preclude the drug from obtaining or
maintaining marketing approval, undesirable side effects may cause delays in such approval, result in a more restrictive
label or inhibit market acceptance of the approved product due to its tolerability or label versus other therapies.
Further, clinical trials by their nature utilize a sample of the potential patient population. With a limited number of patients
and limited duration of exposure, rare and severe side effects of our product candidates may only be uncovered with a
significantly larger number of patients exposed to the product candidate. If our product candidates receive marketing
approval and we or others identify undesirable side effects caused by such product candidates (or any other similar drugs)
after such approval, a number of potentially significant negative consequences could result, including that regulatory
authorities may withdraw or limit their approval of such product candidates, we may be subject to regulatory investigations
and government enforcement actions, we may be required to change the way such product candidates are distributed or
administered, conduct additional clinical trials or change the labeling of the product candidates and our reputation may
suffer.
We believe that any of these events or developments could prevent us from achieving or maintaining market acceptance of
the affected product candidates and could materially harm our business, financial condition and prospects.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed
or otherwise adversely affected.
We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. The timely completion of
clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of
patients who remain in the study until its conclusion. The enrollment of patients depends on many factors, including:
●
the severity of the disease under investigation;
●
the patient eligibility and exclusion criteria defined in the protocol;
●
clinical development programs in the same patient population, resulting in competition for clinical trial enrollment;
●
the size of the patient population required for analysis of the trial’s primary endpoints;
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●
the proximity of patients to trial sites, and the ability or willingness of patients to travel to trial sites during the
ongoing COVID-19 pandemic;
●
the design of the trial;
●
impacts of the ongoing COVID-19 pandemic on clinical trial site activation;
●
our ability to recruit clinical trial investigators and other personnel with the appropriate competencies and experience,
and the availability of qualified investigators and other personnel to conduct clinical trials during the ongoing COVID-
19 pandemic;
●
clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in
relation to other available therapies, including any new drugs that may be in clinical development or approved for the
indications we are investigating;
●
the efforts to facilitate timely enrollment in clinical trials;
●
the patient referral practices of physicians;
●
the ability to monitor patients adequately during and after treatment;
●
the availability of adequate supply or quality of our product candidates or other materials necessary to conduct clinical
trials, including as a result of the ongoing COVID-19 pandemic;
●
our ability to obtain and maintain patient consents; and
●
the risk that patients enrolled in clinical trials will drop out of the trials before completion.
Our clinical trials will compete with other clinical trials of product candidates that are in the same therapeutic areas as our
product candidates, and this competition will reduce the number and types of patients available to us, because some
patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our
competitors. Additionally, since the number of qualified clinical investigators is limited, we expect to conduct some of our
clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who
are available for our clinical trials in such clinical trial sites. Moreover, because our product candidates represent a
departure from more commonly used methods for our targeted therapeutic areas, potential patients and their doctors may be
inclined to use conventional or newly launched competitive therapies, rather than enroll patients in any future clinical trial.
Over the last few months, we have experienced patient enrollment challenges in our Phase 1 clinical trial of RTX-321,
likely as a result of the impacts of the ongoing COVID-19 pandemic on staffing and site activation in general, alongside
more competition for patient enrollment. Although the overall impact has been minimal, if competition for patient
enrollment continues to increase, including as a result of prolonged impacts from the COVID-19 pandemic, our clinical
trial timing could be delayed.
Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our planned clinical
trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our
product candidates.
Interim, top-line and preliminary data from our clinical trials that we announce or publish from time to time may
change as more patient data become available and are subject to audit and verification procedures that could result in
material changes in the final data.
From time to time, we may publish interim, top-line or preliminary data from our preclinical studies and clinical trials,
which are based on a preliminary analysis of then-available data. Interim, preliminary or top-line data from clinical trials
that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient
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enrollment continues and more patient data become available or as patients from our clinical trials continue other
treatments for their disease. We also make assumptions, estimations, calculations, and conclusions as part of our analyses
of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline
results that we report may differ from future results of the same studies, or different conclusions or considerations may
qualify such results, once additional data have been received and fully evaluated. Preliminary or top-line data also remain
subject to audit and verification procedures that may result in the final data being materially different from the preliminary
data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data
are available. Adverse differences between preliminary or interim data and final data could significantly harm our business
prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our
common stock.
Positive results from early preclinical studies or early clinical trials of our product candidates are not necessarily
predictive of the results of later preclinical studies or any future clinical trials of our product candidates. If we cannot
replicate the positive results from our earlier preclinical studies or earlier clinical trials in our later preclinical studies
or future clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our
product candidates.
Any positive results from our preclinical studies or early clinical trials of our product candidates may not necessarily be
predictive of the results from required later preclinical studies or future clinical trials. Similarly, even if we are able to
complete our ongoing or planned preclinical studies or clinical trials according to our current development timeline, the
positive results from such preclinical studies or clinical trials may not be replicated in subsequent preclinical studies or
clinical trial results.
Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage
clinical trials after achieving positive results in early-stage development and we cannot be certain that we will not face
similar setbacks. These setbacks have been caused by, among other things, preclinical and other nonclinical findings made
while clinical trials were underway, or safety or efficacy observations made in preclinical studies and clinical trials,
including previously unreported adverse events. Moreover, preclinical, nonclinical and clinical data are often susceptible to
varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in
preclinical studies and clinical trials nonetheless failed to obtain FDA or EMA approval.
We expect to develop RTX-240, RTX-321, RTX-224, and potentially future product candidates, alone and in
combination with other therapies, and safety or supply issues with combination-use products may delay or prevent
development and approval of our product candidates.
We intend to develop RTX-240, RTX-321, RTX-224 and likely other product candidates alone and in combination with one
or more cancer therapies, both approved and unapproved. Even if any product candidate we develop were to receive
marketing approval or be commercialized for use in combination with other existing therapies, we would continue to be
subject to the risks that the FDA or similar regulatory authorities outside of the United States could revoke approval of the
therapy used in combination with our product candidate or that safety, efficacy, manufacturing or supply issues could arise
with these existing therapies. Combination therapies are commonly used for the treatment of cancer, and we would be
subject to similar risks if we develop any of our product candidates for use in combination with other drugs for indications
other than cancer. Similarly, if the therapies we use in combination with our product candidates are replaced as the standard
of care for the indications we choose for any of our product candidates, the FDA or similar regulatory authorities outside of
the United States may require us to conduct additional clinical trials. The occurrence of any of these risks could result in
our own products, if approved, being removed from the market or being less successful commercially.
We may also evaluate RTX-240, RTX-321, RTX-224 or any future product candidates in combination with one or more
cancer therapies that have not yet been approved for marketing by the FDA or similar regulatory authorities outside of the
United States. We will not be able to market and sell RTX-240, RTX-321, RTX-224 or any other product candidate we
develop in combination with any such unapproved cancer therapies that do not ultimately obtain marketing approval. The
regulations prohibiting the promotion of products for unapproved uses are complex and subject to substantial interpretation
by the FDA and other government agencies. In addition, there are additional risks similar to the ones
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described for our products currently in development and clinical trials that result from the fact that such cancer therapies
are unapproved, such as the potential for serious adverse effects, delay in their clinical trials and lack of FDA approval.
If the FDA or similar regulatory authorities outside of the United States do not approve these other drugs or revoke their
approval, or if safety, efficacy, manufacturing, or supply issues arise with, the drugs we choose to evaluate in combination
with RTX-240, RTX-321, RTX-224 or any other product candidate we develop, we may be unable to obtain approval of or
market RTX-240, RTX-321, RTX-224 or any such other product candidate.
We may expend our resources to pursue a particular product candidate or indication and forgo the opportunity to
capitalize on product candidates or indications that may ultimately be more profitable or for which there is a greater
likelihood of success.
Because we have limited financial and managerial resources, we intend to focus on developing product candidates for
specific indications that we identify as most likely to succeed, in terms of both their potential for regulatory approval and
commercialization. As a result, we may forego or delay pursuit of opportunities with other product candidates, as we did in
the past with RTX-134, or for other indications that may prove to have greater commercial potential.
Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market
opportunities. Our spending on current and future research and development programs and product candidates for specific
indications may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial
potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate
through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for
us to retain sole development and commercialization rights to the product candidate.
We may not be successful in our efforts to identify additional product candidates. Due to our limited resources and
access to capital, we must prioritize development of certain product candidates, which may prove to be wrong and may
adversely affect our business.
Although we intend to explore other therapeutic opportunities in addition to the product candidates that we are currently
developing, we may fail to identify viable new product candidates for clinical development for a number of reasons. If we
fail to identify additional potential product candidates, our business could be materially harmed.
Research programs to pursue the development of our existing and planned product candidates for additional indications and
to identify new product candidates and disease targets require substantial technical, financial and human resources whether
or not they are ultimately successful. Our research programs may initially show promise in identifying potential indications
and/or product candidates, yet fail to yield results for clinical development for a number of reasons, including:
●
the research methodology used may not be successful in identifying potential indications and/or product candidates;
●
potential product candidates may, after further study, be shown to have harmful adverse effects or other characteristics
that indicate they are unlikely to be effective drugs; or
●
it may take greater human and financial resources than we will possess to identify additional therapeutic opportunities
for our product candidates or to develop suitable potential product candidates through internal research programs,
thereby limiting our ability to develop, diversify and expand our product portfolio.
Because we have limited financial and human resources, we intend to initially focus on research programs and product
candidates for a limited set of indications. As a result, we may forego or delay pursuit of opportunities with other product
candidates, as we did in the past with RTX-134, or for other indications that later prove to have greater commercial
potential or a greater likelihood of success. Our resource allocation decisions may cause us to fail to capitalize on viable
commercial products or profitable market opportunities.
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Accordingly, there can be no assurance that we will ever be able to identify additional therapeutic opportunities for our
product candidates or to develop suitable potential product candidates through internal research programs, which could
materially adversely affect our future growth and prospects. We may focus our efforts and resources on potential product
candidates or other potential programs that ultimately prove to be unsuccessful.
Risks related to sales, marketing and competition
The market opportunities for our product candidates may be limited to those patients who are ineligible for other
therapies or who have failed prior treatments and may be small, and our estimates of the prevalence of our target
patient populations may be inaccurate.
Cancer and autoimmune therapies are sometimes characterized as first-line, second-line, third-line and even fourth-line,
and the FDA often approves new therapies initially only for last-line use. Initial approvals for new cancer and autoimmune
therapies are often restricted to later lines of therapy, and in the case of cancer specifically, for patients with advanced or
metastatic disease. This will limit the number of patients who may be eligible for such new therapies, which may include
our product candidates.
Our projections of both the number of people who have the diseases we are targeting, as well as the subset of people with
these diseases in a position to receive our therapies, if approved, are based on our beliefs and estimates. These estimates
have been derived from a variety of sources, including scientific literature, input from key opinion leaders, patient
foundations, or secondary market research databases, and may prove to be incorrect. For example, the number of new
products in development for the diseases we are targeting continues to grow, and it is conceivable that patients will have
multiple treatment options in the future. Further, new studies may change the estimated incidence or prevalence of these
diseases. The number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient
population for our product candidates may be limited or may not be amenable to treatment with our product candidates.
Furthermore, regulators and payors may further narrow the therapy-accessible treatment population. Even if we obtain
significant market share for our product candidates, because certain of the potential target populations are small, we may
never achieve profitability without obtaining regulatory approval for additional indications.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will
suffer if we fail to compete effectively.
The biopharmaceutical industry is characterized by intense competition and rapid innovation. Our competitors may be able
to develop other compounds, drugs, cellular or gene therapies that are able to achieve similar or better results. Our potential
competitors include major multinational pharmaceutical companies, established biotechnology companies, specialty
pharmaceutical companies and universities and other research institutions. Many of our competitors have substantially
greater financial, technical and other resources, such as larger research and development staff, experienced marketing and
manufacturing organizations and well-established sales forces. Smaller or early-stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large, established companies. Established
pharmaceutical companies may also invest heavily to accelerate discovery and development of novel therapeutics or to in-
license novel therapeutics that could make the product candidates that we develop obsolete. Mergers and acquisitions in the
biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors.
Competition may increase further as a result of advances in the commercial applicability of technologies and greater
availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners, may
succeed in developing, acquiring or licensing on an exclusive basis drug, biologic, cellular or gene therapy products that
are more effective, safer, more easily commercialized or less costly than our product candidates or may develop proprietary
technologies or secure patent protection that we may need for the development of our technologies and products. We
believe the key competitive factors that will affect the development and commercial success of our product candidates are
efficacy, safety, tolerability, reliability, convenience of use, price and reimbursement.
We anticipate competing with the largest biopharmaceutical companies in the world, as well as a broad range of smaller
biotechnology companies which are currently conducting research in cellular therapies, either alone or in partnerships with
other parties, and all of which have or may have greater financial and human resources than we currently have. In
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addition to these fully integrated biopharmaceutical companies, we also compete with those companies whose products
target the same indications as our product candidates. Many third parties compete with us in developing various approaches
to cancer and autoimmune therapies. They include pharmaceutical companies, biotechnology companies, academic
institutions and other research organizations. Any treatments developed by our competitors could be superior to our RCT
product candidates. It is possible that these competitors will succeed in developing technologies that are more effective
than our RCTs or that would render our cancer targeted RCTs obsolete or noncompetitive. We anticipate that we will face
increased competition in the future as additional companies enter our market and scientific developments surrounding other
cancer and autoimmune therapies continue to accelerate.
There are at least two companies leveraging red blood cells to develop therapeutics for cancer and/or immune tolerance.
Erytech Pharma SA is using reversible hypotonic and hypertonic osmotic stress to encapsulate drug substances inside of
red blood cells to create product candidates for use in cancer and orphan diseases. SQZ Biotechnologies Company is
pursuing applications in cancer, infectious disease and autoimmune diseases using a variety of cell-based approaches,
including red blood cells.
Outside of RBC-based competition, there are a number of companies competing in our target therapeutic areas. Within
oncology, multiple large and small companies are developing novel immune stimulatory agents, such as Nektar
Therapeutics, which is developing a polymer-conjugated IL-15, and Genmab, which is developing a bispecific antibody
targeting PD-L1 and 4-1BB. Others are developing activated and engineered NK cell product candidates as cancer
therapeutics against both hematologic and solid tumor malignancies, such as Fate Therapeutics. Many companies are
developing therapies to generate antigen-specific immune responses against HPV-positive cancers, such as BioNTech SE
using RNA and Inovio Pharmaceuticals, Inc. using DNA-based therapy. Finally, multiple companies are developing novel
approaches to restore immune tolerance, such as Anokion SA, which is developing engineered proteins for celiac disease,
Type 1 diabetes and multiple sclerosis, Cour Pharmaceuticals, which is developing nanoparticle technology for the
treatment of celiac disease, and Cellerys AG, which is developing a peptide-coupled cell therapy for the treatment of
multiple sclerosis.
In addition to the companies described above, we anticipate competing with the largest biopharmaceutical companies in the
world, such as Novartis AG, Gilead Sciences, Inc., Amgen, Inc., F. Hoffman-La Roche AG (Roche), Johnson & Johnson
and Pfizer, Inc.
Even if we obtain regulatory approval to market our product candidates, the availability and price of our competitors’
products could limit the demand and the price we are able to charge for our product candidates. We may not be able to
implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance
of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new
drug or biologic products or choose to reserve our product candidates for use in limited circumstances.
Even if a product candidate we develop receives marketing approval, it may fail to achieve the degree of market
acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial
success.
If any product candidate we develop receives marketing approval, whether as a single agent or in combination with other
therapies, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors, and others
in the medical community. For example, other cancer treatments like chemotherapy, radiation therapy and immunotherapy
are well established in the medical community, and doctors may continue to rely on these therapies. If the product
candidates we develop do not achieve an adequate level of acceptance, we may not generate significant product revenues
and we may not become profitable. The degree of market acceptance of any product candidate, if approved for commercial
sale, will depend on a number of factors, including:
●
efficacy, safety and potential advantages compared to alternative treatments;
●
product labeling, product insert, or warning requirements of the FDA or other regulatory authorities;
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●
any restrictions on the use of our products together with other medications or restrictions on the use of our products in
certain types of patients;
●
convenience and ease of administration compared to alternative treatments;
●
the timing of market introduction of our product candidates as well as competitive products;
●
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
●
public perception of new therapies, including cellular therapies;
●
the strength of marketing and distribution support;
●
the ability to offer our products, if approved, for sale at competitive prices;
●
the ability to obtain sufficient third-party insurance coverage and adequate reimbursement, including with respect to
the use of the approved product as a combination therapy;
●
the willingness of patients to pay out-of-pocket in the absence of sufficient payor coverage;
●
adoption of a companion diagnostic and/or complementary diagnostic; and
●
the prevalence and severity of any side effects associated with our product candidates.
If our product candidates are approved but do not achieve an adequate level of acceptance by patients, physicians and
payors, we may not recognize sufficient revenue from our product candidates to become or remain profitable. Before
granting reimbursement approval, healthcare payors may require us to demonstrate that our product candidates, in addition
to treating these target indications, also provide incremental health benefits to patients. Our efforts to educate the medical
community and third-party payors about the benefits of our product candidates may require significant resources and may
never be successful.
Cellular therapies are a novel approach and negative perception of any product candidates that we develop could
adversely affect our ability to conduct our business or obtain regulatory approvals for such product candidates.
Cellular therapies in general, and RCTs in particular, remain novel and unproven therapies, with no biologically engineered
red blood cell therapy approved to date in the United States or the European Union. RCTs may not gain the acceptance of
the public or the medical community. For example, CAR-Ts and other cellular therapies have in some cases caused severe
side effects and even mortality and their broader use may therefore be limited. Although our RCTs are fundamentally
different than these earlier cellular therapies, they may be viewed in the same vein, limiting their market acceptance.
Further, with respect to our RTX-240, RTX-321 and RTX-224 programs, the use of potent T cell and NK cell stimulation
as a potential treatment for solid or hematological cancers is a recent scientific development and may not become broadly
accepted by physicians, patients, hospitals, cancer treatment centers and others in the medical community.
Our success will depend upon physicians who specialize in the treatment of diseases targeted by our product candidates
prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with
which they are more familiar and for which greater clinical data may be available. Adverse events in clinical trials of our
product candidates or in clinical trials of others developing similar products and the resulting publicity, as well as any other
adverse events in the field of cellular therapies, could result in a decrease in demand for any product that we may develop.
In addition, responses by the U.S., state or foreign governments to negative public perception or ethical concerns may
result in new legislation or regulations that could limit our ability to develop or commercialize any product candidates,
obtain or maintain regulatory approval or otherwise achieve profitability. More restrictive statutory regimes, government
regulations or negative public opinion would have an adverse effect on our business, financial
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condition, results of operations and prospects and may delay or impair the development and commercialization of our
product candidates or demand for any products we may develop.
We currently have no marketing and sales organization and have no experience in marketing products. If we are unable
to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product
candidates, we may not be able to generate product revenue.
We currently have no sales, marketing or distribution capabilities and have no experience in marketing products. We may
develop an in-house marketing organization and sales force, which will require significant capital expenditures,
management resources and time. In the event we develop and deploy these capabilities, we will have to compete with other
pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.
In addition to establishing internal sales, marketing and distribution capabilities, we may pursue collaborative arrangements
regarding the sales and marketing of our products, however, there can be no assurance that we will be able to establish or
maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue
we receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control
over the marketing and sales efforts of such third parties and our revenue from product sales may be lower than if we had
commercialized our product candidates ourselves. We also face competition in our search for third parties to assist us with
the sales and marketing efforts of our product candidates.
There can be no assurance that we will be able to develop in-house sales and distribution capabilities or establish or
maintain relationships with third-party collaborators to commercialize any product in the United States or overseas.
A variety of risks associated with marketing our product candidates internationally could materially adversely affect our
business.
We plan to seek regulatory approval of our product candidates outside of the United States and, accordingly, we expect that
we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals,
including:
●
differing regulatory requirements in foreign countries;
●
unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;
●
economic weakness, including inflation, or political instability in particular foreign economies and markets;
●
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
●
foreign taxes, including withholding of payroll taxes;
●
foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other
obligations incident to doing business in another country;
●
difficulties staffing and managing foreign operations;
●
workforce uncertainty in countries where labor unrest is more common than in the United States;
●
potential liability under the Foreign Corrupt Practices Act, or FCPA, or comparable foreign regulations;
●
challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not
respect and protect intellectual property rights to the same extent as the United States;
●
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
and
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●
business interruptions resulting from geo-political actions, including war and terrorism or global pandemics, including
but not limited to, the COVID-19 pandemic.
These and other risks associated with our international operations may materially adversely affect our ability to attain or
maintain profitable operations.
Risks related to our business operations
The effects of health epidemics like the ongoing COVID-19 pandemic, including recurring surges and waves of
infection and emergent variants of the coronavirus, in regions where we, or the third parties on which we rely, have
business operations could adversely impact our business, including our clinical supply, preclinical studies and ongoing
and planned clinical trials. The ongoing COVID-19 pandemic could materially affect our operations, including at our
headquarters in Massachusetts and our manufacturing facility in Rhode Island, as well as the businesses or operations
of our contract research organizations, or CROs, or other third parties with whom we conduct business.
In response to the ongoing COVID-19 pandemic, national, state, and local governments have continued to implement
orders and recommendations to attempt to reduce the further spread of the disease, including travel restrictions, limitations
on public gatherings, remote schooling, social distancing requirements and limitations on services and infrastructure.
Although many restrictions have been eased or lifted in light of vaccination rates and as cases in the United States,
including Massachusetts and Rhode Island, have decreased, protocols may be reinstated or become more restrictive if the
United States or certain areas experience a resurgence of infections, as has been the case with the Omicron variant.
Fluctuation in infection rates in the regions in which we have business operations has resulted in periodic changes in
restrictions that vary from region to region and require vigilant attention and rapid response to new or reinstated
restrictions. The duration and severity of the pandemic, as well as periodic spikes in infection rates, new strains of the virus
that causes COVID-19, local outbreaks and resurgence of the virus, and the broad availability of effective vaccines and
treatments have impacted, and may continue to impact, our preclinical studies and clinical trial operations. Our suppliers
and vendors are subject to such restrictions and orders and have been and may continue to be impacted. While not
materially adversely affected, our business continues to experience the impact of COVID-19 on our supply chain, vendor
operations and clinical trial activities. The ultimate extent of such impact, including on the supply chain for our candidates
and our preclinical and clinical trial activities, will depend on future developments, which are highly uncertain and cannot
be predicted with confidence, such as the duration of the pandemic, the severity of COVID-19, or the effectiveness of
actions and vaccinations to contain and treat COVID-19. The continued effects of COVID-19 globally, including the
identification of new strains of COVID-19, could continue to adversely impact our preclinical studies and clinical trials in
the United States, including our ability to recruit and retain patients and principal investigators and site staff who, as
healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography. COVID-19
may also affect employees of third-party CROs located in affected geographies that we will rely upon to carry out our
clinical trials. Any continuing negative impact COVID-19 has on patient enrollment or treatment, including access to study
sites, availability of study data, or the advancement of our current product candidates and any future product candidates
could cause costly delays to clinical trial activities, which could adversely affect our ability to obtain regulatory approval
for and to commercialize our current product candidates and any future product candidates, increase our operating
expenses, and have a material adverse effect on our financial results. To the extent the ongoing COVID-19 pandemic
adversely affects our business and financial results and those of third parties on which we rely, it may also have the effect
of heightening many of the other risks described in this “Risk Factors” section.
Further, we have begun to see the effect that the ongoing COVID-19 pandemic has had on enrollment in our clinical trials
due to, among other reasons, staffing challenges at our clinical trial sites and site availability generally. Key clinical trial
activities, such as site monitoring, have experienced interruptions due to restrictions in travel, and some patients have been,
and may continue to be, unwilling to enroll in our trials or unable to comply with clinical trial protocols, including as a
result of quarantines or travel restrictions which impede patient movement or interrupt
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healthcare services. Such interruptions to clinical activities and impacts on enrollment could delay our ability to conduct
clinical trials or release clinical trial results. While not material, the spread of COVID-19 has in some cases negatively
affected the operations at our third-party vendors, which has resulted in delays and disruptions in the supply of some
components of our current product candidates and could impact the supply of any future product candidates. In addition,
we have taken and may continue to take temporary precautionary measures intended to help minimize the risk of the virus
to our employees, including temporarily requiring all employees to work remotely, suspending all non-essential travel
worldwide for our employees, and discouraging employee attendance at industry events and in-person work-related
meetings, which could negatively affect our business.
Additionally, since the beginning of the ongoing COVID-19 pandemic, three vaccines for COVID-19 have received
Emergency Use Authorization by the FDA and two of those later received marketing approval. Additional vaccines may be
authorized or approved in the future. The resultant demand for vaccines and potential for manufacturing facilities and
materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, has in some
instances made it more difficult, or has delayed our ability, to timely obtain materials or manufacturing slots for the product
candidates needed for our clinical trials, which could lead to future delays in these trials.
We cannot presently predict the scope and severity of the impact of the COVID-19 pandemic or its impact on our business.
Despite the availability of vaccines and improved treatment options, we may continue to see widespread effects from the
ongoing COVID-19 pandemic, including as a result of resurgences of cases, particularly with recently emerged or future
variants that are resistant to the vaccines and treatment alternatives. If we or any of the third parties with whom we engage
were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the
timelines presently planned could be materially and negatively affected, which could have a material adverse impact on our
business and our results of operation and financial condition.
We will need to grow the size of our organization, and we may experience difficulties in managing this growth.
As of January 31, 2022, we had 269 full-time employees. As our research, development, manufacturing and
commercialization plans and strategies develop over time, we expect to need additional managerial, operational, sales,
marketing, financial and other personnel. Future growth would impose significant added responsibilities on members of
management, including:
●
identifying, recruiting, compensating, integrating, maintaining and motivating additional employees;
●
managing our internal research and development efforts effectively, including identification of clinical candidates,
scaling our manufacturing process and navigating the clinical and FDA review process for our product candidates; and
●
improving our operational, financial and management controls, reporting systems and procedures.
Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our
ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of
its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth
activities.
We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain organizations, advisors
and consultants to provide certain services, including many aspects of regulatory affairs, clinical management and
manufacturing. There can be no assurance that the services of these organizations, advisors and consultants will continue to
be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable
to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is
compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain
regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be
able to manage our existing consultants or find other competent outside contractors and consultants on economically
reasonable terms, or at all.
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If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants
and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize
our product candidates and, accordingly, may not achieve our research, development and commercialization goals.
If we lose key management personnel, or if we fail to recruit additional highly skilled personnel, our ability to identify
and develop new or next generation product candidates will be impaired, could result in loss of markets or market share
and could make us less competitive.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to
attract and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our
management, scientific and medical personnel, including David R. Epstein, our Chairman, Pablo J. Cagnoni, our Chief
Executive Officer, Jose Carmona, our Chief Financial Officer, Laurence Turka, our Chief Scientific Officer and Head of
Research & Translational Medicine, Dannielle Appelhans, our Chief Operating Officer, and Spencer Fisk, our Senior Vice
President and Chief Technical Operations Officer. The loss of the services of any of our executive officers, other key
employees, and other scientific and medical advisors, and our inability to find suitable replacements could result in delays
in product development and harm our business.
We conduct our operations at our facilities in Cambridge, Massachusetts and Smithfield, Rhode Island. The New England
region is headquarters to many other biopharmaceutical companies and many academic and research institutions.
Competition for skilled personnel in our market is intense and 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
restricted stock units and stock options that vest over time. The value to employees of stock options 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. Despite our efforts to retain valuable employees, members of our
management, scientific and development teams may terminate their employment with us on short notice. Employment of
our key employees is at-will, which means that any of our employees could leave our employment at any time, with or
without notice. We do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our
other employees. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior,
mid-level and senior managers, as well as junior, mid-level and senior scientific and medical personnel.
Our internal computer systems, or those used by our CROs, any future CMOs or other contractors or consultants, may
fail or suffer security breaches, and our intellectual property is potentially vulnerable to cyber-attacks.
Our intellectual property, other proprietary technology, and other sensitive company information is dependent on
sophisticated information technology systems and is potentially vulnerable to cyber-attack, loss, damage, destruction from
system malfunction, computer viruses, loss of data privacy, or misappropriation or misuse of it by those with permitted
access, and other events. While we have invested to protect our intellectual property and other information, and continue to
upgrade and enhance our systems to keep pace with continuing changes in information processing technology, there can be
no assurance that our precautionary measures will prevent breakdowns, breaches, cyber-attacks, or other events. Such
events could have a material adverse effect on our reputation, financial condition, or results of operations.
Further, despite the implementation of security measures, the internal computer systems of our CROs, any future CMOs
and other contractors and consultants are likewise subject to such vulnerabilities. While we have not experienced any such
material system failure or security breach to date (and while we are not aware of such a failure or breach at any of such
third parties), if such an event were to occur and cause interruptions in our operations, it could result in a material
disruption of our or their development programs and our business operations. For example, the loss of clinical trial data
from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase
our costs to recover or reproduce the data. Likewise, we currently rely on outside vendors to supply raw materials and other
important components, such as CD34+ precursor cells and lentiviral vectors, that are used to manufacture our
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product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a
material adverse effect on our business. 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 confidential or proprietary information, we could incur
liability and the further development and commercialization of our product candidates could be delayed.
Risks related to litigation and noncompliance with applicable laws or regulations
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit
commercialization of our product candidates.
We face an inherent risk of product liability as a result of testing our product candidates in clinical trials and will face an
even greater risk if we commercialize any products. For example, we may be sued if our product candidates cause or are
perceived to cause injury or are found to be otherwise unsuitable during clinical trials, manufacturing, marketing or sale.
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. If we cannot successfully defend ourselves against product liability claims, we may 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 the merits or eventual outcome, liability claims may
result in:
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inability to bring a product candidate to the market;
●
decreased demand for our products;
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injury to our reputation;
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withdrawal of clinical trial participants and inability to continue clinical trials;
●
initiation of investigations by regulators;
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costs to defend the related litigation;
●
diversion of management’s time and our resources;
●
substantial monetary awards to trial participants or patients;
●
product recalls, withdrawals or labeling, marketing or promotional restrictions;
●
loss of revenue;
●
exhaustion of any available insurance and our capital resources;
●
the inability to commercialize any product candidate; and
●
declines in our share price.
Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product
liability claims could prevent or inhibit the commercialization of products we develop, alone or with collaborators. If and
when coverage is secured, our insurance policies may also have various exclusions, and we may be subject to a product
liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a
settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to
obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to
indemnification against losses, such indemnification may not be available or adequate should any claim arise.
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Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or
other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of employee fraud or other illegal activity by our employees, independent contractors,
consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless and/or
negligent conduct, including failure to comply with the laws of the FDA and other similar foreign regulatory bodies, failure
to provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies, failure to
comply with manufacturing standards we have established, failure to comply with healthcare fraud and abuse laws in the
United States and similar foreign fraudulent misconduct laws, and failure to report financial information or data accurately
or to disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin
commercializing those products in the United States, our potential exposure under applicable law will increase
significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact,
among other things, our current activities with principal investigators and research patients, as well as proposed and future
sales, marketing and education programs.
Our relationships with healthcare providers and physicians and third-party payors will be subject to applicable anti-
kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil
penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors in the United States and elsewhere play a primary role in the
recommendation and prescription of pharmaceutical products. Arrangements with third-party payors and customers can
expose pharmaceutical manufacturers to broadly applicable fraud and abuse and other healthcare laws and regulations,
including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act, which may constrain the
business or financial arrangements and relationships through which such companies sell, market and distribute
pharmaceutical products. In particular, the promotion, sales and marketing of healthcare items and services, as well as
certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks,
self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, structuring and commission practices, certain customer incentive programs and
other business arrangements generally. Activities subject to these laws also involve the improper use of information
obtained in the course of patient recruitment for clinical trials. See the sections entitled, “Business — Government
Regulation — Other healthcare laws.”
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of
healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement
bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which
has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Additionally, the
distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-
keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products.
Ensuring that our internal operations and business arrangements with third parties comply with applicable healthcare laws
and regulations can be time- and resource-consuming, can divert our attention from our business and have involved, and
will continue to involve, substantial costs. We have adopted a code of business conduct and ethics, but it is not always
possible to identify and deter employee misconduct, and the precautions we take to detect and prevent inappropriate
conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental
investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. It is
possible that governmental and enforcement authorities will conclude that our business practices may not comply with
current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and
regulations. If any enforcement actions are instituted against us, and we are not successful in defending ourselves or
asserting our rights, those actions could have a significant impact on our business, including the imposition of civil,
criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in
Medicare, Medicaid and other federal healthcare programs, individual imprisonment, contractual damages, reputational
harm, diminished profits and future earnings, and curtailment of our operations, as well as
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additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement
to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our
business and our results of operations. Further, defending against any such actions can be costly and time consuming, and
may require significant financial and personnel resources. Therefore, even if we are successful in defending against any
such actions that may be brought against us, our business may be impaired. If any of the physicians, manufacturers or other
providers or entities with whom we do business is found to not be in compliance with applicable laws, they may be subject
to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs and
imprisonment. Prohibitions or restrictions on sales or withdrawal of future marketed products due to noncompliance with
applicable laws could materially affect business in an adverse way. If any of the above occur, our ability to operate our
business and our results of operations could be adversely affected.
We may become involved in lawsuits to protect or enforce our patents and other intellectual property rights, which could
be expensive, time-consuming, and unsuccessful.
Competitors may infringe our patents or the patents of our licensing partners, or we may be required to defend against
claims of infringement. In addition, our patents or the patents of our licensing partners also may become involved in
inventorship, priority or validity disputes. To counter or defend against such claims can be expensive and time-consuming.
In an infringement proceeding, a court may decide that a patent owned or in-licensed by us is invalid or unenforceable or
that the other party’s use of our patented technology falls under the safe harbor to patent infringement under 35 U.S.C.
§271(e)(1), or may refuse to stop the other party from using the technology at issue on the grounds that our owned and in-
licensed patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or
more of our owned or in-licensed patents at risk of being invalidated or interpreted narrowly. Even if we establish
infringement, the court may decide not to grant an injunction against further infringing activity and instead award only
monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of
discovery required in connection with intellectual property litigation, there is a risk that some of our confidential
information could be compromised by disclosure during this type of litigation.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to
incur significant expenses and could distract our personnel from their normal responsibilities. In addition, there could be
public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities
analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our
common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources
available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient
financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to
sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources
and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation
of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or
penalties or incur costs that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory
procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our research and
development activities involve the use of biological and hazardous materials and produce hazardous waste products. We
generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of
contamination or injury from these materials, which could cause an interruption of our research and development efforts,
business operations and any future commercialization efforts or environmental damage resulting in costly clean-up and
liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and
specified waste products. Although we believe that the safety procedures we have implemented for handling and disposing
of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that
this is the case. In the event of accidental contamination or injury from hazardous materials, we may be held liable for any
resulting damages and such liability could exceed our resources and state or federal or other applicable authorities may
curtail our use of certain materials and/or interrupt our business operations. Furthermore,
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environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot
predict the impact of any changes in, and cannot be certain of our future compliance with, such laws and regulations. In
addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws
and regulations. These current or future laws and regulations may impair our research, development or production efforts.
Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Although we maintain workers’ compensation insurance to cover us for costs and expenses, we may incur due to injuries to
our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide
adequate coverage against potential liabilities. We do not carry specific biological waste or hazardous waste insurance
coverage or workers compensation, property and casualty or general liability insurance policies that include coverage for
damages and fines arising from biological or hazardous waste exposure or contamination.
We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other
trade laws and regulations. We can face serious consequences for violations.
Among other matters, U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade
laws and regulations, which we collectively refer to as Trade Laws, prohibit companies and their employees, agents,
clinical research organizations, legal counsel, accountants, consultants, contractors, and other partners from authorizing,
promising, offering, providing, soliciting, or receiving, directly or indirectly, corrupt or improper payments or anything else
of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal
fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and
fraud litigation, reputational harm, and other consequences. We have direct or indirect interactions with officials and
employees of government agencies and government-affiliated hospitals, universities, and other organizations. We also
expect our non-U.S. activities to increase in time. We currently engage, and plan to continue to engage, third parties for
clinical trials and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals and we can
be held liable for the corrupt or other illegal activities of our personnel, agents, or partners, even if we do not explicitly
authorize or have prior knowledge of such activities.
Risks related to government regulation
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will
be successful in obtaining regulatory approval of our product candidates in other jurisdictions.
We intend to submit marketing applications in both the U.S. and in selected foreign jurisdictions. 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 and maintaining regulatory approval of our product candidates in one
jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction,
while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory
approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable
regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the
product candidate in those countries.
Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different
from, and greater than, those in the United States, including additional nonclinical 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.
Obtaining foreign regulatory 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,
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our target market will be reduced and our ability to realize the full market potential of our product candidates will be
harmed.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals for our product
candidates, we will not be able to commercialize, or will be delayed in commercializing, our product candidates, and our
ability to generate revenue will be materially impaired.
Our product candidates and the activities associated with their development and commercialization, including their design,
testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, distribution,
import and export are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States
and by comparable authorities in other countries. Before we can commercialize any of our product candidates, we must
obtain marketing approval. We have not received approval to market any of our product candidates from regulatory
authorities in any jurisdiction and it is possible that none of our current product candidates or any product candidates we
may develop in the future will ever obtain regulatory approval. We, as a company, have no experience in filing and
supporting the applications necessary to gain regulatory approvals and have had to, and expect to continue to have to, rely
on third-party CROs and/or regulatory consultants to assist us in this process. Securing regulatory approval requires the
submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for
each therapeutic indication to establish the drug candidate’s safety and efficacy. Securing regulatory approval also requires
the submission of information about the drug manufacturing process to, and inspection of manufacturing facilities and
clinical sites by, the relevant regulatory authority. Our product candidates may not be effective, may be only moderately
effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude
our obtaining marketing approval or prevent or limit commercial use.
The process of obtaining regulatory approvals, both in the United States and abroad, if approval is obtained at all, is
expensive, may take many years, particularly if additional clinical trials are required, and can vary substantially based upon
a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing
approval policies during the development period, changes in or the enactment of additional statutes or regulations, or
changes in regulatory review for each submitted IND, Premarket Approval, or PMA, BLA or equivalent application types,
may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries
have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are
insufficient for approval and require additional preclinical, clinical or other studies. Our product candidates could be
delayed in receiving, or fail to receive, regulatory approval for many reasons, including the following:
●
the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical
trials;
●
we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a
drug candidate is safe and effective for its proposed indication or a related companion diagnostic is suitable to identify
appropriate patient populations;
●
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable
foreign regulatory authorities for approval;
●
we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
●
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical
studies or clinical trials;
●
the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an
BLA or other submission or to obtain regulatory approval in the United States or elsewhere;
●
the FDA or comparable foreign regulatory authorities may fail to approve our manufacturing processes or facilities or
those of third-party manufacturers with which we may contract for clinical and commercial supplies; and
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●
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change
in a manner rendering our clinical data insufficient for approval.
Of the large number of drugs in development, only a small percentage successfully complete the FDA or foreign regulatory
approval processes and are commercialized. The lengthy approval process, as well as the unpredictability of future clinical
trial results may result in our failing to obtain regulatory approval to market our product candidates, which would
significantly harm our business, results of operations and prospects.
We expect the novel nature of our product candidates to create further challenges in obtaining regulatory approval. As a
result, our ability to develop product candidates and obtain regulatory approval may be significantly impacted.
For example, the general approach for FDA approval of a new biologic or drug is for sponsors to seek licensure or approval
based on dispositive data from well-controlled, Phase 3 clinical trials of the relevant product candidate in the relevant
patient population. Phase 3 clinical trials typically involve hundreds of patients, have significant costs and take years to
complete. We believe that we may be able to utilize the FDA’s accelerated approval program for our product candidates
given the limited alternatives for treatments for certain cancer and autoimmune diseases, but the FDA may not agree with
our plans.
The FDA may also require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the
safety and efficacy data to support approval. The opinion of the Advisory Committee, although not binding, may have a
significant impact on our ability to obtain approval of any product candidates that we develop based on the completed
clinical trials. Additionally, due to the ongoing COVID-19 pandemic, the conduct of Advisory Committee meetings may be
disrupted or delayed and the impact that may have on the overall timing of regulatory approvals is uncertain.
Moreover, regulatory agencies may require the development and approval of genetic or biomarker diagnostic tests in order
to advance some of our product candidates to clinical trials or potential commercialization. Accordingly, the regulatory
approval pathway for such product candidates may be uncertain, complex, expensive and lengthy, and approval may not be
obtained.
In addition, even if we were to obtain approval, regulatory authorities may approve our product candidates for fewer or
more limited indications than we request, may not approve the price we intend to charge for our products, may grant
approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a
label that does not include the labeling claims necessary or desirable for the successful commercialization of that product
candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.
If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial
prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired.
Breakthrough Therapy Designation, Fast Track Designation or Regenerative Medicine Advanced Therapy Designation
by the FDA, even if granted for any of our product candidates, may not lead to a faster development, regulatory review
or approval process, and it does not increase the likelihood that any of our product candidates will receive marketing
approval in the United States.
We may seek a Breakthrough Therapy Designation for some of our product candidates. A breakthrough therapy is defined
as a therapy that is intended, alone or in combination with one or more other therapies, to treat a serious or life-threatening
disease or condition, and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement
over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early
in clinical development. For therapies that have been designated as breakthrough therapies, interaction and communication
between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while
minimizing the number of patients placed in ineffective control regimens. Therapies designated as breakthrough therapies
by the FDA may also be eligible for priority review and accelerated approval. Designation as a breakthrough therapy is
within the discretion of the FDA. Accordingly, even if we believe one of our product candidates
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meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such
designation. In any event, the receipt of a Breakthrough Therapy Designation for a product candidate may not result in a
faster development process, review or approval compared to therapies considered for approval under conventional FDA
procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates
qualify as breakthrough therapies, the FDA may later decide that such product candidates no longer meet the conditions for
qualification.
We may seek Fast Track Designation for some of our product candidates. If a therapy is intended for the treatment of a
serious or life-threatening condition and the therapy demonstrates the potential to address unmet medical needs for this
condition, the therapy sponsor may apply for Fast Track Designation. The FDA has broad discretion whether or not to
grant this designation, so even if we believe a particular product candidate is eligible for this designation; we cannot assure
our stockholders that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not
experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may
withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical
development program. Fast Track Designation alone does not guarantee qualification for the FDA’s priority review
procedures.
We may seek Regenerative Medicine Advanced Therapy, or RMAT, designation for one or more of our product candidates.
In 2017, the FDA established the RMAT designation as part of its implementation of the 21st Century Cures Act to
expedite review of any drug that meets the following criteria: it qualifies as a RMAT, which is defined as a cell therapy,
therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or
products, with limited exceptions; it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or
condition; and preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for
such a disease or condition. Like Breakthrough Therapy Designation, RMAT designation provides potential benefits that
include more frequent meetings with the FDA to discuss the development plan for the product candidate, and eligibility for
rolling review and priority review. Products granted RMAT designation may also be eligible for accelerated approval on
the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or reliance upon
data obtained from a meaningful number of sites, including through expansion to additional sites. RMAT-designated
products that receive accelerated approval may, as appropriate, fulfill their post-approval requirements through the
submission of clinical evidence, clinical trials, patient registries, or other sources of real world evidence, such as electronic
health records; through the collection of larger confirmatory data sets; or via post-approval monitoring of all patients
treated with such therapy prior to approval of the therapy. There is no assurance that we will be able to obtain RMAT
designation for any of our product candidates. RMAT designation does not change the FDA’s standards for product
approval, and there is no assurance that such designation will result in expedited review or approval or that the approved
indication will not be narrower than the indication covered by the designation. Additionally, RMAT designation can be
revoked if the criteria for eligibility cease to be met as clinical data emerges.
We may seek priority review designation for one or more of our other product candidates, but we might not receive such
designation, and even if we do, such designation may not lead to a faster development or regulatory review or approval
process.
If the FDA determines that a product candidate offers a treatment for a serious condition and, if approved, the product
would provide a significant improvement in safety or effectiveness, the FDA may designate the product candidate for
priority review. A priority review designation means that the goal for the FDA to review an application is six months,
rather than the standard review period of ten months. We may request priority review for our product candidates. The FDA
has broad discretion with respect to whether or not to grant priority review status to a product candidate, so even if we
believe a particular product candidate is eligible for such designation or status, the FDA may decide not to grant it.
Moreover, a priority review designation does not necessarily result in expedited development or regulatory review or
approval process or necessarily confer any advantage with respect to approval compared to conventional FDA procedures.
Receiving priority review from the FDA does not guarantee approval within the six-month review cycle or at all.
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Our product candidates may face competition from biosimilars approved through an abbreviated regulatory pathway.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010,
or collectively the ACA, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA,
which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an
FDA-approved reference biological product. Under the BPCIA, an application for a biosimilar product may not be
submitted to the FDA until four years following the date that the reference product was first approved by the FDA. In
addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which
the reference product was first approved. During this 12-year period of exclusivity, another company may still market a
competing version of the reference product if the FDA approves a BLA for the competing product containing the sponsor’s
own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity, and
potency of the other company’s product. The law is complex and is still being interpreted and implemented by the FDA. As
a result, its ultimate impact, implementation, and meaning are subject to uncertainty.
We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12-year
period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or
otherwise, or that the FDA will not consider our investigational medicines to be reference products for competing products,
potentially creating the opportunity for generic competition sooner than anticipated. Other aspects of the BPCIA, some of
which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent
to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to
traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace
and regulatory factors that are still developing.
We may fail to obtain and maintain orphan drug designations from the FDA for our current and future product
candidates, as applicable.
Our strategy includes filing for orphan drug designation for our product candidates, where available. Under the Orphan
Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition,
which is defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population
greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug or
biologic will be recovered from sales in the United States. In the United States, orphan drug designation entitles a party to
financial incentives, such as opportunities for grant funding toward clinical trial costs, tax advantages and user-fee waivers.
In addition, if a product that has orphan drug designation subsequently receives the first FDA approval for the disease for
which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not
approve any other applications, including a full new drug application, or NDA, or BLA, to market the same drug or
biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority
to the product with orphan drug exclusivity or where the original manufacturer is unable to assure sufficient product
quantity.
On August 3, 2017, Congress passed the FDA Reauthorization Act of 2017, or FDARA. FDARA, among other things,
codified the FDA’s preexisting regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority
of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive
orphan drug exclusivity. The law reverses prior precedent holding that the Orphan Drug Act unambiguously requires that
the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority. Moreover, in the
Consolidated Appropriations Act of 2021, Congress did not further change this interpretation when it clarified that the
interpretation codified in FDARA would apply in cases where the FDA issued an orphan designation before the enactment
of FDARA but where product approval came after the enactment of FDARA. The FDA may further reevaluate the Orphan
Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change the orphan drug
regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what
changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.
In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader
than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was
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materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the
orphan-designated disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity
may not effectively protect the product from competition because different drugs with different active moieties may receive
and be approved for the same condition, and only the first applicant to receive approval will receive the benefits of
marketing exclusivity. Even after an orphan-designated product is approved, the FDA can subsequently approve a later
drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior if it
is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug designation neither shortens
the development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or
approval process. In addition, while we may seek orphan drug designation for our product candidates, we may never
receive such designations.
Even if we receive regulatory approval of any product candidates or therapies, we will be subject to ongoing regulatory
obligations and continued regulatory review, which may result in significant additional expense and we may be subject
to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product
candidates.
If any of our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing,
labeling, packaging, storage, advertising, promotion, sampling, record-keeping, export, import, conduct of post-marketing
studies and submission of safety, efficacy and other post-market information, including both federal and state requirements
in the United States and requirements of comparable foreign regulatory authorities. In addition, we will be subject to
continued compliance with cGMP and GCP requirements for any clinical trials that we conduct post-approval.
Manufacturers and manufacturers’ facilities are required to comply with extensive FDA, and comparable foreign
regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP
regulations and applicable product tracking and tracing requirements. As such, we and any contract manufacturers we may
engage will be subject to continual review and inspections to assess compliance with cGMP and adherence to
commitments made in any BLA, other marketing application, and previous responses to inspection observations.
Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory
compliance, including manufacturing, production and quality control.
Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved
indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for
potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and
efficacy of the product candidate. The FDA may also require a risk evaluation and mitigation strategies, or REMS, program
as a condition of approval of our product candidates, which could entail requirements for long-term patient follow-up, a
medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory
authority approves our product candidates, we will have to comply with requirements including submissions of safety and
other post-marketing information and reports and registration.
The FDA may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is
not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems
with our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party
manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the
approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety
risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences
include, among other things:
●
restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market or
voluntary or mandatory product recalls;
●
fines, warning letters or holds on clinical trials;
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●
refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension
or revocation of license approvals;
●
product seizure or detention or refusal to permit the import or export of our product candidates; and
●
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market.
Products may be promoted only for the approved indications and in accordance with the provisions of the approved label.
The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses of an
approved product, and a company that is found to have improperly promoted off-label uses may be subject to significant
liability and regulatory enforcement actions.
The policies of the FDA and of other regulatory authorities may change and additional government regulations may be
enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt
to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain
regulatory compliance, we may lose any marketing approval that we may have obtained which would adversely affect our
business, prospects and ability to achieve or sustain profitability.
We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or
administrative or executive action, either in the United States or abroad. For example, certain policies of the current
administration in the United States may impact our business and industry. Namely, the current administration has taken
several executive actions, including the issuance of a number of executive orders, that could impose significant burdens on,
or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities, such as
implementing statutes through rulemaking, issuance of guidance and review and approval of marketing applications. It is
difficult to predict how these executive actions, including any executive orders, will be implemented, and the extent to
which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints
on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be
negatively impacted.
Healthcare insurance coverage and reimbursement may be limited or unavailable in certain market segments for our
product candidates, if approved, which could make it difficult for us to sell any product candidates or therapies
profitably.
The success of our product candidates, if approved, depends on the availability of adequate coverage and reimbursement
from third-party payors. In addition, because our product candidates represent new approaches to the treatment of the
diseases they target, we cannot be sure that coverage and reimbursement will be available for, or accurately estimate the
potential revenue from, our product candidates or assure that coverage and reimbursement will be available for any product
that we may develop. See the sections entitled, “Business — Government Regulation — Coverage and Reimbursement.”
Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or
part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare
programs, such as Medicare and Medicaid, and commercial payors are critical to new product acceptance.
Government authorities and other third-party payors, such as private health insurers and health maintenance organizations,
decide which drugs and treatments they will cover and the amount of reimbursement. Coverage and reimbursement by a
third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a
product is:
●
a covered benefit under its health plan;
●
safe, effective and medically necessary;
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●
appropriate for the specific patient;
●
cost-effective; and
●
neither experimental nor investigational.
In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for
Medicare & Medicaid Services, the agency responsible for administering the Medicare program, or CMS. CMS decides
whether and to what extent a new medicine will be covered and reimbursed under Medicare, and private payors tend to
follow CMS to a substantial degree. That being said, however, no uniform policy of coverage and reimbursement for
products exists among third-party payors. As a result, obtaining coverage and reimbursement approval of a product from a
government or other third-party payor is a time-consuming and costly process that could require us to provide to each
payor supporting scientific, clinical and cost-effectiveness data for the use of our products on a payor-by-payor basis, with
no assurance that coverage and adequate reimbursement will be obtained. Even if we obtain coverage for a given product,
the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require
co-payments that patients find unacceptably high, which may adversely impact physicians’ willingness to prescribe and
treat. Further, even if one payor provides coverage for a given product, other payors may not provide coverage for that
product. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up
evaluations required following the use of product candidates. Patients are unlikely to use our product candidates unless
coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our product candidates.
Because our product candidates may have a higher cost of goods than conventional therapies, and may require long-term
follow-up evaluations, the risk that coverage and reimbursement rates may be inadequate for us to achieve profitability
may be greater. There is significant uncertainty related to insurance coverage and reimbursement of newly approved
products and coverage may be more limited than the purposes for which the medicine is approved by the FDA or
comparable foreign regulatory authorities. It is difficult to predict at this time what third-party payors will decide with
respect to the coverage and reimbursement for our product candidates.
Payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives. For example, the
Middle Class Tax Relief and Job Creation Act of 2012 required that CMS reduce the Medicare clinical laboratory fee
schedule by 2% in 2013, which served as a base for 2014 and subsequent years. In addition, effective January 1, 2014,
CMS also began bundling the Medicare payments for certain laboratory tests ordered while a patient received services in a
hospital outpatient setting. Additional state and federal healthcare reform measures are expected to be adopted in the
future, any of which could limit the amounts that federal and state governments will pay for healthcare products and
services, which could result in reduced demand for certain pharmaceutical products or additional pricing pressures.
Moreover, increasing efforts by governmental and other third-party payors in the United States and abroad to cap or reduce
healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved
products and, as a result, they may not cover or provide adequate payment for our product candidates. Increasingly, third-
party payors are requiring that drug companies provide them with predetermined discounts from list prices and are
challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any
product candidate that we commercialize and, if reimbursement is available, the level of reimbursement. There has been
increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.
Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation
designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under
Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program
reimbursement methodologies for drugs.
At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions
on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to
encourage importation from other countries and bulk purchasing. We expect to experience pricing pressures in connection
with the sale of any of our product candidates, if approved, due to the trend toward managed healthcare, the increasing
influence of health maintenance organizations, cost containment initiatives and additional legislative changes. We may face
competition in the United States for our development candidates and investigational medicines, if
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approved, from therapies sourced from foreign countries that have placed price controls on pharmaceutical products. In the
United States, the FDA issued a final guidance document outlining a pathway for manufacturers to obtain an additional
National Drug Code, or NDC, for an FDA-approved drug that was originally intended to be marketed in a foreign country
and that was authorized for sale in that foreign country. The market implications of the final guidance are unknown at this
time. Proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under
certain circumstances. Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price
we receive for any products that we may develop and adversely affect our future revenues and prospects for profitability.
Disruptions at the FDA, the SEC and other government agencies caused by funding shortages or global health
concerns could hinder their ability to hire and retain key leadership and other personnel, prevent new products and
services from being developed or commercialized in a timely manner or otherwise prevent those agencies from
performing normal business functions on which the operation of our business may rely, which could negatively impact
our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government
budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory,
regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition,
government funding of the SEC and other government agencies on which our operations may rely, including those that
fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs or biologics to be reviewed
and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last
several years, including most recently from December 22, 2018 to January 25, 2019, the U.S. government has shut down
several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and
other government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly
impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material
adverse effect on our business.
Since March 2020, when foreign and domestic inspections of facilities were largely placed on hold due to the COVID-19
pandemic, the FDA has been working to resume routine surveillance, bioresearch monitoring and pre-approval inspections
on a prioritized basis. The FDA has developed a rating system to assist in determining when and where it is safest to
conduct prioritized domestic inspections. As of May 2021, certain inspections, such as foreign preapproval, surveillance,
and for-cause inspections that are not deemed mission-critical, remain temporarily postponed. In April 2021, the FDA
issued guidance for industry formally announcing plans to employ remote interactive evaluations, using risk management
methods, to meet user fee commitments and goal dates and in May 2021 announced plans to continue progress toward
resuming standard operational levels. Should the FDA determine that an inspection is necessary for approval and an
inspection cannot be completed during the review cycle due to restrictions on travel, and the FDA does not determine a
remote interactive evaluation to be adequate, the FDA has stated that it generally intends to issue a complete response letter
or defer action on the application until an inspection can be completed. Further, if there is inadequate information to make a
determination on the acceptability of a facility, the FDA may defer action on the application until an inspection can be
completed. In 2020 and 2021, a number of companies announced receipt of complete response letters due to the FDA's
inability to complete required inspections for their applications. Regulatory authorities outside the U.S. may adopt similar
restrictions or other policy measures in response to the ongoing COVID-19 pandemic and may experience delays in their
regulatory activities.
European Union drug marketing and reimbursement regulations may materially affect our ability to market and receive
coverage for our products in the European Member States.
We intend to seek approval to market our product candidates in both the United States and in selected foreign jurisdictions.
If we obtain approval in one or more foreign jurisdictions for our product candidates, we will be subject to rules and
regulations in those jurisdictions. In some foreign countries, particularly certain countries in the European Union, the
pricing of pharmaceutical products is subject to governmental control and other market regulations which
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could put pressure on the pricing and usage of our product candidates. In these countries, pricing negotiations with
governmental authorities can take considerable time after obtaining marketing approval of a product candidate. In addition,
market acceptance and sales of our product candidates will depend significantly on the availability of adequate coverage
and reimbursement from third-party payors for our product candidates and may be affected by existing and future
healthcare reform measures.
Much like the Anti-Kickback Statute prohibition in the United States, the provision of benefits or advantages to physicians
to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal
products is also prohibited in the European Union. The provision of benefits or advantages to induce or reward improper
performance generally is typically governed by the national anti-bribery laws of European Union Member States, and the
Bribery Act 2010 in the United Kingdom. Infringement of these laws could result in substantial fines and imprisonment.
E.U. Directive 2001/83/EC, which is the E.U. Directive governing medicinal products for human use, further provides that,
where medicinal products are being promoted to persons qualified to prescribe or supply them, no gifts, pecuniary
advantages or benefits in kind may be supplied, offered or promised to such persons unless they are inexpensive and
relevant to the practice of medicine or pharmacy. This provision has been transposed into the Human Medicines
Regulations 2012 and so remains applicable in the United Kingdom despite its departure from the European Union.
Payments made to physicians in certain European Union Member States must be publicly disclosed. Moreover, agreements
with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her
competent professional organization and/or the regulatory authorities of the individual European Union Member States.
These requirements are provided in the national laws, industry codes or professional codes of conduct applicable in the
European Union Member States. Failure to comply with these requirements could result in reputational risk, public
reprimands, administrative penalties, fines or imprisonment.
In addition, in some foreign countries, including the European Economic Area, or the EEA, the proposed pricing for a drug
must be approved before it may be lawfully marketed. The requirements governing drug pricing and reimbursement vary
widely from country to country. For example, the European Union provides options for its Member States to restrict the
range of medicinal products for which their national health insurance systems provide reimbursement and to control the
prices of medicinal products for human use. Reference pricing used by various European Union Member States and
parallel distribution, or arbitrage between low-priced and high-priced Member States, can further reduce prices. Other
European Union Member States allow companies to fix their own prices for drug products, but monitor and control
prescription volumes and issue guidance to physicians to limit prescriptions. Instead of approving a specific price for a
medicinal product, a Member State may instead adopt a system of direct or indirect controls on the profitability of the
company placing the medicinal product on the market. In some countries, we may be required to conduct a clinical trial or
other studies that compare the cost-effectiveness of any of our product candidates to other available therapies in order to
obtain or maintain reimbursement or pricing approval. There can be no assurance that any country that has price controls or
reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for
any of our products. Historically, products launched in the European Union do not follow price structures of the United
States and generally prices tend to be significantly lower. Publication of discounts by third-party payors or authorities may
lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If
pricing is set at unsatisfactory levels or if reimbursement of our products is unavailable or limited in scope or amount, our
revenues from sales by us or our strategic partners and the potential profitability of any of our product candidates in those
countries would be negatively affected.
Data collection in Europe and some U.S. states is governed by restrictive regulations governing the use, processing, and
cross-border transfer of personal information.
Regulators globally are imposing greater restrictions relating to data privacy and implementing restrictive regulations
associated with the enhanced protection of certain types of personal data, such as healthcare data or other sensitive
information. For example, in 2016, the European Union, adopted a new regulation governing data practices and privacy
called the General Data Protection Regulation, or GDPR, which became effective on May 25, 2018. The GDPR applies to
any company that collects and uses personal data in connection with offering goods or services to individuals in the
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European Union or the monitoring of such individuals’ behavior and governs the collection, use, storage, disclosure,
transfer or other processing of personal data, including personal health data, in the European Union.
The GDPR imposes a broad range of strict requirements on companies subject to the GDPR, such as including
requirements relating to having legal bases for processing personal information relating to identifiable individuals and
transferring such information outside the EEA, including to the United States, providing details to those individuals
regarding the processing of their personal information, implementing safeguards to keep personal information secure,
having data processing agreements with third parties who process personal information, providing information to
individuals regarding data processing activities, responding to individuals’ requests to exercise their rights in respect of
their personal information, obtaining consent of the individuals to whom the personal data relates, reporting security and
privacy breaches involving personal data to the competent national data protection authority and affected individuals,
appointing data protection officers, conducting data protection impact assessments, and record-keeping. The GDPR also
imposes strict rules on the transfer of personal data to countries outside the EEA, including the United States. It
substantially increases the penalties to which we could be subject in the event of any non-compliance, including fines of up
to 10 million Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to
20 million Euros or up to 4% of our total worldwide annual turnover for more serious offenses. The GDPR also confers a
private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek
judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR
includes restrictions on cross-border data transfers.
In addition, further to the United Kingdom's, or the UK’s, exit from the European Union on January 31, 2020, the GDPR
ceased to apply in the UK at the end of the transition period on December 31, 2020. However, as of January 1, 2021, the
UK’s European Union (Withdrawal) Act 2018 incorporated the GDPR (as it existed on December 31, 2020 but subject to
certain UK specific amendments) into UK law, referred to as the UK GDPR. The UK GDPR and the UK Data Protection
Act 2018 set out the UK’s data protection regime, which is independent from but aligned to the European Union’s data
protection regime. Non-compliance with the UK GDPR may result in monetary penalties of up to £17.5 million or 4% of
worldwide revenue, whichever is higher. The UK is now regarded as a third country under the GDPR but the European
Commission has adopted a decision on June 28, 2021 recognizing the UK as providing adequate protection under the
GDPR for a four-year period (until June 27, 2025). Similarly, the UK has determined that it considers all of the E.U. and
EEA Member States to be adequate for the purposes of data protection. This ensures that data flows between the UK and
the E.U. and EEA remain unaffected.
If we begin conducting trials in the EEA or the UK, we must also ensure that we maintain adequate safeguards to enable
the transfer of personal data outside of the EEA or the UK, in particular to the United States in compliance with European
data protection laws including the GDPR and UK GDPR. The GDPR imposes strict rules on the transfer of personal data to
countries outside the EEA. For example, in July 2020, the Court of Justice of the European Union limited how
organizations could lawfully transfer personal data from the EEA to the United States by invalidating the E.U.-US Privacy
Shield and imposing further restrictions on use of the standard contractual clauses, which could increase our costs and our
ability to efficiently process personal data from the EEA. The UK has adopted similar restrictions. We expect that we will
continue to face uncertainty as to whether our efforts to comply with our obligations under European privacy laws will be
sufficient. If we are investigated by a European data protection authority, we may face fines and other penalties. Any such
investigation or charges by European data protection authorities could have a negative effect on our existing business and
on our ability to attract and retain new clients or pharmaceutical partners. We may also experience hesitancy, reluctance, or
refusal by European, UK or multi-national clients or pharmaceutical partners to continue to use our products and solutions
due to the potential risk exposure as a result of the current (and, in particular, future) data protection obligations imposed
on them by certain data protection authorities in interpretation of current law, including the GDPR and UK GDPR. Such
clients or pharmaceutical partners may also view any alternative approaches to compliance as being too costly, too
burdensome, too legally uncertain, or otherwise objectionable and therefore decide not to do business with us. Further, the
GDPR and UK GDPR and other laws or regulations associated with the enhanced protection of personal data could greatly
increase the cost of providing our product candidates, if approved, or even prevent us from offering our product candidates,
if approved, in certain jurisdictions. Any of the foregoing could materially harm our business, prospects, financial
condition and results of operations.
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Laws and regulations governing any international operations we may have in the future may preclude us from
developing, manufacturing and selling certain products outside of the United States and require us to develop and
implement costly compliance programs.
If we expand our operations outside of the United States, we must dedicate additional resources to comply with numerous
laws and regulations in each jurisdiction in which we plan to operate. The FCPA prohibits any U.S. individual or business
from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official,
political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the
individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in
the United States to comply with certain accounting provisions requiring the company to maintain books and records that
accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and
maintain an adequate system of internal accounting controls for international operations.
Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized
problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries,
hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials.
Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments
to government officials and have led to FCPA enforcement actions.
Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the
sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products
and technical data relating to those products. If we expand our presence outside of the United States, it will require us to
dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing,
or selling certain products and product candidates outside of the United States, which could limit our growth potential and
increase our development costs.
The failure to comply with laws governing international business practices may result in substantial civil and criminal
penalties and suspension or debarment from government contracting. The SEC also may suspend or bar issuers from
trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.
Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business and
results of operations.
Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by
requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling;
(iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were
to be imposed, they could adversely affect the operation of our business. See the section entitled, “Business — Government
Regulation — Current and future healthcare reform legislation.”
Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or
part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare
programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Our ability to
commercialize any products successfully, if approved, will depend in part on the extent to which coverage and adequate
reimbursement for these products and related treatments will be available from government health administration
authorities, private health insurers and other organizations. In the United States, there have been and continue to be a
number of legislative initiatives to contain healthcare costs. For example, in March 2010, the Patient Protection and
Affordable Care Act, or the ACA, was passed, which substantially changes the way healthcare is financed by both
governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry.
Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce
healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved
products and, as a result, they may not cover or provide adequate payment for our product candidates. There has been
increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.
Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state
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legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs
under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government
program reimbursement methodologies for drugs.
These laws, and future state and federal healthcare reform measures may be adopted in the future, any of which may result
in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of
our product candidates for which we may obtain regulatory approval or the frequency with which any such product
candidate is prescribed or used.
Risks related to our intellectual property
If we are unable to obtain and maintain patent protection for any product candidates we develop or for our RED
PLATFORM, our competitors could develop and commercialize products or technology similar or identical to ours, and
our ability to successfully commercialize any product candidates we may develop, and our technology may be adversely
affected.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other
countries with respect to our product candidates, RED PLATFORM and other technologies we may develop. We seek to
protect our proprietary position by in-licensing intellectual property and filing patent applications in the United States and
abroad relating to our product candidates and RED PLATFORM, as well as other technologies that are important to our
business. Given that the development of our technology and product candidates is at an early stage, our intellectual
property portfolio with respect to certain aspects of our technology and product candidates is also at an early stage. For
example, although we own issued patents related to RTX-240, RTX-321 and RTX-224, there can be no assurance that we
will secure issued patents for additional product candidates. We have filed or intend to file patent applications directed to
the composition of matter of our product candidates and various processes of our RED PLATFORM; however, there can be
no assurance that any such patent applications will issue as granted patents. Furthermore, in some cases, we have only filed
provisional patent applications on certain aspects of our technology and product candidates and each of these provisional
patent applications is not eligible to become an issued patent until, among other things, we file a non-provisional patent
application within 12 months of the filing date of the applicable provisional patent application. Any failure to file a non-
provisional patent application within this timeline could cause us to lose the ability to obtain patent protection for the
inventions disclosed in the associated provisional patent applications.
Composition of matter patents for biological and pharmaceutical products are generally considered to be the strongest form
of intellectual property protection for those types of products, as such patents provide protection without regard to any
method of use. Although we have secured issued United States composition of matter patents related to RTX-240, RTX-
321 and RTX-224, we cannot be certain that the claims in our pending patent applications covering the composition of
matter of all of our product candidates will be considered patentable by the United States Patent and Trademark Office, or
the USPTO, or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered valid
and enforceable by courts in the United States or foreign countries. Furthermore, in some cases, we may not be able to
obtain issued claims covering compositions of matter relating to our product candidates and RED PLATFORM, as well as
other technologies that are important to our business, and instead may need to rely on filing patent applications with claims
covering a method of use and/or method of manufacture. Method of use patents protect the use of a product for the
specified method. This type of patent does not prevent a competitor from making and marketing a product that is identical
to our product for an indication that is outside the scope of the patented method. Moreover, even if competitors do not
actively promote their products for our targeted indications, physicians may prescribe these products “off-label” for those
uses that are covered by our method of use patents. Although off-label prescriptions may infringe or contribute to the
infringement of method of use patents, the practice is common and such infringement is difficult to prevent or prosecute.
There can be no assurance that any such patent applications will issue as granted patents, and even if they do issue, such
patent claims may be insufficient to prevent third parties, such as our competitors, from utilizing our technology. Any
failure to obtain or maintain patent protection with respect to our product candidates and RED PLATFORM could have a
material adverse effect on our business, financial condition, results of operations, and prospects.
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The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves complex
legal and factual questions for which legal principles remain unsolved. The patent applications that we own or in-license
may fail to result in issued patents with claims that cover our product candidates in the United States or in other foreign
countries. There is no assurance that all potentially relevant prior art relating to our patents and patents applications has
been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if
patents successfully issue, and even if such patents cover our product candidates, third parties may challenge their validity,
enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated.
Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual
property, provide exclusivity for our product candidates, or prevent others from designing around our claims. Any of these
outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our
business.
We intend to rely on patent and other rights and the status of our product candidates, if approved, as products eligible
for exclusivity under the Biologics Price Competition and Innovation Act (BPCIA). If we are unable to obtain or
maintain exclusivity from the combination of these approaches, we may not be able to compete effectively in our
markets.
We rely or will rely upon a combination of patents, trade secret protection, confidentiality agreements and regulatory
exclusivity to protect the intellectual property related to our technologies and product candidates. Our success depends in
large part on our and our licensors’ ability to maintain patent and other intellectual property protection and obtain
regulatory exclusivity in the United States and in other countries with respect to our proprietary technology and products.
Even if we cannot obtain and maintain effective protection of exclusivity from our intellectual property rights and
regulatory efforts, including patent protection, data exclusivity or orphan drug exclusivity for our product candidates, we
believe that our product candidates could be protected by exclusivity that prevents approval of a biosimilar in the United
States for a period of twelve years from the time the product to which it claims similarity was first approved. However, the
Biologics Price Competition and Innovation Act of 2009, Title VII, Subtitle A of the Patent Protection and Affordable Care
Act, Pub.L.No.111-148, 124 Stat.119, Sections 7001-02 signed into law March 23, 2010, and codified in 42 U.S.C. §262
(the BCPIA), created an elaborate and complex patent dispute resolution mechanism for biosimilars that could prevent us
from launching our product candidates in the United States or could substantially delay such launches. Current biosimilars
litigation are addressing certain requirements of the BPCIA which is creating uncertainty over how certain terms of the
BPCIA should be construed and this presents uncertainty for both the biologics innovator and biosimilar party. The BPCIA
mechanism required for biosimilar applicants may pose greater risk that patent infringement litigation will disrupt our
activities and add increased expenses, as well as divert management’s attention. If a biosimilar version of one of our
product candidates were approved in the United States, it could have a negative effect on our business.
If any of our owned or in-licensed patent applications do not issue as patents in any jurisdiction, we may not be able to
compete effectively.
With respect to our patent portfolio, as of December 31, 2021, most of the patent rights that we own or in-license are
currently pending patent applications, except that we own 14 issued U.S. patents and we have two in-licensed U.S. patents.
With respect to both in-licensed and owned intellectual property, we cannot predict whether the patent applications we and
our licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued
patents will provide sufficient protection from competitors or other third parties.
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 patents and patent applications at a reasonable cost or in a timely
manner. It is also possible that we will fail to identify patentable aspects of our research and development output in time to
obtain patent protection. Although we enter into non-disclosure and confidentiality agreements with parties who have
access to confidential or patentable aspects of our research and development output, such as our employees, corporate
collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors
and other third parties, any of these parties may breach such agreements and disclose such output before a
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patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, our ability to obtain and
maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow
our inventions to be patentable over the prior art. Furthermore, publications of discoveries in the scientific literature often
lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not
published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors
were the first to make the inventions claimed in any of our owned or licensed patents or pending patent applications, or that
we or our licensors were the first to file for patent protection of such inventions.
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our
ability to prevent our competitors from commercializing similar or identical technology and product candidates would
be adversely affected.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal
and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity,
enforceability, and commercial value of our patent rights are highly uncertain. Our owned or in-licensed pending and future
patent applications may not result in patents being issued which protect our product candidates, RED PLATFORM
technology, or other technologies or which effectively prevent others from commercializing competitive technologies and
product candidates.
No consistent policy regarding the scope of claims allowable in patents in the biotechnology field has emerged in the
United States. The patent situation outside of the United States is even more uncertain. Changes in either the patent laws or
their interpretation in the United States and other countries may diminish our ability to protect our inventions and enforce
our intellectual property rights, and more generally could affect the value of our intellectual property or narrow the scope
of our owned or licensed patents. In particular, our ability to stop third parties from making, using, selling, offering to sell,
or importing products that infringe our intellectual property will depend in part on our success in obtaining and enforcing
patent claims that cover our technology, inventions and improvements. With respect to both licensed and company-owned
intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications
or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any
patents that may be granted to us in the future will be commercially useful in protecting our products, the use of our
products, and the methods used to manufacture those products. Moreover, even our issued patents do not guarantee us the
right to practice our technology in relation to the commercialization of our products. The area of patent and other
intellectual property rights in biotechnology is an evolving one with many risks and uncertainties, and third parties may
have blocking patents that could be used to prevent us from commercializing our patented product candidates and
practicing our proprietary technology. Our issued patents and those that may issue in the future may be challenged,
invalidated, or circumvented, which could limit our ability to stop competitors from marketing related products or limit the
length of the term of patent protection that we may have for our product candidates. In addition, the rights granted under
any issued patents may not provide us with protection or competitive advantages against competitors with similar
technology. Furthermore, our competitors may independently develop similar technologies. For these reasons, we may
have competition for our product candidates. Moreover, because of the extensive time required for development, testing
and regulatory review of a potential product, it is possible that, before any particular product candidate can be
commercialized, any related patent may expire or remain in force for only a short period following commercialization,
thereby reducing any advantage of the patent.
In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its
scope can be reinterpreted after issuance. Even if patent applications we own or license issue as patents, they may not issue
in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing
with us, or otherwise provide us with any competitive advantage. Any patents that we own or in-license may be challenged,
narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether our product candidates,
RED PLATFORM technologies or other technologies will be protectable or remain protected by valid and enforceable
patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative
technologies or products in a non-infringing manner which could materially adversely affect our business, financial
condition, results of operations and prospects.
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The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and patents that we own
or license may be challenged in the courts or patent offices in the U.S. and abroad. We or our licensors may be subject to a
third-party pre-issuance submission of prior art to the USPTO or to foreign patent authorities or become involved in
opposition, derivation, revocation, reexamination, post-grant and inter partes review, or interference proceedings or other
similar proceedings challenging our owned or licensed patent rights. An adverse determination in any such submission,
proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our owned or in-licensed patent
rights, allow third parties to commercialize our product candidates, RED PLATFORM technologies or other technologies
and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products
without infringing third-party patent rights. Moreover, we, or one of our licensors, may have to participate in interference
proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as
oppositions in a foreign patent office, that challenge our or our licensor’s priority of invention or other features of
patentability with respect to our owned or in-licensed patents and patent applications. Such challenges may result in loss of
patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit
our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration
of the patent protection of our product candidates, RED PLATFORM and other technologies. Such proceedings also may
result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is
favorable to us.
In addition, given the amount of time required for the development, testing, and regulatory review of new product
candidates, patents protecting such product candidates might expire before or shortly after such product candidates are
commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from
commercializing products similar or identical to ours.
We may, in the future, co-own patent rights relating to future product candidates and our RED PLATFORM with third
parties. Some of our in-licensed patent rights are, and may in the future be, co-owned with third parties. In addition, our
licensors may co-own the patent rights we in-license with other third parties with whom we do not have a direct
relationship. Our exclusive rights to certain of these patent rights are dependent, in part, on inter-institutional or other
operating agreements between the joint owners of such patent rights, who are not parties to our license agreements. For
example, under our license agreement with the Whitehead Institute for Biomedical Research, or WIBR, as amended (or the
WIBR License) we license certain patents rights co-owned by WIBR and Tufts University, or Tufts. Our rights to Tufts’
interest in such patent rights depends on an inter-institutional agreement between WIBR and Tufts, pursuant to which
WIBR controls the licensing of such patent rights. If our licensors do not have exclusive control of the grant of licenses
under any such third-party co-owners’ interest in such patent rights or we are otherwise unable to secure such exclusive
rights, such co-owners may be able to license their rights to other third parties, including our competitors, and our
competitors could market competing products and technology. In addition, we may need the cooperation of any such co-
owners of our patent rights in order to enforce such patent rights against third parties, and such cooperation may not be
provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial
conditions, results of operations, and prospects.
Our rights to develop and commercialize our product candidates and RED PLATFORM are subject, in part, to the terms
and conditions of licenses granted to us by others.
We rely upon licenses to certain patent rights and proprietary technology from third parties that are important or necessary
to the development of our product candidates and RED PLATFORM. For example, under the WIBR License, WIBR grants
us an exclusive, worldwide, sublicensable license under four patent families to research, develop, make, and commercialize
products and processes covered by such patent rights for all uses. The portfolio of patent rights licensed to us under the
WIBR License is directed, in part, to the in vitro production of red blood cells, including the use of the enzyme sortase to
conjugate a protein of interest to the cell surface. Patent rights that we in-license may be subject to a reservation of rights
by one or more third parties. For example, our in-licensed patent rights from WIBR under the WIBR License were funded
in part by the U.S. government. As a result, the U.S. government may have certain rights to such intellectual property.
Furthermore, pursuant to a Defense Advanced Research Projects Agency Agreement between WIBR and a global
biopharmaceutical company, the biopharmaceutical company funded research resulting in one of the patent families
licensed to us under the WIBR License and retained a worldwide, irrevocable, non-exclusive, royalty-free right to use the
inventions and technologies covered by this patent family for research and development purposes.
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WIBR also retains the right with respect to all four patent families licensed to us to (i) to practice the patent rights licensed
under the agreement for research, teaching and educational purposes, including sponsored research and collaboration, and
(ii) to grant non-exclusive licenses to academic and not-for-profit research institutes to practice under the patent rights for
research, teaching and educational purposes (excluding sponsored research), while Tufts retains such rights only with
respect to the patent family that it co-owns.
In addition, subject to the terms of any such license agreements, we may not have the right to control the preparation,
filing, prosecution and maintenance, and we may not have the right to control the enforcement, and defense of patents and
patent applications covering the technology that we license from third parties. For example, under the WIBR License,
WIBR controls prosecution of the patent rights licensed to us, and we control enforcement of the patent rights. We cannot
be certain that our in-licensed patent applications (and any patents issuing therefrom) that are controlled by our licensors
will be prepared, filed, prosecuted, maintained, enforced, and defended in a manner consistent with the best interests of our
business. If our licensors fail to prosecute, maintain, enforce, and defend such patents rights, or lose rights to those patent
applications (or any patents issuing therefrom), the rights we have licensed may be reduced or eliminated, our right to
develop and commercialize any of our product candidates and RED PLATFORM technologies that are the subject of such
licensed rights could be adversely affected, and we may not be able to prevent competitors from making, using and selling
competing products. Moreover, we cannot be certain that such activities by our licensors have been or will be conducted in
compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual
property rights. In addition, even where we have the right to control patent prosecution of patents and patent applications
we have licensed from third parties, we may still be adversely affected or prejudiced by actions or inactions of our licensors
and their counsel that took place prior to the date upon which we assumed control over patent prosecution. Finally, subject
to the terms of any such license agreements, the licensor may be able to terminate the license without our consent. For
example, under the WIBR License, WIBR may terminate the WIBR License upon written notice to us if we, along with our
affiliates and sublicensees, cease to carry on business related to the WIBR License for more than six months. WIBR may
also terminate the WIBR License for our material breach that remains uncured for sixty days after receiving notice thereof,
if we fail to pay amounts due under the agreement within thirty days after receiving notice of such failure, or if we
challenge the validity or enforceability of any of the licensed patent rights.
Some intellectual property may have been discovered through government funded programs and thus may be subject to
federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based
companies. Compliance with such regulations may limit our exclusive rights and limit our ability to contract with non-
U.S. manufacturers.
Our in-licensed patent rights from WIBR under the WIBR License were funded in part by the U.S. government and are
therefore subject to certain federal regulations. When new technologies are developed with U.S. government funding, the
U.S. government generally obtains certain rights in any resulting patents, including rights to disclose the funded inventions
and technology to third parties and to exercise march-in rights to use or allow third parties to use the technology we have
licensed that was developed using U.S. government funding. The U.S. government may exercise its march-in rights if it
determines that action is necessary because we fail to achieve practical application of the government-funded technology,
or because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give
preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture
products embodying such inventions in the United States in certain circumstances and if this requirement is not waived.
Any exercise by the U.S. government of such rights or by any third party of its reserved rights could have a material
adverse effect on our competitive position, business, financial condition, results of operations, and prospects.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from
third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license
rights that are important to our business.
The WIBR License imposes, and we expect our future license agreements will impose, various development, diligence,
commercialization, and other obligations on us in order to maintain the licenses. In spite of our efforts, WIBR or a future
licensor might conclude that we have materially breached our obligations under such license agreements and seek to
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terminate the license agreements, thereby removing or limiting our ability to develop and commercialize products and
technology covered by these license agreements. If these in-licenses are terminated, or if the underlying patent rights
licensed thereunder fail to provide the intended exclusivity, competitors or other third parties would have the freedom to
seek regulatory approval of, and to market, products identical to ours and we may be required to cease our development
and commercialization of certain of our product candidates or of our current RED PLATFORM technologies. Any of the
foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of
operations, and prospects.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including:
●
the scope of rights granted under the license agreement and other interpretation-related issues;
●
the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to
the licensing agreement;
●
the sublicensing of patent and other rights under our collaborative development relationships;
●
our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
●
the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual
property by our licensors and us and our partners;
●
whether and the extent to which inventors are able to contest the assignment of their rights to our licensors; and
●
the priority of invention of patented technology.
The agreements under which we currently license intellectual property or technology from third parties are complex, and
certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract
interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant
intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant
agreement, either of which could have a material adverse effect on our business, financial condition, results of operations,
and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to
maintain our current licensing arrangements on commercially acceptable terms, we may be unable to continue to utilize our
RED PLATFORM or successfully develop and commercialize the affected product candidates, which could have a material
adverse effect on our business, financial conditions, results of operations, and prospects.
We may not be able to protect our intellectual property and proprietary rights throughout the world.
Filing, prosecuting, and defending patents on our product candidates, RED PLATFORM technologies and other
technologies in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may
not protect our rights to the same extent as the laws of the United States. 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 in
jurisdictions where we have not obtained patent protection to develop their own products and, further, may export
otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the
United States. These products may compete with our products, and our patents or other intellectual property rights may not
be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign
jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement
of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products,
which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation
of our intellectual property and proprietary rights generally. Proceedings to enforce our intellectual property and
proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts
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and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly,
could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may
not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially
meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be
inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third
parties. In addition, many countries limit the enforceability of patents against government agencies or government
contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of
such patents. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to
our business, our competitive position may be impaired, and our business, financial condition, results of operations, and
prospects may be adversely affected.
Our inability to protect our intellectual property or failure to maintain the confidentiality and integrity of data or other
sensitive company information could have a material adverse effect on our business.
Our success and competitive position are dependent in part upon our proprietary intellectual property. We rely on a
combination of patents and trade secrets to protect our proprietary intellectual property, and we expect to continue to do so.
Although we seek to protect our proprietary rights through a variety of means, we cannot guarantee that the protective steps
we have taken are adequate to protect these rights. Patents issued to or licensed by us in the past or in the future may be
challenged and held invalid. In addition, as our patents expire, we may be unsuccessful in extending their protection
through patent term extensions. The expiration of, or the failure to maintain or extend our patents, could have a material
adverse effect on us.
We also rely on confidentiality agreements with certain employees, consultants, and other third parties to protect, in part,
trade secrets and other proprietary information. These agreements could be breached, and we may not have adequate
remedies for such a breach. In addition, others could independently develop substantially equivalent proprietary
information or gain access to our trade secrets or proprietary information.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document
submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection
could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will
be due to be paid to the USPTO and various government patent agencies outside of the United States over the lifetime of
our owned or licensed patents and applications. In certain circumstances, we rely on our licensing partners to pay these fees
due to U.S. and non-U.S. patent agencies. The USPTO and various non-U.S. government agencies require compliance with
several procedural, documentary, fee payment, and other similar provisions during the patent application process. We are
also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed
intellectual property. In some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in
accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment or
lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction.
In such an event, potential competitors might be able to enter the market with similar or identical products or technology,
which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our
products.
Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties
and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Assuming
that other requirements for patentability are met, prior to March 2013, in the United States, the first to invent the claimed
invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to
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the patent. After March 2013, under the Leahy-Smith America Invents Act, or the America Invents Act, enacted in
September 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements
for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention
regardless of whether a third party was the first to invent the claimed invention. A third party that files a patent application
in the USPTO after March 2013, but before us, could therefore be awarded a patent covering an invention of ours even if
we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the
time from invention to filing of a patent application. Since patent applications in the United States and most other countries
are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first
to either (i) file any patent application related to our product candidates, RED PLATFORM or other technologies or
(ii) invent any of the inventions claimed in our or our licensor’s patents or patent applications.
The America Invents Act also includes a number of significant changes that affect the way patent applications will be
prosecuted and also may affect patent litigation. These include allowing third-party submission of prior art to the USPTO
during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant
proceedings, including post-grant review, inter partes review, and derivation proceedings. Because of a lower evidentiary
standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to
invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO
to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a
district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims
that would not have been invalidated if first challenged by the third party as a defendant in a district court action.
Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the
prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed
issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations,
and prospects.
In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals
are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in
certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has
created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by
the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in
unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and
enforce our intellectual property in the future.
Issued patents covering our product candidates, and any patents that may issue covering our RED PLATFORM
technologies and other technologies, could be found invalid or unenforceable if challenged in court or before
administrative bodies in the United States or abroad.
If we or one of our licensors initiated legal proceedings against a third party to enforce a patent covering our product
candidates, RED PLATFORM technologies or other technologies, the defendant could counterclaim that such patent is
invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or
unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several
statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability
assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from
the USPTO, or made a misleading statement, during prosecution. Third parties may raise claims challenging the validity or
enforceability of our owned or in-licensed patents before administrative bodies in the United States or abroad, even outside
the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, interference
proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).
Such proceedings could result in the revocation of, cancellation of, or amendment to our patents in such a way that they no
longer cover our product candidates, RED PLATFORM technologies, or other technologies. The outcome following legal
assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot
be certain that there is no invalidating prior art, of which we or our licensing partners and the patent examiner were
unaware during prosecution. If a third party were to prevail on a legal assertion of invalidity or unenforceability, we would
lose at least part, and perhaps all, of the patent protection on our product
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candidates, RED PLATFORM or other technologies. Such a loss of patent protection would have a material adverse impact
on our business, financial condition, results of operations, and prospects.
If we do not obtain patent term extension and/or data exclusivity for any product candidates we may develop, our
business may be materially harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we may
develop, one or more of our owned or in-licensed U.S. patents may be eligible for limited patent term extension under the
Hatch-Waxman Act. The Hatch-Waxman Act permits a patent term extension of up to five years as compensation for
patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a
patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims
covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar extensions as
compensation for patent term lost during regulatory review processes are also available in certain foreign countries and
territories, such as in Europe under a Supplementary Protection Certificate. However, we may not be granted an extension
in the United States and/or foreign countries and territories because of, for example, failing to exercise due diligence during
the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to
expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period
or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or
the term of any such extension is shorter than what we request, our competitors may obtain approval of competing products
following our patent expiration, and our business, financial condition, results of operations and prospects could be
materially harmed.
We may be subject to claims challenging the inventorship of our patents and other intellectual property.
We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in
our owned or in-licensed patent rights, trade secrets, or other intellectual property as an inventor or co-inventor. For
example, we or our licensors may have inventorship disputes arise from conflicting obligations of employees, consultants
or others who are involved in developing our product candidates, RED PLATFORM or other technologies. Litigation may
be necessary to defend against these and other claims challenging inventorship or our licensors’ ownership of our owned or
in-licensed patent rights, trade secrets or other intellectual property. If we or our licensors fail in defending any such
claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive
ownership of, or right to use, intellectual property that is important to our product candidates, RED PLATFORM and other
technologies. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a
distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business,
financial condition, results of operations and prospects.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be
harmed.
In addition to seeking patents for our product candidates, RED PLATFORM and other technologies, we also rely on trade
secrets and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information
and to maintain our competitive position. Trade secrets and know-how can be difficult to protect. We expect our trade
secrets and know-how to over time be disseminated within the industry through independent development, the publication
of journal articles describing the methodology, and the movement of personnel from academic to industry scientific
positions.
We currently, and may continue in the future continue to, rely on third parties to assist us in developing and manufacturing
our product candidates. Accordingly, we must, at times, share know-how and trade secrets, including those related to our
RED PLATFORM, with them. We may in the future also enter into research and development collaborations with third
parties that may require us to share know-how and trade secrets under the terms of our research and development
partnerships or similar agreements. We seek to protect our know-how, trade secrets and other proprietary technology, in
part, by entering into non-disclosure and confidentiality agreements, and including in our vendor and service agreements
terms protecting our confidential information, know-how and trade secrets, with parties who have access to such
information, such as our employees, scientific collaborators, contract research organizations,
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contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or
patent assignment agreements with our employees and consultants, as well as train our employees not to bring or use
proprietary information or technology from former employers to us or in their work, and we remind former employees
when they leave their employment of their confidentiality obligations. However, we cannot guarantee that we have entered
into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and
processes. We also seek to preserve the integrity and confidentiality of our data and other confidential information by
maintaining physical security of our premises and physical and electronic security of our information technology systems.
Despite our efforts, any of the aforementioned parties may breach the agreements and disclose our proprietary information,
including our trade secrets, or there may be a lapses or failures in our physical and electronic security systems which lead
to our proprietary information being disclosed, and we may not be able to obtain adequate remedies in the event of any
such breaches. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have
taken to protect our proprietary technologies will be effective. If any of our scientific advisors, employees, contractors and
consultants who are parties to these agreements breaches or violates the terms of any of these agreements, we may not have
adequate remedies for any such breach or violation, and we could lose our trade secrets as a result. Moreover, if
confidential information that is licensed or disclosed to us by our partners, collaborators, or others is inadvertently
disclosed or subject to a breach or violation, we may be exposed to liability to the owner of that confidential information.
Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-
consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing
or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by
a competitor or other third party, we would have no right to prevent them from using that technology or information to
compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other
third party, our competitive position would be materially and adversely harmed.
We may not be successful in obtaining, through acquisitions, in-licenses or otherwise, necessary rights to our product
candidates, RED PLATFORM technologies or other technologies.
We currently have rights to certain intellectual property, through licenses from third parties, to develop our product
candidates and RED PLATFORM technologies. Some pharmaceutical companies, biotechnology companies, and academic
institutions are competing with us in the field of cellular therapeutics and red blood cell technologies and may have patents
and have filed and are likely filing patent applications potentially relevant to our business. In order to avoid infringing
these third-party patents, we may find it necessary or prudent to obtain licenses to such patents from such third-party
intellectual property holders. We may also require licenses from third parties for certain technologies that we are evaluating
for use with our current or future product candidates. However, we may be unable to secure such licenses or otherwise
acquire or in-license any compositions, methods of use, processes, or other intellectual property rights from third parties
that we identify as necessary for our current or future product candidates and our RED PLATFORM at a reasonable cost or
on reasonable terms, if at all. The licensing or acquisition of third-party intellectual property rights is a competitive area,
and several more established companies may pursue strategies to license or acquire third-party intellectual property rights
that we may consider attractive or necessary. These established companies may have a competitive advantage over us due
to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies
that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or
acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our
investment or at all.
If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing
intellectual property rights we have, we may be required to expend significant time and resources to redesign our
technology, product candidates, or the methods for manufacturing them or to develop or license replacement technology, all
of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or
commercialize the affected product candidates or continue to utilize our existing RED PLATFORM technology, which
could harm our business, financial condition, results of operations, and prospects significantly.
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We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged
trade secrets of their current or former employers or claims asserting ownership of what we regard as our own
intellectual property.
Many of our employees, consultants, and advisors are currently or were previously employed at universities or other
biotechnology or pharmaceutical companies, including our licensors, competitors and potential competitors. Although we
try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in
their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property,
including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation
may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against
such claims, litigation could result in substantial costs and be a distraction to management.
In addition, while it is our policy to require our employees and contractors who may be involved in the conception or
development of intellectual property to execute agreements assigning such intellectual property to us, we may be
unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that
we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment
agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may
bring against us, to determine the ownership of what we regard as our intellectual property. Such claims could have a
material adverse effect on our business, financial condition, results of operations, and prospects.
Third-party claims of intellectual property infringement, misappropriation or other violation against us, our licensors or
our collaborators may prevent or delay the development and commercialization of our product candidates, RED
PLATFORM and other technologies.
The field of cellular therapeutics is competitive and dynamic. Due to the focused research and development that is taking
place by several companies, including us and our competitors, in this field, the intellectual property landscape is in flux,
and it may remain uncertain in the future. As such, there may be significant intellectual property related litigation and
proceedings relating to our owned and in-licensed, and other third-party, intellectual property and proprietary rights in the
future.
Our commercial success depends in part on our, our licensors’ and our collaborators’ ability to avoid infringing,
misappropriating and otherwise violating the patents and other intellectual property rights of third parties. There is a
substantial amount of complex litigation involving patents and other intellectual property rights in the biotechnology and
pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation
and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign
jurisdictions. As discussed above, recently, due to changes in U.S. law referred to as patent reform, new procedures
including inter partes review and post-grant review have been implemented. As stated above, this reform adds uncertainty
to the possibility of challenge to our patents in the future.
Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist relating to red
blood cell technologies and therapeutic proteins, and in the fields in which we are developing our product candidates. As
the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product
candidates, RED PLATFORM technologies and other technologies may give rise to claims of infringement of the patent
rights of others. We cannot assure you that our product candidates, RED PLATFORM technologies and other technologies
that we have developed, are developing or may develop in the future will not infringe existing or future patents owned by
third parties. We may not be aware of patents that have already been issued and that a third party, for example, a competitor
in the fields in which we are developing our product candidates, RED PLATFORM and other technologies might assert are
infringed by our current or future product candidates, RED PLATFORM or other technologies, including claims to
compositions, formulations, methods of manufacture or methods of use or treatment that cover our product candidates,
RED PLATFORM or other technologies.
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It is also possible that patents owned by third parties of which we are aware, but which we do not believe are relevant to
our product candidates, RED PLATFORM or other technologies, could be found to be infringed by our product candidates,
RED PLATFORM or other technologies. In addition, because patent applications can take many years to issue, there may
be currently pending patent applications that may later result in issued patents that our product candidates, RED
PLATFORM or other technologies may infringe. We cannot provide any assurances that third-party patents do not exist
which might be enforced against our current technology, including our RED PLATFORM technologies, manufacturing
methods, product candidates, or future methods or products resulting in either an injunction prohibiting our manufacture or
future sales, or, with respect to our future sales, an obligation on our part to pay royalties and/or other forms of
compensation to third parties, which could be significant.
Third parties may have patents or obtain patents in the future and claim that the manufacture, use or sale of our product
candidates, RED PLATFORM or other technologies infringes upon these patents. We are aware of an issued patent outside
the United States that is directed to erythrocytes that comprise exogeneous polypeptides. While we believe that we have
reasonable defenses against a claim of infringement should such a claim be brought, including that certain claims in this
patent are invalid, there can be no assurance that we will prevail in any such action by the holder of the patent. In the event
that any third party claims that we infringe their patents or that we are otherwise employing their proprietary technology
without authorization and initiates litigation against us, even if we believe such claims are without merit, a court of
competent jurisdiction could hold that such patents are valid, enforceable and infringed by our product candidates, RED
PLATFORM or other technologies. In this case, the holders of such patents may be able to block our ability to
commercialize the applicable product candidate or technology unless we obtain a license under the applicable patents, or
until such patents expire or are finally determined to be held invalid or unenforceable. Such a license may not be available
on commercially reasonable terms or at all. Even if we are able to obtain a license, the license would likely obligate us to
pay license fees or royalties or both, and the rights granted to us might be non-exclusive, which could result in our
competitors gaining access to the same intellectual property. If we are unable to obtain a necessary license to a third-party
patent on commercially reasonable terms, we may be unable to commercialize our product candidates, RED PLATFORM,
or other technologies, or such commercialization efforts may be significantly delayed, which could in turn significantly
harm our business.
Defense of infringement claims, regardless of their merit, would involve substantial litigation expense and would be a
substantial diversion of management and other employee resources from our business, and may impact our reputation. In
the event of a successful claim of infringement against us, we may be enjoined from further developing or commercializing
our infringing product candidates, RED PLATFORM, or other technologies. In addition, we may have to pay substantial
damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third
parties, pay royalties and/or redesign our infringing product candidates or technologies, which may be impossible or
require substantial time and monetary expenditure. In that event, we would be unable to further develop and commercialize
our product candidates, RED PLATFORM, or other technologies, which could harm our business significantly.
Engaging in litigation to defend against third parties alleging that we have infringed, misappropriated or otherwise violated
their patents or other intellectual property rights is very expensive, particularly for a company of our size, and time-
consuming. Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more
effectively than we can because of greater financial resources. Patent litigation and other proceedings may also absorb
significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or other
proceedings against us could impair our ability to compete in the marketplace. The occurrence of any of the foregoing
could have a material adverse effect on our business, financial condition or results of operations.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in
our markets of interest and our business may be adversely affected.
Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic
or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade
names, which we need to build name recognition among potential partners or customers in our markets of interest. At
times, competitors or other third parties may adopt trade names or trademarks similar to ours, thereby impeding our ability
to build brand identity and possibly leading to market confusion. If we assert trademark infringement claims, a
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court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have
asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to
cease use of such trademarks. In addition, there could be potential trade name or trademark infringement claims brought by
owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered
trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and
trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to
enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual
property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our
business, financial condition, results of operations and prospects.
Intellectual property rights do not necessarily address all potential threats.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights
have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For
example:
●
others may be able to make products that are similar to our product candidates or utilize similar technology but that are
not covered by the claims of the patents that we license or own;
●
we, or our current or future licensors or collaborators, might not have been the first to make the inventions covered by
the issued patent or pending patent application that we license or own now or in the future;
●
we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering
certain of our or their inventions;
●
others may independently develop similar or alternative technologies or duplicate any of our technologies without
infringing our owned or licensed intellectual property rights;
●
it is possible that our current or future pending owned or licensed patent applications will not lead to issued patents;
●
issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by
our competitors or other third parties;
●
our competitors or other third parties might conduct research and development activities in countries where we do not
have patent rights and then use the information learned from such activities to develop competitive products for sale in
our major commercial markets;
●
we may not develop additional proprietary technologies that are patentable;
●
the patents of others may harm our business; and
●
we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may
subsequently file a patent covering such intellectual property.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of
operations and prospects.
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Risks related to our reliance on third parties
We rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their
contractual duties or meet expected deadlines or comply with regulatory requirements, we may not be able to obtain
regulatory approval of, or commercialize, any potential product candidates.
We depend, and will continue to depend, upon third parties, including independent investigators, to conduct our clinical
trials under agreements with universities, medical institutions, CROs, strategic partners and others. We have had to, and
expect to continue to have to, negotiate budgets and contracts with CROs and trial sites, which may result in delays to our
development timelines and increased costs.
We have relied, and expect to continue to rely, heavily on third parties over the course of our clinical trials, and, as a result,
will have limited control over the clinical investigators and limited visibility into their day-to-day activities, including with
respect to their compliance with the approved clinical protocol. Nevertheless, we are responsible for ensuring that each of
our trials is conducted in accordance with the applicable protocol, legal and regulatory requirements and scientific
standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties
are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and comparable
foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCP
requirements through periodic inspections of trial sponsors, clinical investigators and trial sites. If we or any of these third
parties fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed
unreliable and the FDA or comparable foreign regulatory authorities may require us to suspend or terminate these trials or
perform additional nonclinical studies or clinical trials before approving our marketing applications. We cannot be certain
that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with the GCP
requirements. In addition, our clinical trials must be conducted with biologic product produced under cGMP requirements
and may require a large number of patients.
Our failure or any failure by these third parties to comply with applicable legal and regulatory requirements or to recruit a
sufficient number of patients may require us to repeat clinical trials, which would delay the regulatory approval process.
Moreover, our business may be implicated if any of these third parties violates federal or state fraud and abuse or false
claims laws and regulations or healthcare privacy and security laws.
Any third parties conducting our current or future clinical trials are not, and will not be, our employees and, except for
remedies that may be available to us under our agreements with such third parties, we cannot control whether or not they
devote sufficient time and resources to our ongoing or future clinical programs. These third parties may also have
relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical
trials or other product development activities, which could affect their performance on our behalf. If these third parties do
not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or
if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical
protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we
may not be able to complete development of, obtain regulatory approval of or successfully commercialize our product
candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our
costs could increase and our ability to generate revenue could be delayed.
If any of our relationships with these third-party CROs or others terminate, we may not be able to enter into arrangements
with alternative CROs or other third parties or do so on commercially reasonable terms. Switching or adding CROs
involves additional cost and requires management time and focus. In addition, there is a natural transition period when a
new CRO begins work. As a result, delays may occur, which can materially impact our ability to meet our desired clinical
development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we
will not encounter similar challenges or delays in the future or that any such delays or challenges will not have a material
adverse impact on our business, financial condition and prospects.
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We may rely on third parties to conduct investigator-sponsored clinical trials of our product candidates. Any failure by a
third party to meet its obligations with respect to the clinical development of our product candidates may delay or impair
our ability to obtain regulatory approval for other product candidates.
We may rely on academic and private non-academic institutions to conduct and sponsor clinical trials relating to our
product candidates. We will not control the design or conduct of the investigator-sponsored trials, and it is possible that the
FDA or non-U.S. regulatory authorities will not view these investigator-sponsored trials as providing adequate support for
future clinical trials, whether controlled by us or third parties, for any one or more reasons, including elements of the
design or execution of the trials or safety concerns or other trial results.
Such arrangements will likely provide us certain information rights with respect to the investigator-sponsored trials,
including access to and the ability to use and reference the data, including for our own regulatory filings, resulting from the
investigator-sponsored trials. However, we would not have control over the timing and reporting of the data from
investigator-sponsored trials, nor would we own the data from the investigator-sponsored trials. If we are unable to confirm
or replicate the results from the investigator-sponsored trials or if negative results are obtained, we would likely be further
delayed or prevented from advancing further clinical development of our product candidates. Further, if investigators or
institutions breach their obligations with respect to the clinical development of our product candidates, or if the data proves
to be inadequate compared to the first-hand knowledge we might have gained had the investigator-sponsored trials been
sponsored and conducted by us, then our ability to design and conduct any future clinical trials ourselves may be adversely
affected.
Additionally, the FDA or non-U.S. regulatory authorities may disagree with the sufficiency of our right of reference to the
preclinical, manufacturing or clinical data generated by these investigator-sponsored trials, or our interpretation of
preclinical, manufacturing or clinical data from these investigator-sponsored trials. If so, the FDA or other non-U.S.
regulatory authorities may require us to obtain and submit additional preclinical, manufacturing, or clinical data before we
may initiate our planned trials and/or may not accept such additional data as adequate to initiate our planned trials.
We may rely on third parties to produce and process our products, if approved.
We currently rely on outside vendors to supply raw materials and other important components, such as CD34+ precursor
cells and lentiviral vectors, that are used to manufacture our product candidates. We have only recently begun clinical scale
manufacturing and have not reached commercial scale manufacturing capabilities. We may not be able to manufacture
sufficient materials to meet clinical demand for all of our product candidates and may not reach commercial scale for any
of our product candidates. We will make changes as we work to optimize the manufacturing process for our product
candidates, and we cannot be sure that even minor changes in the process will result in therapies that are safe and effective.
The facilities used to manufacture our product candidates must be approved by the FDA or other foreign regulatory
agencies pursuant to inspections that will be conducted after we submit an application to the FDA or other foreign
regulatory agencies. As of January 2020, our manufacturing facility purchased in 2018 is operational and we are and will
continue to be responsible for compliance with regulatory requirements, known as cGMP requirements, and the clinical
supply of our product candidates is also subject to compliance with cGMP requirements. If we or any contract
manufacturers that we may engage cannot successfully manufacture in conformance with our specifications and the strict
regulatory requirements of the FDA or other regulatory authorities, we and they will not be able to secure and/or maintain
regulatory approval for their manufacturing facilities with respect to the manufacture of our product candidates. In
addition, we have no control over the ability of any contract manufacturers that we may engage to maintain adequate
quality control, quality assurance and qualified personnel and such third parties may experience business interruptions. 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 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.
For more information, see “Risk factors—Risks related to manufacturing and supply” below.
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Cell therapies rely on the availability of specialty raw materials, which may not be available to us on acceptable terms or
at all.
Our product candidates require certain specialty raw materials, some of which we obtain from small companies with
limited resources and experience to support a commercial product. In addition, those suppliers normally support blood-
based hospital businesses and generally do not have the capacity to support commercial products manufactured under
cGMP by biopharmaceutical firms. The suppliers may be ill-equipped to support our needs, especially in non-routine
circumstances like an FDA inspection or medical crisis, such as widespread contamination. We do not currently have
contracts in place with all of the suppliers that we may need at any point in time, and if needed, may not be able to contract
with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key raw materials to support
clinical or commercial manufacturing.
We are dependent on suppliers for some of our components, precursor cells and materials used to manufacture our
product candidates.
We currently depend on suppliers for some of the components and precursor cells necessary for our product candidates and
our suppliers of precursor cells depend on the availability of human donors. We cannot be sure that these suppliers will
remain in business, that they will be able to identify and recruit adequate numbers of donors, that they will be able to meet
our supply needs, that they will not be purchased by one of our competitors or another company that is not interested in
continuing to produce these materials for our intended purpose or whether they will otherwise be affected by factors
outside of their control. Additionally, we rely on sole suppliers for certain of our supplies. If these sole suppliers are unable
to supply to us in the quantities we require, or at all, or otherwise default on their supply obligations to us, we may not be
able to obtain alternative supplies from other suppliers on acceptable terms, in a timely manner, or at all.
There are, in general, relatively few alternative sources of supply for these components and precursor cells. These suppliers
may be unable or unwilling to meet our future demands for our clinical trials or commercial sale. Establishing additional or
replacement suppliers for these components and precursor cells could take a substantial amount of time and it may be
difficult to establish replacement suppliers who meet regulatory requirements. Any disruption in supply from a supplier or
manufacturing location could lead to supply delays or interruptions which would damage our business, financial condition,
results of operations and prospects.
If we are able to find a replacement supplier, the replacement supplier would need to be qualified and may require
additional regulatory authority approval, which could result in further delay. While we seek to maintain adequate inventory
of the components, precursor cells and other materials used to manufacture our products, any interruption or delay in the
supply of components, precursor cells or other materials, or our inability to obtain components, precursor cells or materials
from alternate sources at acceptable prices in a timely manner, could impair our ability to meet clinical and commercial
demand.
In addition, as part of the FDA’s approval of our product candidates, we will also require FDA approval of the individual
components of our process, which include the manufacturing processes and facilities of our suppliers.
Our reliance on these suppliers subjects us to a number of risks that could harm our business, and financial condition,
including, among other things:
●
material interruption of product candidate or commercial supply resulting from modifications to or discontinuation of
a supplier’s operations as a result of the ongoing COVID-19 pandemic;
●
the continued manufacture and supply of raw materials and components for the Company’s clinical and development
programs, which, in some cases, have been delayed or interrupted due to the ongoing COVID-19 pandemic, and the
availability of any of which could be significantly impaired in the future by the ongoing COVID-19 pandemic;
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●
delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a
component;
●
a lack of long-term supply arrangements for key components with our suppliers;
●
inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable
terms;
●
difficulty and cost associated with locating and qualifying alternative suppliers for our components and precursor cells
in a timely manner;
●
production delays related to the evaluation and testing of products from alternative suppliers, and corresponding
regulatory qualifications;
●
continued delay in delivery due to our suppliers prioritizing other customer orders over ours, in particular to meet
demand for vaccines, or other delays related to the ongoing COVID-19 pandemic; and
●
fluctuation in delivery by our suppliers due to changes in demand from us or their other customers.
If any of these risks materialize, our manufacturing costs could significantly increase and our ability to meet clinical and
commercial demand for our products could be impacted.
Our future collaborations may be important to our business. If we are unable to maintain any of these collaborations,
or if these collaborations are not successful, our business could be adversely affected.
We have limited capabilities for product development and do not yet have any capability for sales, marketing or
distribution. Accordingly, we may enter into collaborations with other companies to provide us with important technologies
and funding for our programs and technology, and we may receive additional technologies and funding under these and
other collaborations in the future. Any future collaborations we enter into, may pose a number of risks, including the
following:
●
collaborators have significant discretion in determining the efforts and resources that they will apply;
●
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 or license arrangements
based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors,
such as a strategic transaction that may 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 independently develop, or develop with third parties, products that compete directly or indirectly
with our products and product candidates if the collaborators believe that the 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;
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●
collaborators may fail to comply with applicable regulatory requirements regarding the development, manufacture,
distribution or marketing of a product candidate or product;
●
collaborators 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 or products;
●
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the
preferred course of development, might cause delays or terminations 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 that could jeopardize or invalidate our intellectual property or proprietary information or
expose us to potential litigation;
●
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and
potential liability;
●
if a collaborator of ours is involved in a business combination, the collaborator might deemphasize or terminate the
development or commercialization of any product candidate licensed to it by us; and
●
collaborations may be terminated by the collaborator, and, if terminated, we could be required to raise additional
capital to pursue further development or commercialization of the applicable product candidates.
If our potential future collaborations do not result in the successful discovery, development and commercialization of
products or if one of our future collaborators terminates its agreement with us, we may not receive any future research
funding or milestone or royalty payments under the collaboration. If we do not receive the funding we expect under these
agreements, our development of our technology and product candidates could be delayed and we may need additional
resources to develop product candidates and our technology. All of the risks relating to product development, regulatory
approval and commercialization described in this Annual Report on Form 10-K also apply to the activities of our future
therapeutic collaborators.
Additionally, if one of our potential future collaborators terminates its agreement with us, we may find it more difficult to
attract new collaborators and our perception in the business and financial communities could be adversely affected.
Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant
number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of
potential future collaborators. We face significant competition in seeking appropriate collaborators. Our ability to reach a
definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s
resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation
of a number of factors. 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 increase our expenditures to fund 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 or 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, bring them to market and
generate revenue from sales of drugs or continue to develop our technology, and our business may be materially and
adversely affected.
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Risks related to manufacturing and supply
Our product candidates are uniquely manufactured. If we or any third-party manufacturers that we may engage
encounter difficulties in manufacturing our product candidates or any of their components, our ability to provide supply
of our product candidates for clinical trials or our products for patients, if approved, could be delayed or stopped, or we
may be unable to maintain a commercially viable cost structure.
The manufacturing process used to produce our product candidates is complex and novel and it has not previously been
used to manufacture products for clinical testing or commercialization. As a result of these complexities, the cost to
manufacture our product candidates is higher than traditional small molecule chemical compounds and monoclonal
antibodies and the manufacturing process is less reliable and is more difficult to reproduce. Furthermore, our
manufacturing process development and scale-up is at an early stage. The actual cost to manufacture and process our
product candidates could be greater than we expect and could materially and adversely affect the commercial viability of
our product candidates.
Our manufacturing process may be susceptible to logistical issues associated with the collection of hematopoietic precursor
cells from donors, procurement of plasmids and lentiviral vectors sourced from various suppliers and shipment to the RCT
product candidate manufacturing site, as well as shipment of the final product to clinical centers, manufacturing issues
associated with interruptions in the manufacturing process, contamination, equipment or reagent failure, improper
installation or operation of equipment, vendor or operator error, inconsistency in cell growth, and variability in product
characteristics. Even minor deviations from normal manufacturing processes, or changes to these processes, could result in
reduced production yields, lot failures, product defects, product recalls, product liability claims and other supply
disruptions. If microbial, viral, or other contaminations are discovered in our product candidates or in our manufacturing
facilities in which our product candidates are made, production at such manufacturing facilities may be interrupted for an
extended period of time to investigate and remedy the contamination. Further, as product candidates are developed through
preclinical to late-stage clinical trials toward approval and commercialization, it is common that various aspects of the
development program, such as manufacturing methods, are altered along the way in an effort to optimize processes and
results. Such changes can trigger regulatory review or delays and, regardless of regulatory feedback, will carry the risk that
they will not achieve these intended objectives, and any of these changes could cause our product candidates to perform
differently and affect the results of ongoing clinical trials or other future clinical trials.
Although we continue to optimize our manufacturing process for our RCT product candidates, doing so is a difficult and
uncertain task, and there are risks associated with scaling to the level required for advanced clinical trials or
commercialization, including, among others, cost overruns, potential problems with process scale-up, process
reproducibility, stability issues, lot consistency, and timely availability of reagents and/or raw materials. We ultimately may
not be successful in operating the manufacturing facility we established ourselves, or any contract manufacturer that we
may engage with may not have the necessary capabilities to successfully implement our manufacturing process. If we are
unable to adequately validate or scale-up the manufacturing process for our product candidates as planned, we will need to
transfer to an alternative contract manufacturer and complete the manufacturing validation process, which can be costly,
lengthy and unpredictable. If we are able to adequately validate and scale-up the manufacturing process for our product
candidates with a contract manufacturer that we may engage, we may still need to negotiate with such contract
manufacturer an agreement for commercial supply and it is not certain we will be able to come to agreement on terms
acceptable to us. As a result, we may ultimately be unable to reduce the cost of goods for our product candidates to levels
that will allow for an attractive return on investment if and when those product candidates are commercialized.
The manufacturing process for any products that we may develop is subject to the FDA and foreign regulatory authority
approval process, and we will need to contract with manufacturers who can meet all applicable FDA and foreign regulatory
authority requirements on an ongoing basis. If we or our CMOs that we may engage are unable to reliably produce
products to specifications acceptable to the FDA or other regulatory authorities, we may not obtain or maintain the
approvals we need to commercialize such products. Even if we obtain regulatory approval for any of our product
candidates, there is no assurance that either we or our CMOs that we may engage will be able to manufacture the approved
product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet
the requirements for the potential launch of the product, or to meet potential future demand. Any of these challenges could
delay completion of clinical trials, require bridging clinical trials or the repetition of one or more
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clinical trials, increase clinical trial costs, delay approval of our product candidates, impair commercialization efforts,
increase our cost of goods, and have an adverse effect on our business, financial condition, results of operations and growth
prospects. We or CMOs we may engage may fail to manage the logistics of storing and shipping our raw materials and
product candidates. Storage failures and shipment delays and problems caused by us, our vendors or other factors not in
our control, such as weather, could result in the inability to manufacture product or the loss of usable product or could
prevent or delay the delivery of product candidates to patients. Our future success depends on our ability to manufacture
our products on a timely basis with acceptable manufacturing costs, while at the same time maintaining good quality
control and complying with applicable regulatory requirements, and an inability to do so could have a material adverse
effect on our business, financial condition, and results of operations. In addition, we could incur higher manufacturing costs
if manufacturing processes or standards change, and we could need to replace, modify, design, or build and install
equipment, all of which would require additional capital expenditures. Specifically, because our product candidates may
have a higher cost of goods than conventional therapies, the risk that coverage and reimbursement rates may be inadequate
for us to achieve profitability may be greater.
Fluctuations in a CMO’s demand from other customers may affect their ability or willingness to deliver materials or
products in a timely manner or may lead to long-term capacity constraints at the supplier. Additionally, a CMO may lose
access to critical services or sustain damage to a facility, including losses due to man-made or natural disasters, geo-
political events, or epidemics that may result in a sustained interruption in the manufacture and supply of our products. Our
CMOs may also encounter financial or other hardships unrelated to our demand for materials, products and services, which
could inhibit their ability to fulfill our orders and meet our requirements. If any CMO with whom we contract fails to
perform its obligations, we may be forced to enter into an agreement with a different CMO, which we may not be able to
do on reasonable terms, if at all. Our clinical trials supply could be delayed significantly as a result. In some cases, the
technical skills required to manufacture our products or product candidates may be unique or proprietary to the original
CMO and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills to a
back-up or alternate supplier, or we may be unable to transfer such skills at all. In addition, if we are required to change
CMOs for any reason, we will be required to verify that the new CMO maintains facilities and procedures that comply with
quality standards and with all applicable regulations. We will also need to verify, such as through a manufacturing
comparability study, that any new manufacturing process will produce our product candidate according to the
specifications previously submitted to the FDA or another regulatory authority. The delays associated with the verification
of a new CMO could negatively affect our ability to develop product candidates or commercialize our products in a timely
manner or within budget. Furthermore, a CMO may possess technology related to the manufacture of our product
candidate that such CMO owns independently. This would increase our reliance on such CMO or require us to obtain a
license from such CMO in order to have another CMO manufacture our product candidates. In addition, changes in
manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct
bridging studies between our prior clinical supply used in our clinical trials and that of any new manufacturer. We may be
unsuccessful in demonstrating the comparability of clinical supplies which could require the conduct of additional clinical
trials.
We have acquired and are establishing our own manufacturing facility and infrastructure in addition to or in lieu of
relying on CMOs for the manufacture of our product candidates, which is costly, time-consuming, and which may not
be successful.
In July 2018, we purchased a 135,000 square foot manufacturing facility located in Smithfield, Rhode Island as an
alternative, or in addition, to our reliance on CMOs for the manufacture of our product candidates. As of January 2020, this
manufacturing facility is operational and is expected to provide cGMP materials for clinical supply and, ultimately,
commercial product upon regulatory approval. We are currently providing cGMP supply for our ongoing RTX-240, RTX-
321 and RTX-224 cancer clinical trials from this site.
We expect that our own manufacturing facility will provide us with enhanced control of material supply for both clinical
trials and commercial product, enable more rapid implementation of process changes, and allow for better long-term cost
of goods manufactured. However, we do not have extensive experience as a company in setting up, building, managing or
operating a manufacturing facility and may never be successful in developing or operating this facility and recognizing its
full capabilities. As a result, we may need to hire additional personnel to manage our operations and facilities and develop
the necessary infrastructure to continue the research and development, and eventual
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commercialization, if approved, of our product candidates. Additionally, if we have failed to select the correct location for
our facility, or if we fail to complete any future renovations in an efficient manner, or fail to generally manage our growth
effectively, the development and production of our product candidates could be curtailed or delayed, or could require
changes in the manufacturing process which could trigger the requirement to conduct bridging studies. We may establish
multiple manufacturing facilities as we expand our commercial footprint to multiple geographies, which may lead to
regulatory delays or prove costly. Even if we are successful, our manufacturing capabilities could be affected by cost-
overruns, unexpected delays, equipment failures, labor shortages, man-made or natural disasters, utility failures or other
business interruptions and numerous other factors (many of which we are predominantly self-insured for) that could
prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our
business.
In addition, the FDA, the EMA and other foreign regulatory authorities may require us to submit samples of any lot of any
approved product together with the protocols showing the results of applicable tests at any time. Under some
circumstances, the FDA, the EMA or other foreign regulatory authorities may require that we not distribute a lot until the
relevant agency authorizes its release. Slight deviations in the manufacturing process, including those affecting quality
attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls.
Lot failures or product recalls could cause us to delay product launches or clinical trials, which could be costly to us and
otherwise harm our business, financial condition, results of operations and prospects. Problems in our manufacturing
process could restrict our ability to meet market demand for our products.
We also may encounter problems hiring and retaining the experienced scientific, quality-control and manufacturing
personnel needed to operate our manufacturing processes, which could result in delays in production or difficulties in
maintaining compliance with applicable regulatory requirements.
Any problems in our manufacturing process or facilities could make us a less desirable collaborator for potential partners,
including larger pharmaceutical companies and academic research institutions, which could limit our access to additional
attractive development programs and capital.
We have limited experience as a company managing a manufacturing facility.
Operating our own manufacturing facility will require significant resources, and we have limited experience as a company
in managing a manufacturing facility, having done so only since January 2020, when our Smithfield, RI facility became
operational. In part because of this limited experience, we cannot be certain that our manufacturing plans will be completed
on time, if at all, or if manufacturing of product candidates from our own manufacturing facility for our ongoing or future
clinical trials will begin or be completed on time, if at all. In part because of our inexperience, we may have unacceptable
or inconsistent product quality success rates and yields, and we may be unable to maintain adequate quality control, quality
assurance and qualified personnel. Failure to successfully operate our manufacturing facility could adversely affect the
approvability and commercial viability of our product candidates.
Risks related to our common stock
The price of our stock has been and may continue to be volatile, and our stockholders could lose all or part of their
investment.
The trading price of our common stock has been highly volatile and could continue to be subject to large fluctuations in
response to the risk factors discussed in this section and elsewhere in this Annual Report on Form 10-K, and other risk
factors beyond our control, including:
●
the commencement, enrollment or results of our ongoing and planned clinical trials of our product candidates or any
future clinical trials we may conduct, or changes in the development status of our product candidates;
●
any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse
development with respect to the applicable regulatory authority’s review of such filings;
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●
adverse or uninterpretable results from or delays in clinical trials of our product candidates, such as those we
encountered with our Phase 1b clinical trial for RTX-134, which we have since discontinued;
●
our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
●
adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;
●
changes in laws or regulations applicable to our product candidates, including but not limited to clinical trial
requirements for approvals;
●
adverse developments concerning the manufacture of our product candidates, such as the difficulties encountered by
our former contract manufacturer for clinical supply of our discontinued Phase 1b clinical trial for RTX-134;
●
our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices;
●
our inability to establish collaborations, if needed;
●
our failure to commercialize our product candidates;
●
additions or departures of key scientific or management personnel;
●
unanticipated serious safety concerns related to the use of our product candidates;
●
introduction of new products or services by our competitors;
●
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our
competitors;
●
our ability to effectively manage our growth;
●
the size and growth of our initial target markets;
●
actual or anticipated variations in quarterly operating results;
●
our cash position;
●
our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the
public;
●
publication of research reports about us or our industry, or cellular therapies in particular, or positive or negative
recommendations or withdrawal of research coverage by securities analysts;
●
changes in the market valuations of similar companies;
●
overall performance of the equity markets;
●
sales of our common stock by us or our stockholders in the future;
●
trading volume of our common stock;
●
adoption of new accounting standards;
●
ineffectiveness of our internal controls;
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●
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to
obtain patent protection for our technologies;
●
significant lawsuits, including patent or stockholder litigation;
●
general political and economic conditions; and
●
other events or factors, many of which are beyond our control, including pandemics such as COVID-19.
In recent years, the stock market in general, and the market for biopharmaceutical companies in particular, have
experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating
performance of these companies. Broad market and industry factors may negatively affect the market price of our common
stock, regardless of our actual operating performance. Since our common stock began trading on The Nasdaq Global Select
Market on July 18, 2018, our stock price has traded at prices as low as $3.35 per share and as high as $38.71 per share
through January 31, 2022.
Additionally, technical factors in the public trading market for our stock may produce price movements that may or may
not comport with macro, industry or company-specific fundamentals, including, without limitation, the sentiment of retail
investors (including as may be expressed on financial trading and other social media sites), speculation in the press, in the
investment community, or on the internet, including on online forums and social media, about us, our industry or our
securities, the amount and status of short interest in our securities (including a “short squeeze”), access to margin debt,
trading in options and other derivatives on our common stock and other technical trading factors. We may incur rapid and
substantial decreases in our stock price in the foreseeable future that are unrelated to our operating performance or
prospects. There can be no guarantee that our stock price will remain at current prices or that future sales of our common
stock will not be at prices lower than the sales price in previous offerings. If the market price of our common stock does
not exceed their purchase price, our stockholders may not realize any return on their investment in us and may lose some or
all of their investment. In the past, securities class action litigation has often been instituted against companies following
periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in
substantial costs and a diversion of management’s attention and resources, which would harm our business, operating
results or financial condition.
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. In addition, under the Loan
Agreement, we are restricted from paying any dividends or making any distributions on account of our capital stock. Any
return to stockholders will therefore be limited in the foreseeable future to the appreciation of their stock.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert
significant control over matters subject to stockholder approval.
Our executive officers, directors and their affiliates beneficially hold, in the aggregate, over 48% of our outstanding voting
stock. These stockholders will have the ability to influence us through this ownership position. These stockholders may be
able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control
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 our stockholders may feel are in their best interest as one of our stockholders.
We incur significant increased costs as a result of operating as a public company, and our management is required to
devote substantial time to new compliance initiatives.
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, which
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require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business
and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and The
Nasdaq Market to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies,
including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate
governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the
Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions
in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas, such as “say on pay”
and proxy access.
As of December 31, 2021, we became a large accelerated filer and no longer qualify as an emerging growth company under
the Jumpstart Our Business Startups Act, or the JOBS Act. Accordingly, we have ceased to be eligible for the emerging
growth company provisions of the JOBS Act as of such date and are no longer able to avail ourselves of exemptions from
various reporting requirements applicable to non-emerging growth companies. Such requirements include the requirement
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the
Sarbanes-Oxley Act, enhanced disclosure obligations regarding executive compensation in our periodic reports and proxy
statements and the requirement to hold nonbinding advisory votes on executive compensation and stockholder approval of
any golden parachute payments not previously approved. Additionally, we will no longer have the option to delay the
adoption of new or revised accounting standards until such time as those standards apply to private companies. As a result,
we may incur additional expenses or challenges relating to our transition to a large accelerated filer and/or our loss of
emerging growth company status. Further, stockholder activism, the current political environment and the current high
level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations,
which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot
currently anticipate.
The rules and regulations applicable to public companies substantially increase our legal and financial compliance costs
and make some activities more time-consuming and costly. If these requirements divert the attention of our management
and personnel from other business concerns, they could have a material adverse effect on our business, financial condition
and results of operations. The increased costs will decrease our net income or increase our net loss and may require us to
reduce costs in other areas of our business or increase the prices of our products or services. For example, we expect these
rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance
and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate
the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements
could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board
committees or as executive officers.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our
business, our stock price and trading volume could decline.
The trading market for our common stock is influenced by research and reports that securities or industry analysts publish
about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or
unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of
our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock
price and trading volume to decline.
We have broad discretion in the use of our existing cash, cash equivalents and investments and may not use them
effectively.
Our management has broad discretion in the application of our cash, cash equivalents and investments. Because of the
number and variability of factors that will determine our use of our cash, cash equivalents and investments, their ultimate
use may vary substantially from their currently intended use. Our management might not apply our cash, cash equivalents
and investments in ways that ultimately increase the value of our stockholders’ investment. The failure by our management
to apply these funds effectively could harm our business. Pending their use, we may invest our cash in short-term,
investment-grade, interest-bearing securities. These investments may not yield a favorable return to our
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stockholders. If we do not use our resources in ways that enhance stockholder value, we may fail to achieve expected
financial results, which could cause our stock price to decline.
Risks related to corporate governance
Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control
which could limit the market price of our common stock and may prevent or frustrate attempts by our stockholders to
replace or remove our current management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay
or prevent a change of control of our company or changes in our board of directors that our stockholders might consider
favorable. Some of these provisions include:
●
a board of directors divided into three classes serving staggered three-year terms, such that not all members of the
board will be elected at one time;
●
a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a
meeting of our stockholders;
●
a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief
executive officer, or by a majority of the total number of authorized directors;
●
advance notice requirements for stockholder proposals and nominations for election to our board of directors;
●
a requirement that no member of our board of directors may be removed from office by our stockholders except for
cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all
outstanding shares of our voting stock then entitled to vote in the election of directors;
●
a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws
by stockholder action or to amend specific provisions of our certificate of incorporation; and
●
the authority of the board of directors to issue preferred stock on terms determined by the board of directors without
stockholder approval and which preferred stock may include rights superior to the rights of the holders of common
stock.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware
General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our
outstanding voting stock. These anti-takeover provisions and other provisions in our amended and restated certificate of
incorporation and amended and restated bylaws could make it more difficult for stockholders or potential acquirers to
obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and could
also delay or impede a merger, tender offer or proxy contest involving our company. These provisions could also
discourage proxy contests and make it more difficult for our stockholders and other stockholders to elect directors of their
choosing or cause us to take other corporate actions they desire. Any delay or prevention of a change of control transaction
or changes in our board of directors could cause the market price of our common stock to decline.
Our amended and restated bylaws designate specific courts as the exclusive forum for certain litigation that may be
initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for
disputes with us.
Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the
Court of Chancery of the State of Delaware is the sole and exclusive forum for any state law claim for (1) any derivative
action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty owed by any of
our directors, officers, or other employees to us or our stockholders; (3) any action asserting a claim against us arising
pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws; (4)
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any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; or (5) any
action asserting a claim against us governed by the internal affairs doctrine, or the Delaware Forum Provision. The
Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act. Our
amended and restated bylaws further provide that, unless we consent in writing to the selection of an alternative forum, the
United States District Court for the District of Massachusetts is the sole and exclusive forum (1) for resolving any
complaint asserting a cause of action arising under the Securities Act or the rules and regulations promulgated thereunder,
and (2) of all suits in equity and actions at law brought to enforce any liability or duty created by the Securities Act or the
rules and regulations thereunder, or the Federal Forum Provision, as our principal executive offices are located in
Cambridge, Massachusetts. In addition, our amended and restated bylaws provide that any person or entity purchasing or
otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing
Delaware Forum Provision and Federal Forum Provision; provided, however, that stockholders cannot and will not be
deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.
We recognize that the Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs
on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware
or the Commonwealth of Massachusetts. Additionally, the forum selection clauses in our amended and restated by-laws
may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our
directors, officers or employees, which may discourage the filing of lawsuits against us and our directors, officers and
employees even though an action, if successful, might benefit our stockholders. While the Delaware Supreme Court ruled
in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in
federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our
Federal Forum Provision. The Federal Forum Provision may also impose additional litigation costs on us and/or our
stockholders who assert that the provision is invalid or unenforceable, and if the Federal Forum Provision is found to be
unenforceable, we may incur additional costs with resolving such matters. The Court of Chancery of the State of Delaware
or the United States District Court for the District of Massachusetts may also reach different judgments or results than
would other courts, including courts where a stockholder considering an action may be located or would otherwise choose
to bring the action, and such judgments may be more or less favorable to us than our stockholders.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate headquarters is located in approximately 85,000 square feet of office and laboratory space at 399
Binney Street, Cambridge, Massachusetts. The lease term for approximately 48,000 square feet commenced on
January 28, 2019 and the lease term for the remaining 37,000 square feet commenced on August 8, 2019. The
lease terms will expire eight and nine years from the commencement date of the 48,000 square feet and the
remaining 37,000 square feet, respectively.
In addition to our corporate headquarters, we own a 135,000 square foot manufacturing facility located in
Smithfield, Rhode Island.
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
Certain Information Regarding the Trading of Our Common Stock
Our common stock trades under the symbol “RUBY” on the Nasdaq Global Select Market and has been publicly traded
since July 18, 2018. Prior to this time, there was no public market for our common stock.
Holders of Our Common Stock
As of January 31, 2022, there were approximately 13 holders of record of shares of our common stock. This number does
not include stockholders for whom shares are held in “nominee” or “street” name.
Dividends
We have never declared or paid any cash 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, general business conditions
and other factors that our board of directors may deem relevant.
Stock Performance Graph
The following performance graph and related information shall not be deemed to be “soliciting material” or to be “filed”
with the SEC, for purposes of Section 18 of the Exchange Act, nor shall such information be incorporated by reference into
any future filing under the Exchange Act or Securities Act, except to the extent that we specifically incorporate it by
reference into such filing.
The following graph compares the performance of our common stock to the Nasdaq Composite Index and to the Nasdaq
Biotechnology Index from July 18, 2018 (the first date that shares of our common stock were publicly traded) through
December 31, 2021. The comparison assumes $100 was invested in our common stock and in each of the foregoing indices
after the market closed on July 18, 2018, and it assumes reinvestment of dividends, if any. The stock price performance
included in this graph is not necessarily indicative of future stock price performance.
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Securities Authorized for Issuance Under Equity Compensation Plans
Information about our equity compensation plans will be included in our definitive proxy statement to be filed with the
SEC with respect to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference.
Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Equity Securities
None.
Use of Proceeds from Initial Public Offering
On July 20, 2018, we completed the IPO of our common stock pursuant to which we issued and sold 12,055,450 shares of
our common stock at a price to the public of $23.00 per share.
The offer and sale of all of the shares of our common stock in our IPO were registered under the Securities Act pursuant to
a registration statement on Form S-1, as amended (File No. 333-225840), which was declared effective by the SEC on
July 17, 2018 and a registration statement on Form S-1MEF (File No. 333-226214), which was automatically effective
upon filing with the SEC on July 17, 2018. Following the sale of all of the shares offered in connection with the closing of
our IPO, the offering terminated. J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Jefferies LLC and Leerink
Partners LLC acted as joint book-running managers of our IPO.
We received aggregate gross proceeds from our IPO of $277.3 million, or aggregate net proceeds of $254.3 million after
deducting underwriting discounts and commissions and other offering costs. None of the underwriting discounts and
commissions or offering expenses were incurred or paid, directly or indirectly, to directors or officers of ours or their
associates or to persons owning 10% or more of our common stock or to any of our affiliates.
As of December 31, 2021, we estimate that we have used 100% of the net proceeds from the IPO for operations, the
purchase of our manufacturing facility and purchases of other property, plant, and equipment. There was no material
change in our planned use of the net proceeds from the IPO as described in our final prospectus filed pursuant to Rule
424(b)(4) under the Securities Act with the SEC on July 18, 2018.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our registered equity securities during the period covered by this Annual Report on Form 10-K.
Item 6. Reserved
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Objective
The purpose of the following discussion and analysis is to provide material information relevant to an assessment of our
financial condition and results of operations from management’s perspective, including to describe and explain key trends,
events and other factors that impacted our reported results and that are reasonably likely to impact our future performance.
As such, the following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our consolidated financial statements and related notes appearing at the end of this Annual Report on
Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report
on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking
statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk
Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described
in, or implied by, the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biopharmaceutical company that is biologically engineering red blood cells or RBCs, to develop an
entirely new class of cellular medicines called Red Cell Therapeutics, or RCTs, for the treatment of cancer and
autoimmune diseases. Based on our vision that human red blood cells are the foundation of the next significant innovation
in medicine, we have developed a programmable and highly versatile platform, which we call the RED PLATFORM, to
biologically engineer and culture allogeneic cellular therapies that enable multiple applications, or modalities. We believe
that the advantage of the platform is that once a modality is validated, as we have demonstrated with our lead product
candidate RTX-240 for the treatment of advanced cancers, we increase the likelihood that all the programs within that
modality will work, underscoring the broad potential of the RED PLATFORM to help patients.
In 2021, we demonstrated strong execution across our pipeline of RCTs. During the year, we presented initial clinical data
from our Phase 1 trial with RTX-240 in patients with relapsed refractory solid tumors, which we believe provides clinical
validation for our RED platform. Over the course of the year, we advanced enrollment in all our Phase 1studies for RTX-
240 in solid tumors and AML, as well as our second program, RTX-321 in patients with HPV 16-positive tumors. In the
fourth quarter of 2021, we received IND clearance for our third oncology program, RTX-224, our second broad immune
agonist. In January 2022, we began dosing patients in the Phase 1/2 clinical trial of RTX-224 for the treatment of patients
with certain relapsed/refractory or locally advanced solid tumors, including non-small cell lung cancer, cutaneous
melanoma, head and neck squamous cell carcinoma, urothelial (bladder) carcinoma and triple-negative breast cancer.
At our Investor Day in December 2021, we shared preclinical proof of concept data, demonstrating tolerance induction and
the potential for bystander suppression in two stringent type 1 diabetes preclinical models. These findings are potentially
translatable beyond type 1 diabetes to multiple autoimmune diseases, including our priority target indications such as
multiple sclerosis and celiac disease.
In 2021, we continued to advance our manufacturing capabilities and achieved significant manufacturing milestones,
including increased cells produced per batch in 50L bioreactors by four times that of 2020 and providing uninterrupted
clinical supply for three Phase 1 arms of the RTX-240 clinical trial and for the Phase 1 RTX-321 trial. We have the
potential to significantly expand our manufacturing capabilities and plan to stage additional investments based on future
needs and in preparation for potential pivotal trial and eventual commercialization.
Highlights of our clinical product candidates, RTX-240, RTX-321and RTX-224 are described further below.
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Broad Immune Stimulation for the Treatment of Cancer
RTX-240
In March 2021, we announced initial clinical data from the ongoing Phase 1/2 clinical trial of RTX-240 in advanced solid
tumors that we believe provides clinical validation of the RED PLATFORM’s potential ability to engineer red blood cells
to mimic the human immune system and stimulate adaptive and innate immunity to generate clinical responses in cancer
patients with refractory disease. RTX-240 is an allogeneic, off-the-shelf cellular therapy product candidate that is
engineered to simultaneously present hundreds of thousands of copies of the costimulatory molecule 4-1BB ligand (4-
1BBL) and IL-15TP (trans-presentation of IL-15 on IL-15Rα) in their native forms. RTX-240 is designed to broadly
stimulate the immune system by activating and expanding both NK and CD8+ memory T cells to generate a potent anti-
tumor response.
The data reported in March 2021 included initial safety (n=16) and efficacy (n=15) data from the RTX-240 Phase 1/2
clinical trial in relapsed/refractory or locally advanced solid tumors. These data were also presented at the American
Association for Cancer Research Virtual Annual Meeting in April 2021. Five dose cohorts were completed at the time of
the data cutoff on February 28, 2021, and the data analysis was based on RECIST v1.1. criteria. We observed the
following:
●
no treatment-related Grade 3 or Grade 4 adverse events or dose limiting toxicities;
●
most common treatment-related Grade 1/2 adverse events were fatigue, chills, nausea, decreased appetite and
arthralgias. There was a single Grade 1 event of liver toxicity;
●
two responses were observed in the study including a confirmed partial response, or PR, in a patient with metastatic
anal cancer, and an unconfirmed PR in a patient with metastatic uveal melanoma. Both patients’ diseases had
progressed on prior anti PD-L1 and anti-PD-1 therapy, respectively;
●
stable disease, or SD, was observed in six patients, including four patients with stable disease for at least 12 weeks in
non-small cell lung cancer, soft tissue sarcoma, pancreatic cancer and prostate cancer; and
●
pharmacodynamic effects showed the activation and/or expansion of the key NK and/or T cells types in all patients
(n=16).
Further, preliminary data from the single agent solid tumor arm of our RTX-240 Phase 1 study that we reported in March
2021 showed early evidence of favorable immune-permissive changes in the tumor microenvironment, or TME, in three
out of four patient biopsies, including increased expression of PD-L1 and/or increased ratio of M1/M2 macrophages after
treatment with RTX-240, suggesting single-agent RTX-240 is able to induce changes in the TME that have been associated
with response to checkpoint inhibition.
As a result of no dose-limiting toxicities, or DLTs, and a clear NK cell number dose response and other pharmacodynamic
effects, we are continuing to dose escalate the single-agent RTX-240 solid tumor trial and expect to report clinical results
for this trial, along with an integrated clinical development plan during the first quarter of 2022.
In March 2021, we presented preliminary trafficking data from the first acute myeloid leukemia, or AML, patient in the
Phase 1 arm of the ongoing RTX-240 clinical trial for the treatment of relapsed/refractory AML, showing accumulation of
activated, granzyme B-positive NK and T cells in the bone marrow, which is the site of disease in AML. We plan to report
additional results from this arm of the ongoing RTX-240 clinical trial during the first quarter of 2022.
In June 2021, we began dosing patients in the arm of our RTX-240 clinical trial that is evaluating RTX-240 as a
combination therapy with pembrolizumab for the treatment of patients with relapsed/refractory or locally advanced solid
tumors. We believe that RTX-240, with its mechanism of action as a broad immune agonist, may have synergy with
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immune checkpoint inhibition and could potentially overcome resistance to PD-1 inhibition. We expect to report initial
clinical results from this arm of the ongoing Phase 1/2 clinical of RTX-240 during the second half of 2022.
In July 2021, the paper entitled “Anti-Tumor Effects of RTX-240: An Engineered Red Blood Cell Expressing 4-1BB
Ligand and Interleukin-15” was published in the peer-reviewed journal Cancer Immunology, Immunotherapy. The
publication highlights preclinical findings and demonstrates that, consistent with the data reported in March 2021, RTX-
240 activates and expands CD8+ T cells and NK cells in vitro and in vivo generating potent anti-tumor activity in both a
colorectal and melanoma model.
RTX-224
RTX-224 is an allogeneic cellular therapy that is engineered to express hundreds of thousands of copies of 4-1BBL and
interleukin-12, or IL-12, on the cell surface. RTX-224 is designed as a broad immune agonist of both adaptive and innate
responses, designed to activate CD8+ and CD4+ T cells, activate and expand NK cells, and promote antigen presentation.
It is expected to produce a broad and potent anti-tumor T cell response and an innate immune response and have anti-tumor
activity in those tumor types with known sensitivity to T cell killing, including tumor types with high mutational burden,
PD-L1 expression and known responsiveness to checkpoint inhibitors. The combination of IL-12 and 4-1BBL has the
potential to broadly induce an immune response in patients with solid tumors and may serve as the bridge between the
innate and adaptive immune systems.
In November 2021, we presented preclinical data for RTX-224 at the Society for Immunotherapy of Cancer’s 36th Annual
Meeting, showing that RTX-224 activated immune cells in the spleen and blood, leading to their trafficking into the tumor
microenvironment to deliver an anti-tumor effect in our preclinical models.
The IND for RTX-224 was cleared in 2021, and, in January 2022, we began dosing patients in the Phase 1/2 clinical trial of
RTX-224 for the treatment of patients with certain relapsed/refractory or locally advanced solid tumors, including non-
small cell lung cancer, cutaneous melanoma, head and neck squamous cell carcinoma, urothelial (bladder) carcinoma and
triple-negative breast cancer.
Antigen-Specific Immune Stimulation for the Treatment of Cancer
RTX-321
RTX-321 is an allogeneic, off-the-shelf artificial antigen presenting cells, or aAPC, therapy product candidate that is
engineered to induce a tumor-specific immune response by expanding antigen-specific T cells. RTX-321 expresses
hundreds of thousands of copies of an HPV 16 peptide antigen bound to major histocompatibility complex class I proteins,
the costimulatory molecule 4-1BBL and the cytokine IL-12 on the cell surface to mimic human T cell-APC interactions. In
our Investigational New Drug, or IND, application filing, we included frozen drug substance for the first
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time as part of the manufacturing process, allowing for a truly off-the-shelf cellular therapy product candidate with a
potential shelf life of several years.
In May 2021, a peer-reviewed manuscript about RTX-321 was published in Nature Communications, highlighting
preclinical findings demonstrating that the surrogate model of RTX-321 induced a broad immune response, epitope
spreading and memory formation in preclinical studies.
We began dosing patients in the Phase 1 clinical trial of RTX-321 in April 2021. As of January 2022, there have been no
DLTs observed and we are therefore continuing to dose escalate the trial. We expect to report initial results from the trial
during the second half of 2022.
Antigen-Specific Immune Tolerance for the Treatment of Autoimmune Diseases
RTX-T1D (Type 1 Diabetes)
In December 2021, we shared preclinical proof of concept data, demonstrating tolerance induction and the potential for
bystander suppression in two stringent type 1 diabetes preclinical models. Specifically, we established efficacy in the
BDC2.5 adoptive transfer model with data showing that an RTX-T1D surrogate reversed established inflammation and
induced two types of regulatory T cells, resulting in protection against re-challenge. Moreover, the data showed that
repeated dosing could extend duration of disease protection to 5 months (the endpoint of the study). We also showed early
efficacy in the non-obese diabetic mouse, or NOD, preclinical model. Results at 25 weeks showed that a mouse surrogate
of RTX-T1D that delivered only two antigens delayed disease. As disease in NOD mice is caused by many autoantigens,
these results demonstrate the potential for bystander suppression. These findings are potentially translatable beyond type 1
diabetes to multiple autoimmune diseases, including other Rubius’ high priority target indications such as multiple
sclerosis and celiac disease.
We intend to present these results in a peer-reviewed setting and expect to provide details of our development timeline later
in 2022.
Manufacturing
Using our RED PLATFORM, we are utilizing our universal engineering and manufacturing processes to advance a broad
pipeline of RCT product candidates into clinical trials in cancer and autoimmune diseases. Common design and
manufacturing elements of our RCTs should enable us to achieve significant advantages in product development.
To more efficiently develop new RCTs designed to treat different diseases, we have modified one of our initial
manufacturing steps in which we add a gene or genes of interest that encode biotherapeutic proteins within the cell or on
the cell surface. Using this approach, we have expressed more than 1,000 different therapeutic proteins since platform
inception. This programmable process allows for the repeated generation of product candidates and enables us to leverage
common CMC and toxicology data packages across our therapies.
Recognizing the importance of controlling our own manufacturing capabilities to produce consistent and reproducible
product at greater scale, we acquired, renovated and operationalized a manufacturing facility in Smithfield, RI, that is
currently providing cGMP supply for our ongoing Phase 1 clinical trials: RTX-240 in advanced solid tumors, RTX-240 in
relapsed/refractory AML, RTX-240 in combination with pembrolizumab, RTX-321 in HPV 16-positive cancers and RTX-
224 in advanced solid tumors.
We have industrialized the production of RCTs by developing and scaling up a manufacturing process by which
hematopoietic progenitor cells are expanded, then biologically engineered and subsequently differentiated into erythroid
cells (RCTs) that express biotherapeutic proteins within the cell or on the cell surface. The RED PLATFORM allows us to
generate a wide variety of allogeneic, ready-to-use RCT product candidates with a universal and proprietary process.
In 2021, we achieved the following manufacturing milestones:
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●
increased cells produced per batch in 50L bioreactors by four times that of 2020, enabling uninterrupted clinical
supply for three Phase 1 arms of the RTX-240 clinical trial and for the Phase 1 RTX-321 trial; and
●
introduced frozen drug substance for RTX-321 and RTX-224, potentially enabling inventory storage for more than two
years.
Additional accomplishments include:
●
greater than 90% lot success rate for RTX-240 and RTX-321 clinical supply;
●
hundreds of doses administered across all three arms of our RTX-240 Phase 1/2 trial and our RTX-321 Phase 1 trial;
●
high transduction efficiency, with greater than 90% of cells transduced with therapeutic proteins; and
●
highly consistent protein expression (dual or triple).
We have the potential to significantly expand our manufacturing capabilities and plan to stage additional investments based
on future needs and in preparation for potential pivotal trial and eventual commercialization.
Since our inception, we have focused substantially all of our resources on building our proprietary RED PLATFORM,
establishing and protecting our intellectual property portfolio, conducting research and development activities, developing
our manufacturing process and manufacturing drug product material, organizing and staffing our company, business
planning, raising capital and providing general and administrative support for these operations. We do not have any
products approved for sale and have not generated any revenue from product sales. To date, we have funded our operations
with proceeds from the sale of preferred stock and issuance of debt and with proceeds from our public offerings.
On July 20, 2018, we completed our IPO pursuant to which we issued and sold 12,055,450 shares of common stock,
inclusive of 1,572,450 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares. We
received proceeds of $254.3 million after deducting underwriting discounts and commissions and other offering costs. In
August 2019, we entered into a Distribution Agreement with J.P. Morgan Securities LLC, Jefferies LLC and SVB Leerink
LLC with respect to an at-the-market, or ATM, offering program under which we may offer and sell, from time to time at
our sole discretion, shares of our common stock, having aggregate gross proceeds of up to $100.0 million. We have not yet
sold any shares of our common stock under the ATM offering program. In March 2021, we completed an underwritten
public offering, or the March 2021 Offering, pursuant to which we issued and sold 6,896,552 shares of common stock. We
received proceeds of $187.2 million, after deducting underwriting discounts and commissions and other offering costs.
Since our inception, we have incurred significant operating losses. Our ability to generate any product revenue or product
revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of
one or more of our product candidates. We reported net losses of $196.5 million for the year ended December 31, 2021 and
$167.7 million for the year ended December 31, 2020. As of December 31, 2021, we had an accumulated deficit of $677.0
million. We expect to continue to incur significant expenses and operating losses for at least the next several years. We
expect that our expenses and capital requirements will increase in connection with our ongoing activities, particularly if,
and as, we:
●
conduct clinical trials for our product candidates and to the extent we continue to experience delays, setbacks or
disruptions to our preclinical studies, clinical trials or clinical supply chain due to the ongoing COVID-19 pandemic;
●
further develop our RED PLATFORM;
●
continue to discover and develop additional product candidates;
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●
maintain, expand and protect our intellectual property portfolio;
●
hire additional clinical, scientific, manufacturing and commercial personnel;
●
expand in-house manufacturing capabilities, including through the operation and any future renovation or expansion of
our manufacturing facility;
●
establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial
quantities of any product candidates for which we may obtain regulatory approval;
●
acquire or in-license other product candidates and technologies;
●
seek regulatory approvals for any product candidates that successfully complete clinical trials;
●
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain
regulatory approval; and
●
add operational, financial and management information systems and personnel, including personnel to support our
product development and planned future commercialization efforts, as well as to continue to support the requirements
of a public company.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain
regulatory approval for our product candidates. If we obtain regulatory approval for any of our product candidates, we
expect to incur significant expenses related to developing our commercialization capability to support product sales,
marketing and distribution. Further, we expect to continue to incur costs associated with operating as a public company.
As a result, we will need substantial 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 public and private equity financings, debt financings, borrowings under our credit
facility, collaborations, strategic alliances and marketing, distribution and 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
are unable to obtain funding, we plan to implement an operating plan that scales back our operations and focuses our
available capital on a reduced number of activities and programs, which we believe will enable the continued advancement
of certain of our research and development programs and the preservation of our technology platform. These actions could
adversely affect our business prospects.
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 December 31, 2021, we had cash and cash equivalents of $225.8 million. We believe that our existing cash and cash
equivalents will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of
2023. See “—Liquidity and Capital Resources.”
Impact of the Ongoing COVID-19 Pandemic
Since March of 2020 and throughout the ongoing COVID-19 pandemic, we have implemented various precautionary
measures to protect the health and safety of our employees, partners and prospective clinical trial participants, to comply
with applicable national, state and local governmental orders, proclamations and/or directives in effect at any time aimed at
minimizing the spread of COVID-19 and to minimize disruption to our operations. Such measures have included, at
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certain times, the elimination of business travel, shifting to remote work wherever possible and implementing rotating
laboratory work schedules to reduce the number of people onsite at our facilities, advance ordering of certain raw materials
impacted by delays in the global supply chain, as well as working with our external partners and clinical sites to utilize
virtual clinical trial site training and monitoring, minimizing patient visits and instituting telemedicine to minimize patient
exposure. We will continue to use these and other precautionary measures as required until such time as the ongoing
COVID-19 pandemic, including any subsequent outbreak whether or not due to emerging variants thereof, is contained.
While the ongoing COVID-19 pandemic has impacted manufacturing, supply chain and clinical trial activities worldwide,
including those of our suppliers, vendors and clinical trial sites, these disruptions did not significantly impact our results of
operations during 2020 or 2021. The ultimate impact on our operations, however, is unknown and will depend on future
developments, such as the duration, spread and intensity of the pandemic, among others, which are highly uncertain and
cannot be predicted with confidence. In particular, global developments concerning COVID-19, including the identification
of new strains of coronavirus, and the magnitude of interventions to contain the spread of viruses, such as government-
mandated quarantines, shelter-in-place mandates, restrictions on travel, shutdowns for non-essential businesses,
requirements regarding social distancing, impact of government-imposed restrictions on the global supply chain, including
through use of the Defense Production Act, distribution of vaccines and other public health safety measures, will determine
the impact of the pandemic on our business. We are continuing to monitor the latest developments regarding the ongoing
COVID-19 pandemic and its impact on our business, financial condition, results of operations and prospects. However, any
resulting financial impact cannot be reasonably estimated at this time and may have a material adverse impact on our
business, financial condition and results of operations.
Recent Developments
During 2021, we strengthened our leadership team by appointing Dannielle Appelhans as Chief Operating Officer. Ms.
Appelhans brings significant experience in building organizations as they evolve from early- to late-stage development,
with a particular focus on clinical and commercial manufacturing and scaling supply chains. Additionally, Dr. Laurance
Turka has been promoted to chief scientific officer and head of research & translational medicine. Joining Rubius
Therapeutics as chief scientific officer in January 2020, Dr. Turka is an internationally recognized physician-scientist in
autoimmunity and translational immunology with a distinguished career working in academia and, more recently, in the
biotechnology industry where he has built a portfolio of novel therapies targeting immune cells.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of
products in the near future. If our development efforts for our product candidates are successful and result in regulatory
approval or license or collaboration agreements with third parties, we may generate revenue in the future from product
sales, payments from collaboration or license agreements that we may enter into with third parties, or any combination
thereof.
Operating Expenses
Research and Development Expenses
Research and development expenses consist of costs incurred for our research activities, including our drug discovery
efforts, and the development and manufacturing of our product candidates, which include:
●
employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees
engaged in research and development functions;
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●
expenses incurred in connection with the preclinical and clinical development of our product candidates and research
programs, including under agreements with third parties, such as consultants, contractors and contract research
organizations, or CROs;
●
the cost of developing and scaling our manufacturing process and manufacturing drug products for use in our
preclinical studies and clinical trials, including those produced in our manufacturing facility as well as components
that are produced under agreements with third parties, such as consultants, contractors and any contract manufacturing
organizations, or CMOs, that we may engage;
●
laboratory supplies and research materials;
●
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of
facilities and insurance; and
●
payments made under third-party licensing agreements.
We expense research and development costs as incurred. Advance payments that we make for goods or services to be
received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts
are expensed as the related goods are delivered or the services are performed.
Our direct research, manufacturing and development expenses are tracked on a program-by-program basis for clinical
candidates. These consist mostly of fees, reimbursed materials, testing and other costs paid to consultants, contractors,
CMOs and CROs, as well as the cost of materials incurred for internal manufacturing. In addition, starting in the first
quarter of 2020, we allocate the cost of operating our manufacturing facility to research and development program costs,
consisting of associated personnel costs, other than stock-based compensation expense, and manufacturing facility costs,
including depreciation. We do not allocate costs associated with our platform development, early stage research and shared
research and development, including associated personnel costs, laboratory supplies, non-manufacturing facilities expenses
and other indirect costs, to research and development programs, because these costs are deployed across multiple programs
and our technology platform and, as such, are not separately classified.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier
stages of clinical development, due to the increased size and duration of later-stage clinical trials. We expect that our
research and development expenses will increase substantially over time in connection with our planned preclinical and
clinical development activities in the future. At this time, we cannot accurately estimate or know the nature, timing and
costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our 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 timing and progress of preclinical and clinical development activities;
●
the number and scope of preclinical and clinical programs we decide to pursue;
●
our ability to raise the additional funds necessary to complete preclinical and clinical development of and
commercialize our drug candidates;
●
the progress of the development efforts of parties with whom we may enter into collaboration arrangements;
●
our ability to maintain our current research and development programs and to establish new ones;
●
our ability to establish new licensing or collaboration arrangements;
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●
the successful initiation and completion of clinical trials with safety, tolerability and efficacy profiles that are
satisfactory to the U.S. Food and Drug Administration, or FDA, or any comparable foreign regulatory authority;
●
the continued impact of the COVID-19 pandemic on our operations;
●
the receipt and related terms of regulatory approvals from applicable regulatory authorities;
●
the availability of specialty raw materials for use in production of our product candidates;
●
our ability to consistently manufacture our product candidates for use in clinical trials;
●
our ability to operate a manufacturing facility, or secure 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;
●
obtaining and maintaining third-party insurance coverage and adequate reimbursement;
●
the acceptance of our product candidates, if approved, by patients, the medical community and third-party payors;
●
competition with other products; and
●
a continued acceptable safety profile of our therapies following approval.
A change in the outcome of any of these variables with respect to the development of any of our product candidates could
significantly change the costs and timing associated with the development of that product candidate. We may never
succeed in obtaining regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses include salaries and related costs, including stock-based compensation, for personnel
in executive, finance and administrative functions. General and administrative expenses also include direct and allocated
facility-related costs, as well as professional fees for legal, patent, consulting, investor and public relations, accounting and
audit services. We anticipate that our general and administrative expenses may increase in the future as we continue to
build infrastructure to support the expansion of our research activities, development of our product candidates and any
expanded compliance requirements.
Other Income (Expense)
Interest Income
Interest income consists of interest earned on our invested cash balances.
Interest Expense
Interest expense consists of interest owed on outstanding borrowings under our Loan Agreement (as defined below), as
well as amortization of debt discount.
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130
Other Income, Net
Other income, net consists of miscellaneous income and expense unrelated to our core operations.
Income Taxes
Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each year or for
our research and development tax credits generated, as we believe, based upon the weight of available evidence, that it is
more likely than not that all of our net operating loss, or NOL, carryforwards and tax credits will not be realized. As of
December 31, 2021, we had U.S. federal and state net operating loss carryforwards of $534.2 million and $534.8 million,
respectively, which may be available to offset future taxable income. The federal NOLs include $37.2 million, which
expire at various dates through 2037, and $497.0 million, which carryforward indefinitely. The state NOLs expire at
various dates through 2041. As of December 31, 2021, we also had U.S. federal and state research and development tax
credit carryforwards of $22.7 million and $15.6 million, respectively, which may be available to offset future tax liabilities
and begin to expire in 2034 and 2026, respectively. We have recorded a full valuation allowance against our net deferred
tax assets at each balance sheet date.
Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
The following table summarizes our results of operations for the years ended December 31, 2021 and 2020:
Year Ended December 31,
2021
2020
Change
(in thousands)
Revenue
$
—
$
—
$
—
Operating expenses:
Research and development
141,587
116,107
25,480
General and administrative
53,029
50,341
2,688
Total operating expenses
194,616
166,448
28,168
Loss from operations
(194,616)
(166,448)
(28,168)
Other income (expense):
Interest income
91
1,760
(1,669)
Interest expense
(6,434)
(4,185)
(2,249)
Other income, net
4,412
1,142
3,270
Total other income (expense), net
(1,931)
(1,283)
(648)
Net loss
$ (196,547)
$ (167,731)
$ (28,816)
Research and Development Expenses
Year Ended December 31,
2021
2020
Change
(in thousands)
Research and development program expenses:
Rare disease
$
284
$
5,302
$
(5,018)
Cancer
74,080
45,401
28,679
Platform development, early-stage research and unallocated expenses:
Personnel-related
27,827
25,408
2,419
Stock-based compensation expense
12,338
8,023
4,315
Contract research and development
7,115
7,842
(727)
Laboratory supplies and research materials
5,186
10,097
(4,911)
Facility related and other
14,757
14,034
723
Total research and development expenses
$ 141,587
$ 116,107
$
25,480
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131
Research and development expenses were $141.6 million for the year ended December 31, 2021, compared to
$116.1 million for the year ended December 31, 2020. The decrease in direct costs related to our rare disease program of
$5.0 million was due to the decision in March 2020 to deprioritize development of our rare disease programs and
discontinue the RTX-134 Phase 1b clinical trial. The increase in direct costs of $28.7 million in our lead cancer programs,
including RTX-240 and RTX-321, was principally related to costs incurred for the three arms of our Phase 1/2 clinical trial
of RTX-240, including CRO costs and internal manufacturing costs, costs incurred for our Phase 1 clinical trial of RTX-
321 in patients with advanced HPV 16-positive cancers as well as start-up costs related to our Phase 1 clinical trial of RTX-
224. The reduction in contract research and development and laboratory supplies and research materials of $0.7 million and
$4.9 million, respectively, was mostly due to the shift from pilot-scale manufacturing activities to manufacturing activities
to support the technical development of clinical candidates included in program expenses. The increase in stock-
compensation expense of $4.3 million was driven by an increase in the market price of our common stock resulting in a
higher valuation of options granted in 2021. Personnel-related costs increased $2.4 million due to headcount additions to
support our expanded operations. Finally, facility related and other costs increased by $0.7 million due to increases in
building operating costs.
General and Administrative Expenses
Year Ended December 31,
2021
2020
Change
(in thousands)
Personnel-related
$ 13,895
$ 12,048
$
1,847
Stock-based compensation expense
23,272
25,642
(2,370)
Professional and consultant fees
9,278
7,640
1,638
Facility related and other
6,584
5,011
1,573
Total general and administrative expenses
$ 53,029
$ 50,341
$
2,688
General and administrative expenses for the year ended December 31, 2021 were $53.0 million, compared to $50.3 million
for the year ended December 31, 2020. The increase in general and administrative expenses of $2.7 million was primarily
the result of additional personnel-related expenses of $1.8 million resulting from rising headcount in our general and
administrative function, including recruitment costs, to support our expanded operations. In addition, the increase in
professional and consultant fees of $1.6 million was driven by additional patent costs as we expand our patent portfolio and
the increase in facility-related and other expenses of $1.6 million was largely due to higher building operating costs and
non-capitalized software costs. These increases were offset by a reduction in stock-based compensation expense of $2.4
million due principally to stock option awards that fully vested during the third quarter of 2021.
Interest Income
Interest income was less than $0.1 million for the year ended December 31, 2021, compared to $1.8 million for the year
ended December 31, 2020. Interest income decreased due to lower prevailing interest rates.
Interest Expense
Interest expense was $6.4 million for the year ended December 31, 2021, compared to $4.2 million for the year ended
December 31, 2020. The increase in interest expense was principally due to higher outstanding borrowings and a higher
interest rate in connection with our Loan Agreement (as defined below).
Other Income, Net
Other income, net was $4.4 million for the year ended December 31, 2021, compared to $1.1 million for the year ended
December 31, 2020. The increase in other income, net was due to the monetization of certain tax credits during the period.
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132
Comparison of the Years Ended December 31, 2020 and 2019
The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:
Year Ended December 31,
2020
2019
Change
(in thousands)
Revenue
$
—
$
—
$
—
Operating expenses:
Research and development
116,107
112,419
3,688
General and administrative
50,341
57,182
(6,841)
Total operating expenses
166,448
169,601
(3,153)
Loss from operations
(166,448)
(169,601)
3,153
Other income (expense):
Interest income
1,760
7,994
(6,234)
Interest expense
(4,185)
(2,590)
(1,595)
Other income (expense), net
1,142
739
403
Total other income (expense), net
(1,283)
6,143
(7,426)
Net loss
$ (167,731)
$ (163,458)
$
(4,273)
Research and Development Expenses
Year Ended December 31,
2020
2019
Change
(in thousands)
Direct research and development expenses by program:
Rare disease
$
5,302
$ 24,292
$ (18,990)
Cancer
45,401
8,775
36,626
Platform development, early-stage research and unallocated expenses:
Personnel related
25,408
27,508
(2,100)
Stock-based compensation expense
8,023
9,011
(988)
Contract research and development
7,842
12,463
(4,621)
Laboratory supplies and research materials
10,097
14,286
(4,189)
Facility related and other
14,034
16,084
(2,050)
Total research and development expenses
$ 116,107
$ 112,419
$
3,688
Research and development expenses were $116.1 million for the year ended December 31, 2020, compared to $112.4
million for the year ended December 31, 2019. The decrease in direct costs related to our rare disease program of $19.0
million was due to costs incurred in connection with our Phase 1b clinical trial of RTX-134 in patients with
phenylketonuria, which was discontinued in March 2020. The increase in direct costs of $36.6 million in our lead cancer
programs, including RTX-240 and RTX-321, was principally related to costs incurred for our Phase 1/2 clinical trial of
RTX-240 for the treatment of solid tumors, including clinical CRO and internal manufacturing costs, as well as to costs
incurred for preclinical, IND-enabling activities and clinical startup costs for RTX-321. The decrease in contract research
and development of $4.6 million was due to the advancement of discovery research to support IND-enabling activities. The
decline in laboratory supplies and research materials of $4.2 million was primarily due to the shift in pilot-scale
manufacturing activities to support the technical development of clinical candidates. The reduction in stock-compensation
expense of $1.0 million was driven by a reduction in the market price of our common stock resulting in a lower valuation
of options granted during 2020. The decrease in personnel-related costs and facility related and other costs of $4.2 million
was principally due to the allocation of the costs to operate our manufacturing facility to research and development
program costs starting in the first quarter of 2020, as well as a reduction in onsite activities in connection with our response
to the COVID-19 pandemic.
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133
General and Administrative Expenses
Year Ended December 31,
2020
2019
Change
(in thousands)
Personnel related
$ 12,048
$ 10,485
$
1,563
Stock-based compensation expense
25,642
32,260
(6,618)
Professional and consultant fees
7,640
8,539
(899)
Facility related and other
5,011
5,898
(887)
Total general and administrative expenses
$ 50,341
$ 57,182
$
(6,841)
General and administrative expenses for the year ended December 31, 2020 were $50.3 million, compared to $57.2 million
for the year ended December 31, 2019. The decrease in general and administrative expenses of $6.8 million was primarily
the result of a reduction in stock-based compensation expense of $6.6 million due principally to restricted stock awards that
fully vested in January 2020. In addition, the decrease in professional and consultant fees of $0.9 million was driven by
reduced spending on business support initiatives. The increase in personnel-related costs of $1.6 million was due to the
timing of executive management hiring, as well as executive recruiting costs and compensation. The decrease in facility-
related and other expenses of $0.9 million was largely driven by decreased spending for business support initiatives and a
reduction in onsite activities in connection with our response to the COVID-19 pandemic.
Interest Income
Interest income was $1.8 million for the year ended December 31, 2020, compared to $8.0 million for the year ended
December 31, 2019. Interest income decreased due to reduced invested balances as cash was used to fund operations, as
well as reduced interest rates.
Interest Expense
Interest expense was $4.2 million for the year ended December 31, 2020, compared to $2.6 million for the year ended
December 31, 2019. The increase in interest expense was principally due to higher outstanding borrowings in connection
with our Loan Agreement (as defined below).
Other Income (Expense), Net
Other income, net was $1.1 million for the year ended December 31, 2020, compared to $0.7 million for the year ended
December 31, 2019. Other income, net primarily increased as a result of income earned from a sublease agreement that
commenced February 2019.
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product
candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all. To
date, we have funded our operations with proceeds from the sale of preferred stock, with the issuance of debt, with
proceeds from our IPO and, most recently, with proceeds from our March 2021 Offering, described further below. As of
December 31, 2021, we had cash and cash equivalents of $225.8 million. In July 2018, we completed our IPO, pursuant to
which we issued and sold 12,055,450 shares of common stock, inclusive of 1,572,450 shares pursuant to the full exercise
of the underwriters’ option to purchase additional shares. We received proceeds of $254.3 million, after deducting
underwriting discounts and commissions and other offering costs. In December 2018, we entered into a loan and security
agreement, which was amended in June 2021, which provides for aggregate borrowings of up to $75.0 million. As of
December 31, 2021, $75.0 million is outstanding under the agreement and principal payments commence in July 2024. In
March 2021, we completed the March 2021 Offering, pursuant to which we issued and sold 6,896,552 shares of common
stock. We received proceeds of $187.2 million, after deducting underwriting discounts and commissions and other offering
costs.
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134
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
Year Ended December 31,
2021
2020
2019
(in thousands)
Cash used in operating activities
$ (145,122)
$ (127,648) $ (110,444)
Cash provided by (used in) investing activities
81,351
100,432
(132,635)
Cash provided by financing activities
198,453
26,484
27,291
Net increase in cash, cash equivalents and restricted cash
$ 134,682
$
(732) $ (215,788)
Operating Activities
During the year ended December 31, 2021, operating activities used $145.1 million of cash, primarily resulting from our
net loss of $196.5 million, partially offset by net non-cash charges of $44.7 million, predominantly consisting of stock-
based compensation expense. Net cash used in our operating assets and liabilities for the twelve months ended December
31, 2021 consisted of a $0.1 million decrease in accounts payable, accrued expenses and other current liabilities, other
long-term liabilities and operating lease liabilities, offset by a decrease in prepaid expenses and other current assets, other
assets and operating lease, right-of-use asset of $6.6 million.
During the year ended December 31, 2020, operating activities used $127.6 million of cash, primarily resulting from our
net loss of $167.7 million, partially offset by net non-cash charges of $40.0 million, predominantly consisting of stock-
based compensation expense. Net cash used in our operating assets and liabilities for the twelve months ended December
31, 2020 consisted of a $6.5 million decrease in accounts payable, accrued expenses and other current liabilities, other
long-term liabilities and operating lease liabilities, offset by a decrease in prepaid expenses and other current assets, other
assets and operating lease, right-of-use asset of $6.6 million.
During the year ended December 31, 2019, operating activities used $110.4 million of cash, primarily resulting from our
net loss of $163.5 million, partially offset by net non-cash charges of $42.6 million, primarily consisting of stock-based
compensation expense. Changes in our operating assets and liabilities for the year ended December 31, 2019 provided cash
of $10.4 million consisting primarily of a $5.5 million increase in accounts payable, accrued expenses and other current
liabilities, a $5.0 million increase in operating lease, right-of-use asset, and a $2.7 million increase in prepaid expenses and
other current assets, offset by a $2.7 million decrease in operating lease liabilities.
Changes in accounts payable, accrued expenses and other current liabilities and prepaid expenses and other current assets
in all periods presented were generally due to growth in our business, the advancement of our research programs and the
timing of vendor invoicing and payments.
Investing Activities
During the year ended December 31, 2021, net cash provided by investing activities was $81.4 million, consisting of sales
and maturities of investments of $85.0 million, offset by purchases of property, plant and equipment of $3.6 million. Our
cash purchases of property, plant and equipment primarily relate to the purchase of computer and laboratory equipment
installed in our manufacturing facility in Smithfield, Rhode Island and our laboratory space in Cambridge, Massachusetts.
During the year ended December 31, 2020, net cash provided by investing activities was $100.4 million, consisting of sales
and maturities of investments of $228.6 million, offset by net purchases of investments of $122.7 million and purchases of
property, plant and equipment of $5.5 million. Our cash purchases of property, plant and equipment consisted of $2.9
million for purchases related to our manufacturing facility in Smithfield, Rhode Island, largely driven by payments for
manufacturing equipment purchases and construction costs incurred in 2019, and $2.6 million for the purchase of computer
and laboratory equipment installed in our manufacturing facility and our laboratory space in Cambridge, Massachusetts.
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During the year ended December 31, 2019, net cash used in investing activities was $132.6 million, consisting of purchases
of investments of $319.1 million and purchases of property, plant and equipment of $40.7 million, offset by sales and
maturities of investments of $227.2 million. Our purchases of property, plant and equipment primarily consisted of $29.8
million related to the renovation and customization of our manufacturing facility in Smithfield, Rhode Island, and $8.5
million for the purchase of laboratory equipment as we expanded our discovery and technical development activities.
Financing Activities
During the year ended December 31, 2021, net cash provided by financing activities of $198.5 million consisted primarily
of proceeds of $187.2 million, after deducting underwriting discounts and commissions and other offering costs, from the
March 2021 Offering, as well as proceeds received from issuance of common stock upon exercise of stock options and
under the employee stock purchase plan of $11.0 million. Net cash used in financing activities includes $0.4 million of
offering cost payments in connection with the March 2021 Offering and $0.2 million of debt issuance cost payments
related to our Loan Agreement (as defined below) in June 2021.
During the year ended December 31, 2020, net cash provided by financing activities of $26.5 million consisted of $25.0
million proceeds received from borrowings under our Loan Agreement and $1.5 million proceeds received from issuance
of common stock upon exercise of stock options.
During the year ended December 31, 2019, net cash provided by financing activities of $27.3 million consisted of $25.0
million proceeds received from borrowings under our Loan Agreement and $2.4 million proceeds received from issuance
of common stock upon exercise of stock options.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of December 31, 2021 and the effects that such obligations
are expected to have on our liquidity and cash flows in future periods:
Payments Due by Period
Total
Less Than
1 Year
1 to 3 Years 4 to 5 Years
More
Than 5
Years
(in thousands)
Operating lease commitments (1)
$ 46,121
$ 9,015
$ 15,048
$ 15,859
$
6,199
Debt obligations (2)
99,164
5,700
29,853
63,611
—
Total
$ 145,285
$ 14,715
$ 44,901
$ 79,470
$
6,199
(1)
Amounts in table reflect payments due for our leases of office and laboratory space in Cambridge, Massachusetts under two operating lease
agreements that expire in January 2027 and August 2028.
(2)
Amounts in table reflect the contractually required principal and interest payments payable under the Loan Agreement. For purposes of this
table, the interest due under the Loan Agreement was calculated using an assumed interest rate of 8.86% per annum, which was the interest rate in effect
as of December 31, 2021.
We enter into contracts in the normal course of business with CROs, CMOs and other third parties for preclinical research
studies, assay development, clinical trials, manufacturing and testing services. These contracts generally do not contain
minimum purchase commitments and are cancelable by us upon prior written notice. Payments due upon cancellation
typically consist only of payments for services provided or expenses incurred, including noncancelable obligations of our
service providers, up to the date of cancellation. These payments are not included in the table above as the amount and
timing of such payments are not known.
We have also entered into a license agreement with the Whitehead Institute for Biomedical Research, or WIBR, as
amended, under which we have been granted an exclusive, sublicensable, nontransferable license under certain patent
families related to the development of our RCTs, or the WIBR License. We are obligated to pay to WIBR low
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single-digit royalties based on annual net sales by us, our affiliates and our sublicensees of licensed products and licensed
services that are covered by a valid claim of the licensed patent rights at the time and in the country of sale. Based on the
progress we make in the advancement of products covered by the licensed patent rights, we are required to make aggregate
milestone payments of up to $1.6 million upon the achievement of specified preclinical, clinical and regulatory milestones.
In addition, we are required to pay to WIBR a percentage of the non-royalty payments that we receive from sublicensees of
the patent rights licensed by WIBR. This percentage varies from low single-digit to low double-digit percentages and will
be based upon the clinical stage of the product that is the subject of the sublicense. Royalties shall be paid by us on a
licensed product-by-licensed product and country-by-country basis, beginning on the first commercial sale of such licensed
product in such country until expiration of the last valid patent claim covering such licensed product in such country.
We have the right to terminate the WIBR License in its entirety, on a patent-by-patent or country-by-country basis, at will
upon three months’ notice to WIBR. WIBR may terminate the agreement upon breach of contract or in the event of
bankruptcy, liquidation, insolvency or cessation of business related to the license. For additional information, see “Business
—Licenses.”
Loan and Security Agreements
In December 2018, or the Closing Date, we entered into a loan and security agreement, or, as amended, the Loan
Agreement, with SLR Investment Corp. (formerly Solar Capital Ltd.) as collateral agent for the lenders party thereto for an
aggregate principal amount of $75.0 million. The aggregate principal amount was funded in three tranches of term loans of
$25.0 million each, on the Closing Date, in June 2019 and in June 2020.
On June 22, 2021, or the Amendment Closing Date, we entered into an amendment, or the Amendment, to our Loan
Agreement. Pursuant to the Amendment, we and our lenders agreed to extend the interest-only period in respect of our
borrowings under the Loan Agreement from December 21, 2021 until July 1, 2024. The parties also agreed to extend the
final maturity date on which all of our outstanding obligations under the Loan Agreement become due to June 1, 2026
(from December 21, 2023 originally). An additional tranche in the amount of $35.0 million is available to us prior to the
final maturity date, to be provided at the sole discretion of the lenders. Interest on the outstanding loan balance will accrue
at a rate of 5.50%, plus the greater of 2.10% or the one-month U.S. LIBOR rate. Monthly principal payments will
commence on July 1, 2024 and will be amortized over the following 24 months. Certain back-end fees are due to the lender
at the time of final repayment based on the total funded term loans. The term loans are subject to a prepayment fee of
1.00% if prepayment occurs within the first year subsequent to the Amendment Closing Date, 0.50% in the second year
and 0.25% in the third year through final maturity date.
The Loan Agreement contains financial covenants that require us to maintain either a certain minimum cash balance or a
minimum market capitalization threshold. We were in compliance with all such financial covenants as of December 31,
2021. The Loan Agreement contains customary representations, warranties and covenants and also includes customary
events of default, including payment defaults, breaches of covenants, change of control and a material adverse change
default. Upon the occurrence of an event of default, a default interest rate of an additional 4.00% per annum may be
applied to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and
payable. Borrowings under the Loan Agreement are collateralized by substantially all of our assets, other than our
intellectual property.
Common Stock Sales Agreement
On August 1, 2019, we entered into a Distribution Agreement (the “Distribution Agreement”), with multiple sales agents,
pursuant to which the Company may offer and sell to or through the agents, from time to time, shares of the Company's
common stock, par value $0.001 per share, having an aggregate gross sales price of up to $100.0 million. Sales, if any, of
the Company's shares of common stock will be made primarily in “at-the-market” offerings, as defined in Rule 415 under
the Securities Act. The shares of common stock will be offered and sold pursuant to our registration statement on Form S-3
and a related prospectus supplement, both filed with the SEC on August 1, 2019. We intend to use substantially all of the
net proceeds from any sale of shares of the Company's common stock for working capital and
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other general corporate purposes. There have been no shares of the Company's common stock sold under the Distribution
Agreement as of December 31, 2021.
Funding Requirements
We expect our expenses to increase substantially in the future as we conduct the activities necessary to advance our product
candidates through development. The timing and amount of our operating and capital expenditures will depend largely on:
●
the timing and progress of preclinical and clinical development activities;
●
the commencement, enrollment or results of the planned clinical trials of our product candidates or any future clinical
trials we may conduct, or changes in the development status of our product candidates;
●
the timing and outcome of regulatory review of our product candidates;
●
the continued impact of the COVID-19 pandemic, including from any subsequent outbreak whether or not due to
emerging variants thereof, on our operations;
●
our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
●
changes in laws or regulations applicable to our product candidates, including but not limited to clinical trial
requirements for approvals;
●
developments concerning our key vendors;
●
our ability to obtain materials to produce adequate product supply for any approved product or inability to do so at
acceptable prices;
●
the costs associated with the operation of our multi-suite manufacturing facility and the costs and timing of any future
renovation or expansion of the facility;
●
our ability to establish collaborations if needed;
●
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and
distribution, for any of our product candidates for which we obtain marketing approval;
●
the legal patent costs involved in prosecuting patent applications and enforcing patent claims and other intellectual
property claims;
●
additions or departures of key scientific or management personnel;
●
unanticipated serious safety concerns related to the use of our product candidates; and
●
the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any
milestone payments thereunder.
Before consideration of management’s plans described below, we believe that our existing cash and cash equivalents will
enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2023. We have
based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner
than we expect.
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Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a
combination of public and private equity financings, debt financings, borrowings under our credit facility, collaborations,
strategic alliances and marketing, distribution and licensing arrangements. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, investors’ ownership interest will be diluted, and the terms of these
securities may include liquidation or other preferences that adversely affect investors’ rights as a common stockholder.
Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or
restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures
or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or
licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue
streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. If we are unable
to obtain funding, we will implement an operating plan that scales back our operations and focuses our available capital on
a reduced number of activities and programs, which we believe will enable the continued advancement of certain of our
research and development programs and the preservation of our technology platform. These actions could adversely affect
our business prospects. Based on our current cash and cash equivalents, and after considering management’s plans
described above, we have the ability to fund our operating costs and working capital needs into the middle of 2023.
Off-Balance Sheet Arrangements
We did not have 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.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the
United States, or GAAP. The preparation of our consolidated financial statements and related disclosures requires us to
make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and
expenses, and related disclosures. 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 more detail in Note 2 to our consolidated financial statements,
we believe that the following accounting policies are those most critical to the judgments and estimates used in the
preparation of our 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
applicable 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 advance 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. We periodically confirm the accuracy of the estimates with the service providers and make
adjustments if necessary. Examples of estimated accrued research and development expenses include fees paid to:
●
vendors in connection with preclinical and assay development activities;
●
CMOs in connection with raw material acquisition; and
●
CROs in connection with clinical trials.
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We base the expense recorded related to contract research and manufacturing on our estimates of the services received and
efforts expended pursuant to quotes and contracts with multiple CMOs and CROs that supply materials and conduct
services. 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. 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 prepaid expense accordingly. Although we
do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and
timing of services performed relative to the actual status and timing of services performed may vary and 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 measure stock-based awards with service-based and performance-based vesting conditions granted to employees,
directors and non-employees based on their fair value on the date of the grant using the Black-Scholes option-pricing
model for options or the difference between the purchase price per share of the award, if any, and the fair value of our
common stock for restricted common stock awards. Compensation expense for those awards is recognized over the
requisite service period, which is generally the vesting period of the respective award. We use the straight-line method to
record the expense of awards with service-based vesting conditions. We use the graded-vesting method to record the
expense of awards with both service-based and performance-based vesting conditions, commencing when achievement of
the performance condition becomes probable.
The Black-Scholes option-pricing model uses as inputs the fair value of our common stock and assumptions we make for
the volatility of our common stock, the expected term of our common stock options, the risk-free interest rate for a period
that approximates the expected term of our common stock options, and our expected dividend yield.
We measure the fair value of stock-based awards with market-based vesting conditions on the date of grant using a Monte
Carlo simulation model. When service-based vesting conditions also exist, we recognize stock-based compensation
expense using the graded-vesting method over the longer of the derived service period from the market condition or the
required service period. In accordance with accounting guidance for awards with market conditions, the stock-based
compensation expense will be recognized over the appropriate period regardless of whether the award achieves the market
condition and will only be adjusted to the extent the service condition is not met. When an award contains a market-based
vesting condition and a performance-based vesting condition where both must be achieved to earn the award, we recognize
stock-based compensation expense over the longer of the derived service period from the market condition or the period
estimated for the performance-based vesting condition to be achieved. We begin recording stock-based compensation
expense for this type of award when the achievement of the performance-based vesting condition becomes probable
regardless of whether the market condition has been achieved.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position, results of
operations or cash flows are disclosed in Note 2 to our consolidated financial statements.
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Item 7A. Quantitative and Qualitative Disclosure about Market Risk
As of December 31, 2021, we had cash and cash equivalents of $225.8 million, which consisted of cash, money market
accounts and U.S. government money market funds. Interest 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.
As of December 31, 2021, we had $75.0 million of borrowings outstanding under the Loan Agreement. Interest on the
outstanding borrowings under the Loan Agreement accrues at a rate of 5.50%, plus the greater of 2.10% or the one-month
U.S. LIBOR rate. An immediate 10% change in the one-month U.S. LIBOR rate would not have a material impact on our
debt-related obligations, financial position or results of operations.
We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we
have contracted with and may continue to contract with foreign vendors that are located in Europe, Australia and China.
Our operations may be subject to fluctuations in foreign currency exchange rates in the future.
Inflation generally affects us by increasing our cost of labor, research supplies and materials and manufacturing raw
materials. We do not believe that inflation had a material effect on our business, financial condition or results of operations
during the year ended December 31, 2021.
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141
Item 8. Consolidated Financial Statements and Supplementary Data
RUBIUS THERAPEUTICS, INC.
Index to Consolidated Financial Statements
Page No.
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
142
Consolidated Balance Sheets
145
Consolidated Statements of Operations and Comprehensive Loss
146
Consolidated Statements of Stockholders' Equity
147
Consolidated Statements of Cash Flows
148
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142
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Rubius Therapeutics, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Rubius Therapeutics, Inc. and its subsidiary (the
“Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive
loss, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021,
including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the
Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for
leases in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A. Our
responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal
control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
Our audits of the consolidated financial statements 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
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143
Emphasis of Matter
As discussed in Note 1 to the consolidated financial statements, the Company will require additional financing to fund
future operations. Management’s evaluation of the events and conditions and management’s plans to mitigate this matter
are also described in Note 1.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (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 receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts
or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Debt - Loan and Security Agreement Amendment
As described in Note 6 to the consolidated financial statements, in December 2018 the Company entered into a loan and
security agreement (the “Loan Agreement”) for an aggregate principal amount of $75.0 million. In June 2021, the
Company entered into an amendment (the “Amendment”) to its Loan Agreement to extend the interest-only period
applicable to borrowings under the Loan Agreement from December 21, 2021 until July 1, 2024 and the final maturity date
from December 21, 2023 until June 1, 2026. As the terms of the Amendment were not substantially different than the terms
of the Loan Agreement, the Amendment was accounted for as a debt modification. The Loan Agreement represents a long-
term obligation of the Company and is presented as long-term debt, net of discount, on its consolidated balance sheet.
Long-term debt, net of discount, totaled $76.2 million as of December 31, 2021.
The principal considerations for our determination that performing procedures relating to the loan and security agreement
amendment is a critical audit matter are the high degree of auditor effort in performing procedures and evaluating evidence
related to management’s determination that the Amendment represented an accounting modification.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to debt, including controls over determining the impact of the Amendment on the Loan Agreement. These
procedures also included, among others, testing management’s process for determining if the Amendment to the Loan
Agreement represented an accounting modification or extinguishment, evaluating the impact of the contractual terms of the
Amendment by examining the contract, and determining if the change in debt terms is considered substantially
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144
different by calculating the present value of the cash flows under the terms of the Amendment and comparing it to the
present value of the remaining cash flows under the terms of the original Loan Agreement.
/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
February 25, 2022
We have served as the Company’s auditor since 2016.
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145
RUBIUS THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31,
2021
2020
Assets
Current assets:
Cash and cash equivalents
$
225,848
$
91,165
Investments
—
85,122
Prepaid expenses and other current assets
3,975
5,224
Total current assets
229,823
181,511
Operating lease, right-of-use-asset
35,095
40,447
Property, plant and equipment, net
51,530
53,952
Restricted cash
1,573
1,573
Other assets
—
311
Total assets
$
318,021
$
277,794
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
11,572
$
5,478
Accrued expenses and other current liabilities
14,072
13,417
Operating lease liabilities
9,015
8,945
Total current liabilities
34,659
27,840
Long-term debt, net of discount
76,154
74,944
Other long-term liabilities
135
688
Operating lease liabilities, net of current portion
28,291
32,762
Total liabilities
139,239
136,234
Commitments and contingencies (see Note 10)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized at
December 31, 2021 and December 31, 2020; no shares issued or outstanding at
December 31, 2021 and December 31, 2020
—
—
Common stock, $0.001 par value; 150,000,000 shares authorized at
December 31, 2021 and December 31, 2020; 90,063,770 and 81,053,651 shares
issued and outstanding at December 31, 2021 and December 31, 2020, respectively
90
81
Additional paid-in capital
855,710
621,946
Accumulated other comprehensive income
—
4
Accumulated deficit
(677,018)
(480,471)
Total stockholders' equity
178,782
141,560
Total liabilities and stockholders' equity
$
318,021
$
277,794
The accompanying notes are an integral part of these consolidated financial statements.
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146
RUBIUS THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
Year Ended December 31,
2021
2020
2019
Revenue
$
—
$
—
$
—
Operating expenses:
Research and development
141,587
116,107
112,419
General and administrative
53,029
50,341
57,182
Total operating expenses
194,616
166,448
169,601
Loss from operations
(194,616)
(166,448)
(169,601)
Other income (expense):
Interest income
91
1,760
7,994
Interest expense
(6,434)
(4,185)
(2,590)
Other income, net
4,412
1,142
739
Total other income (expense), net
(1,931)
(1,283)
6,143
Net loss
(196,547)
(167,731)
(163,458)
Net loss per share, basic and diluted
$
(2.23)
$
(2.08)
$
(2.08)
Weighted average common shares outstanding, basic and diluted
87,950,440
80,624,608
78,688,878
Comprehensive loss:
Net loss
$
(196,547)
$
(167,731)
$
(163,458)
Other comprehensive income (loss):
Unrealized gains (losses) on investments, net of tax of $0
(4)
(71)
104
Comprehensive loss
$
(196,551)
$
(167,802)
$
(163,354)
The accompanying notes are an integral part of these consolidated financial statements.
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147
RUBIUS THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
Accumulated
Additional
other
Total
Common stock
paid-in
comprehensive
Accumulated
stockholders’
Shares
Amount
capital
income (loss)
deficit
equity
Balances at December 31, 2018
79,234,853
79
543,040
(29)
(150,082)
393,008
Issuance of common stock upon
exercise of stock options
1,449,309
2
2,443
—
—
2,445
Stock-based compensation
expense
—
—
41,271
—
—
41,271
Repurchase of unvested restricted
common stock
(667,917)
(1)
—
—
—
(1)
Vesting of restricted
common stock
—
—
44
—
—
44
Unrealized gains on investments
—
—
—
104
—
104
Cumulative effect adjustment for
adoption of ASC 842
—
—
—
—
800
800
Net loss
—
—
—
—
(163,458)
(163,458)
Balances at December 31, 2019
80,016,245
$
80
$
586,798
$
75
$
(312,740)
$
274,213
Issuance of common stock
upon exercise of stock
options
1,037,406
1
1,483
—
—
1,484
Stock-based compensation
expense
—
—
33,665
—
—
33,665
Unrealized losses on
investments
—
—
—
(71)
—
(71)
Net loss
—
—
—
—
(167,731)
(167,731)
Balances at December 31, 2020
81,053,651
$
81
$
621,946
$
4
$
(480,471)
$
141,560
Issuance of common stock
from public offering, net of
commissions, underwriting
discounts and offering costs of
$800
6,896,552
7
187,193
—
—
187,200
Issuance of common stock
upon exercise of stock
options
1,933,523
2
10,683
—
—
10,685
Issuance of common stock under
employee stock purchase plan
26,444
—
278
—
—
278
Vesting of restricted stock units
153,600
—
—
—
—
—
Stock-based compensation
expense
—
—
35,610
—
—
35,610
Unrealized losses on
investments
—
—
—
(4)
—
(4)
Net loss
—
—
—
—
(196,547)
(196,547)
Balances at December 31, 2021
90,063,770
$
90
$
855,710
$
—
$
(677,018)
$
178,782
The accompanying notes are an integral part of these consolidated financial statements.
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148
RUBIUS THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
2021
2020
2019
Cash flows from operating activities:
Net loss
$ (196,547)
$ (167,731)
$ (163,458)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
35,610
33,665
41,271
Depreciation and amortization expense
7,723
5,691
2,995
Amortization (accretion) of premium (discount) on investments
118
266
(2,320)
Loss on disposal of property and equipment
—
—
335
Non-cash interest expense
1,280
349
289
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
1,249
992
2,655
Operating lease, right-of-use-asset
5,352
5,539
4,991
Other assets
5
46
2
Accounts payable
5,858
(1,369)
(1,037)
Accrued expenses and other current liabilities
(816)
(96)
6,107
Other long-term liabilities
(553)
283
396
Operating lease liabilities
(4,401)
(5,283)
(2,670)
Net cash used in operating activities
(145,122)
(127,648)
(110,444)
Cash flows from investing activities:
Purchases of property, plant and equipment
(3,649)
(5,497)
(40,657)
Purchases of investments
—
(122,671)
(319,133)
Sales and maturities of investments
85,000
228,600
227,155
Net cash provided by (used in) investing activities
81,351
100,432
(132,635)
Cash flows from financing activities:
Proceeds from underwritten public offering of common stock, net of commissions and
underwriting discounts
188,000
—
—
Payments of offering costs
(360)
—
—
Payments of debt issuance costs
(150)
—
—
Proceeds from borrowings under loan and security agreement
—
25,000
25,000
Repurchase of unvested restricted common stock
—
—
(122)
Proceeds from issuance of common stock upon exercise of stock options and under employee
stock purchase plan
10,963
1,484
2,413
Net cash provided by financing activities
198,453
26,484
27,291
Net increase (decrease) in cash, cash equivalents and restricted cash
134,682
(732)
(215,788)
Cash, cash equivalents and restricted cash at beginning of period
92,901
93,633
309,421
Cash, cash equivalents and restricted cash at end of period
$ 227,583
$
92,901
$
93,633
Supplemental cash flow information:
Cash paid for interest
$
5,092
$
3,822
$
2,961
Cash paid for leases
$
7,364
$
8,486
$
5,375
Supplemental disclosure of non-cash investing and financing information:
Purchases of property, plant and equipment included in accounts payable or accrued expenses
$
1,989
$
317
$
3,095
Offering costs included in accounts payable and accrued expenses
$
35
$
—
$
—
Lease assets obtained in exchange for new operating lease liabilities
$
—
$
496
$
49,799
Lease asset derecognized upon lease cancellation
$
—
$
982
$
—
Proceeds from issuance of common stock upon exercise of stock options in other current assets
$
—
$
—
$
32
The accompanying notes are an integral part of these consolidated financial statements.
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149
RUBIUS THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business and Basis of Presentation
Rubius Therapeutics, Inc. (“Rubius” or the “Company”) is a biopharmaceutical company that is using its platform to
genetically engineer red blood cells into medicines, called Red Cell Therapeutics, for the treatment of cancer and
autoimmune diseases. Rubius was incorporated in April 2013 as VL26, Inc. under the laws of the State of Delaware. In
January 2015, the Company changed its name to Rubius Therapeutics, Inc.
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, the ability to establish clinical- and
commercial-scale manufacturing processes and the ability to secure additional capital to fund operations. In addition, the
Company is subject to uncertainty regarding the performance and safety of its product candidates in humans. Product
candidates currently under development will require significant additional research and development efforts, including
extensive 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-reporting
capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will
realize significant revenue from product sales.
The Company is monitoring the potential impact of the novel coronavirus (“COVID-19”), if any, on the carrying value of
certain assets. To date, the Company has not experienced material business disruption, nor has it incurred impairment of
any assets as a result of COVID-19. The extent to which these events may impact the Company’s business will depend on
future developments, which are highly uncertain and cannot be predicted at this time. The duration and intensity of these
impacts and resulting disruption to the Company’s operations is uncertain and the Company will continue to assess the
financial impact.
On July 20, 2018, the Company completed its initial public offering (“IPO”), pursuant to which it issued and sold
12,055,450 shares of common stock, inclusive of 1,572,450 shares sold by the Company pursuant to the full exercise of the
underwriters’ option to purchase additional shares. The aggregate net proceeds received by the Company from the IPO
were $254.3 million, after deducting underwriting discounts and commissions and other offering costs. Upon the closing of
the IPO, all of the shares of the Company’s outstanding convertible preferred stock then outstanding automatically
converted into 51,845,438 shares of common stock.
On March 18, 2021, the Company completed an underwritten public offering (the “March 2021 Offering”), pursuant to
which it issued and sold 6,896,552 shares of common stock. The aggregate net proceeds received by the Company from the
March 2021 Offering were $187.2 million, after deducting underwriting discounts and commissions and other offering
costs.
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 inception, including net losses of $196.5 million, $167.7 million and $163.5 million for
the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, the Company had an
accumulated deficit of $677.0 million. The Company expects to continue to generate operating losses in the foreseeable
future. Before considering management’s plans described below, the Company expects that its cash and cash equivalents
will be sufficient to fund its operating expenses and capital expenditure requirements into the second quarter of 2023.
The Company has financed its operations to date primarily through private placements, proceeds from its IPO and the
March 2021 Offering and borrowings under credit facilities. The Company has devoted substantially all of its financial
resources and efforts to research and development, including preclinical studies and clinical trials, and developing
manufacturing capabilities. The Company will need to raise additional funds through private or public equity financings,
debt financings, collaborations, strategic alliances or marketing, distribution or licensing arrangements to fund operations.
The Company may not be able to obtain financing, or enter into collaboration or other arrangements, on
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150
acceptable terms, or at all. Furthermore, the terms of any financing may adversely affect the holdings or the rights of the
Company's stockholders. If the Company is unable to obtain funding, the Company will implement an operating plan that
scales back its operations and focuses its available capital on a reduced number of activities and programs, which it
believes will enable the continued advancement of certain of its research and development programs and the preservation
of its technology platform. These actions could adversely affect the Company’s business prospects. Based on the
Company’s current cash and cash equivalents of $225.8 million as of December 31, 2021, and after considering
management’s operating plans, the Company has the ability to fund its operating costs and working capital needs into the
middle of 2023.
The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally
accepted in the United States of America (“GAAP”).
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned
subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period
amounts have been reclassified to conform to the current year presentation.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of 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 financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant
estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual of
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. On an ongoing basis, management evaluates its estimates as there are changes in circumstances,
facts and experience. Actual results may differ from those estimates or assumptions.
The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of
operations and financial condition, including clinical trials, 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. As of the date of issuance of these
consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the
Company to update estimates, judgments or revise the carrying value of any assets or liabilities. Actual results may differ
from those estimates or assumptions.
Concentrations of Credit Risk and of Significant Suppliers
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash
equivalents, and investments. The Company’s cash and cash equivalents as of December 31, 2021 consisted of cash,
money market accounts and U.S. government money market funds. The Company does not believe that it is subject to
unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company 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.
Deferred Offering Costs
The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with
in-process equity financings as deferred offering costs until such financings are consummated. After consummation of an
equity financing, these costs are recorded in stockholders’ equity as a reduction of additional paid-in capital
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generated as a result of the offering. Should the in-process equity financing be abandoned, the deferred offering costs will
be expensed immediately as a charge to operating expenses in the statements of operations and comprehensive loss.
Deferred Financing Costs
The Company capitalizes certain legal and other third-party fees that are directly associated with obtaining access to capital
under credit facilities. Deferred financing costs incurred in connection with obtaining access to capital are recorded in other
assets and are amortized over the term of the credit facility. Deferred financing costs related to a recognized debt liability
are recorded as a reduction of the carrying amount of the debt liability and amortized to interest expense using the effective
interest method over the repayment term.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the date of
purchase to be cash equivalents.
Restricted Cash
As of both December 31, 2021 and 2020, the Company maintained letters of credit totaling $1.7 million for the benefit of
the landlords of its leased properties. The Company was required to maintain separate cash balances of these amounts to
secure the letters of credit. Related to these separate cash balances, the Company included $0.1 million in prepaid expenses
and other current assets and $1.6 million in restricted cash (non-current) in its consolidated balance sheet as of December
31, 2021 and 2020.
Cash, cash equivalents and restricted cash presented in the accompanying consolidated statement of cash flows was $227.6
million, $92.9 million and $93.6 million for the years ended December 31, 2021, 2020 and 2019, respectively, of which
$1.7 million was restricted cash for each year, respectively.
Property, Plant and Equipment
Property 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 life of each asset as follows:
Estimated useful life
Computer equipment
3 years
Laboratory equipment
5 years
Furniture and fixtures
7 years
Manufacturing equipment
10 years
Manufacturing facility
30 years
Leasehold improvements
Shorter of life of lease or 10 years
Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed
into service. Interest costs incurred during the construction of major capital projects are capitalized until the underlying
asset is ready for its intended use, at which point the interest costs are amortized as depreciation expense over the life of the
underlying asset. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and
amortization are removed from the accounts and any resulting gain or loss is included in loss from operations.
Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. Items
of an ordinary repair or maintenance nature are charged directly to operating expense as incurred.
Impairment of Long-Lived Assets
Long-lived assets consist of property 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
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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 in loss from operations when estimated undiscounted future cash flows expected to result from the use and
eventual disposition 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. The
Company did not record any impairment losses during the years ended December 31, 2021, 2020 and 2019.
Fair Value Measurements
Certain assets and liabilities 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 and 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 cash equivalents and investments are carried at fair value, determined according to the fair value hierarchy
described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate
their fair values due to the short-term nature of these liabilities. The carrying value of the Company’s long-term debt
approximates its fair value due to its variable interest rate, which approximates a market interest rate.
Investments
The Company’s investments are classified as available-for-sale and are carried at fair value. Realized gains and losses and
declines in value are based on the specific identification method and are included as a component of other income
(expense), net in the consolidated statements of operations and comprehensive loss. The Company classifies its
investments with maturities beyond one year as short-term, based on their highly liquid nature and because such
investments are available for current operations.
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.
2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses, which changes the impairment
model for most financial assets, including the Company’s investments. The Company adopted the standard effective
January 1, 2020 using a prospective transition method. The adoption did not have a material impact on the Company’s
consolidated financial statements.
The Company evaluates its investments with unrealized losses for impairment. When assessing investments for unrealized
declines in value, the Company considers whether the decline in value is related to a credit loss or non-credit loss. For
credit losses, the Company reduces the investment to fair value through an allowance for credit losses recorded to the
balance sheet and corresponding charge to the statement of operations. The allowance for credit losses and corresponding
impairment charge is adjusted each period for changes in fair value. For non-credit losses, the Company reduces the
investment to fair value through a charge to the statement of comprehensive loss, reported as a component of
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accumulated other comprehensive income (loss) in stockholders’ equity. No such credit losses were recorded during the
periods presented.
Leases
The Company adopted ASC 842 using the modified retrospective approach with an effective date of January 1, 2019 for
leases that existed on that date. Prior period results continue to be presented under ASC 840 based on the accounting
standards originally in effect for such periods.
At the inception of an arrangement as lessee or lessor, the Company determines whether the arrangement is or contains a
lease. Operating lease cost is recognized over the lease term on a straight-line basis. Variable lease cost and short-term
leases (lease terms less than 12 months) are recognized as incurred. For both lessee and lessor arrangements, variable lease
payments are the amounts owed by the Company to a lessor that are not fixed, such as reimbursement for common area
maintenance and utilities costs, and are expensed when incurred. When determining the lease term, the Company includes
options to extend or terminate the lease when it is reasonably certain that it will exercise that option.
For lessee arrangements, operating lease liabilities and their corresponding right-of-use assets are recorded based on the
present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not
readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on
a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain
adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.
Operating leases are recognized on the balance sheet as right-of-use assets, operating lease liabilities current and operating
lease liabilities non-current.
The Company has elected the following lease policies at the inception of a lease: (1) for lessee and lessor arrangements
within all asset classes, combine lease and non-lease components as a single component, with the lease expense recognized
over the expected term on a straight-line basis and (2) for lessee arrangements, apply short-term lease exemption for all
leases that qualify, where a right-of-use asset or lease liability will not be recognized for leases with terms of one year or
less.
Segment Information
The Company manages its operations as a single segment for the purposes of assessing performance and making operating
decisions. The Company is developing product candidates based on biologically engineered red blood cells for the
treatment of patients with severe diseases. All of the Company’s tangible assets are held in the United States.
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 and bonuses, stock-based compensation, employee
benefits, facilities costs, laboratory supplies, depreciation, manufacturing expenses and external costs of vendors engaged
to conduct preclinical development activities and clinical trials, as well as the cost of licensing technology.
Upfront payments and milestone payments made for the licensing of technology are expensed as research and development
in the period in which they are incurred. Advance payments for goods or services to be received in the future for use in
research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related
goods are delivered or the services are performed.
Research and Manufacturing Contract Costs and Accruals
The Company has entered into various research and development and manufacturing contracts with research institutions
and other companies both inside and outside of the U.S. When billing terms under these contracts do not coincide with the
timing of when the work is performed, the Company is required to make estimates of outstanding obligations as of period
end with those third parties to record accruals for estimated ongoing research and development costs. Any accrual
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estimates are based on a number of factors, including the Company’s knowledge of the progress towards completion of the
research and development activities, invoicing to date under the contracts, communication from the research institution or
other companies of any actual costs incurred during the period that have not yet been invoiced, and the costs included in
the contracts. 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 measures stock options with service-based vesting or performance-based vesting granted to employees, non-
employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model. The
Company measures restricted common stock awards using the difference between the purchase price per share of the
award, if any, and the fair value of the Company’s common stock. Compensation expense for those awards is recognized
over the requisite service period, which is generally the vesting period of the respective award. The Company measures
restricted stock units with service-based vesting as the market value of the Company’s stock on the date of grant. The
Company uses the straight-line method to record the expense of awards with only service-based vesting conditions. The
Company uses the graded-vesting method to record the expense of awards with both service-based and performance-based
vesting conditions, commencing once achievement of the performance condition becomes probable. The Company
accounts for forfeitures as they occur and records compensation cost assuming all option holders will complete the
requisite service period. If an award is forfeited, the Company reverses compensation expense previously recognized in the
period the award is forfeited.
For stock-based awards with market-based vesting conditions, the Company measures the fair value on the date of grant
using a Monte Carlo simulation model. When service-based vesting conditions also exist, the Company recognizes stock-
based compensation expense using the graded-vesting method over the longer of the derived service period from the
market condition or the required service period. In accordance with accounting guidance for awards with market
conditions, the stock-based compensation expense will be recognized over the appropriate period regardless of whether the
award achieves the market condition and will only be adjusted to the extent the service condition is not met. When an
award contains a market-based vesting condition and a performance-based vesting condition where both must be achieved
to earn the award, the Company recognizes stock-based compensation expense over the longer of the derived service
period from the market condition or the period estimated for the performance-based vesting condition to be achieved. The
Company begins recording stock-based compensation expense for this type of award once the achievement of the
performance-based vesting condition becomes probable regardless of whether the market condition has been achieved.
The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive
loss 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.
Comprehensive Loss
Comprehensive loss includes net loss, as well as other changes in stockholders’ equity that result from transactions and
economic events other than those with stockholders. For the years ended December 31, 2021, 2020 and 2019, the
Company’s only element of other comprehensive loss was unrealized gains (losses) on investments.
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Net Income (Loss) per Share
Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number
of shares of common stock outstanding for the period. Diluted net income (loss) per common share is computed by
dividing net income (loss) by the weighted average number of common shares outstanding for the period, including
potential dilutive common shares assuming the dilutive effect of outstanding common stock equivalents. Accordingly, in
periods in which the Company reported a net loss, dilutive common shares were not assumed to have been issued as their
effect was anti-dilutive, and as a result, diluted net loss per common share was the same as basic net loss per common
share.
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 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 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.
Recently Adopted Accounting Pronouncements
ASU No. 2016-13, Financial Instruments—Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit
Losses on Financial Instruments. The standard amends the impairment model by requiring entities to use a forward-looking
approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that
aren’t measured at fair value through net income. For available-for-sale debt securities, entities are required to recognize an
allowance for credit losses rather than a reduction in carrying value of the asset. Entities are no longer permitted to
consider the length of time that fair value has been less than amortized cost when evaluating when credit losses should be
recognized. For public entities, the guidance was effective for annual reporting periods beginning after December 15, 2019
and for interim periods within those fiscal years. Early adoption was permitted. The Company early adopted this standard
as of January 1, 2020 on a prospective basis. The adoption did not have a material impact on the Company’s consolidated
financial statements.
ASU No. 2018-13, Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to
the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which eliminates, adds and modifies certain
disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project. For all entities,
this guidance was effective for annual reporting periods beginning after December 15, 2019, including interim periods
within those fiscal years. Early adoption was permitted. The Company early adopted this standard as of January
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1, 2020 on a prospective basis. The adoption did not have an impact on the Company’s consolidated financial statements.
ASU No. 2020-04, Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides temporary optional expedients and
exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting
burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. For
all entities, this guidance is effective as of issuance, March 12, 2020, through December 31, 2022. The Company adopted
this standard as of March 12, 2020 on a prospective basis and is currently evaluating its contracts referencing LIBOR for
reference rate replacement.
ASU No. 2019-12, Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (ASC 740). The ASU
enhances and simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related
to hybrid tax regimes, the tax basis step-up in goodwill obtained in a transaction that is not a business combination,
separate financial statements of entities not subject to tax, the intra-period tax allocation exception to the incremental
approach, ownership changes in investments, changes from a subsidiary to an equity method investment, interim-period
accounting for enacted changes in tax law, and the year-to-date loss limitation in interim-period tax accounting. This
guidance is effective for the Company for annual and interim periods beginning after December 31, 2020; however, early
adoption is permitted. The Company adopted this standard as of January 1, 2021 on a prospective basis. The adoption did
not have an impact on the Company’s condensed consolidated financial statements.
3. Investments and Fair Value of Financial Assets and Liabilities
The Company had no investments as of December 31, 2021. As of December 31, 2020, investments by security type
consisted of the following (in thousands):
December 31, 2020
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Credit
Losses
Fair Value
U.S. treasury bills and notes (due within one year)
$
85,118 $
6 $
(2) $
— $ 85,122
$
85,118 $
6 $
(2) $
— $ 85,122
The following tables present the Company’s fair value hierarchy for its assets and liabilities, which are measured at fair
value on a recurring basis (in thousands):
Fair value measurements at December 31, 2021 using:
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
U.S. money market funds
$
217,009 $
— $
—
$
217,009
$
217,009
$
—
$
—
$
217,009
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Fair value measurements at December 31, 2020 using:
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents:
U.S money market funds
$
88,814 $
— $
—
$
88,814
Investments:
U.S. treasury bills and notes
—
85,122
—
85,122
$
88,814
$
85,122
$
—
$
173,936
U.S. government money market funds were valued by the Company based on quoted market prices, which represent a
Level 1 measurement within the fair value hierarchy. U.S. treasury notes 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. There have
been no changes to the valuation methods during the year ended December 31, 2021. The Company evaluates transfers
between levels at the end of each reporting period. There were no transfers between Level 1, Level 2 or Level 3 during the
year ended December 31, 2021 and 2020, respectively.
4. Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following (in thousands):
December 31,
2021
2020
Land
$
1,300
$
1,300
Manufacturing facility
33,203
30,969
Manufacturing equipment
8,831
8,782
Laboratory equipment
17,501
16,639
Computer equipment
2,645
2,118
Furniture and fixtures
1,281
1,228
Leasehold improvements
444
444
Construction-in-progress
4,181
2,605
69,386
64,085
Less: Accumulated depreciation and amortization
(17,856)
(10,133)
$
51,530
$
53,952
Manufacturing Facility
The Company owns a 135,000 square foot manufacturing facility located in Smithfield, Rhode Island. The facility was
purchased in July 2018 for $8.0 million. During the remainder of 2018 and throughout 2019, it was renovated and
customized to manufacture clinical supply of the Company’s product candidates and was placed into service in January
2020 after achieving the regulatory qualifications required to bring it to its intended use. The carrying value of the land
represents an allocation of the original purchase price based on the value of comparable assets. The carrying value of the
manufacturing facility represents the remaining purchase price, plus the capitalized design, demolition, construction and
interest costs related to renovations and improvements. The Company continues to incur capital asset expenditures related
to the operation of the manufacturing facility, which are capitalized as construction-in-progress until they are ready for
their intended use and placed into service.
Depreciation and amortization expense was $7.7 million, $5.7 million and $3.0 million for the years ended December 31,
2021, 2020 and 2019, respectively.
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5. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
December 31,
2021
2020
Accrued employee compensation and benefits
$
7,451
$
8,124
Accrued external research and development expenses
2,713
3,156
Accrued manufacturing facility expenses
2,349
339
Accrued general and administrative expenses
889
1,244
Other
670
554
$
14,072
$
13,417
6. Debt
Long-term debt consisted of the following (in thousands):
December 31, 2021 December 31, 2020
Principal amount of long‑term debt
$
75,000
$
75,000
Less: Current portion of long‑term debt
—
—
Long‑term debt, net of current portion
75,000
75,000
Accrued final interest payment
1,654
408
Debt discount
(500)
(464)
Long‑term debt, net of discount and current portion
$
76,154
$
74,944
Loan Agreement
On December 21, 2018 (the “Closing Date”), the Company entered into a loan and security agreement (the “Loan
Agreement”) with Solar Capital Ltd. as collateral agent for the lenders party thereto for an aggregate principal amount of
$75.0 million. The aggregate principal amount will be funded in three tranches of term loans of $25.0 million each. On the
Closing Date, the Company made an initial borrowing of $25.0 million, in June 2019, the Company made a second
borrowing of $25.0 million and in June 2020, the Company made a third and final borrowing of $25.0 million.
On June 22, 2021 (the “Amendment Closing Date”), the Company entered into an amendment (the “Amendment”) to its
Loan Agreement. Pursuant to the Amendment, the Company and its lenders agreed to extend the interest-only period
applicable to borrowings under the Loan Agreement from December 21, 2021 until July 1, 2024 and the final maturity date
from December 21, 2023 until June 1, 2026. An additional tranche in the amount of $35.0 million is available at the request
of the Company prior to the final maturity date, to be provided at the sole discretion of the lenders. The Amendment
increases the LIBOR interest rate floor from 0.00% to 2.10%. Interest on the outstanding loan balance will accrue at a rate
of 5.50%, plus the greater of 2.10% or the one-month U.S. LIBOR rate. Certain back-end fees are due to the lender at the
time of final repayment based on the total funded term loans. The Company accrues the back-end fees that will be due at
final repayment to outstanding debt by charges to interest expense over the term of the loans using the effective interest
method. The term loans are subject to a prepayment fee of 1.00% if prepayment occurs within the first year subsequent to
the Amendment Closing Date, 0.50% in the second year and 0.25% in the third year through final maturity date.
As the terms of the Amendment were not substantially different than the terms of the Loan Agreement, the Amendment
was accounted for as a debt modification. In conjunction with the Amendment, the Company incurred issuance costs of
$0.2 million payable to the lenders, which were recorded as an additional debt discount and will be amortized to interest
expense over the remaining term, together with unamortized original issuance costs as of the Amendment Closing Date,
using the effective interest method.
The Loan Agreement contains financial covenants that require the Company to maintain either a certain minimum cash
balance or a minimum market capitalization threshold. The Company was in compliance with all such financial
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covenants as of December 31, 2021. The Loan Agreement contains customary representations, warranties and covenants
and also includes customary events of default, including payment defaults, breaches of covenants, change of control and a
material adverse change default. Upon the occurrence of an event of default, a default interest rate of an additional 4.00%
per annum may be applied to the outstanding loan balances, and the lenders may declare all outstanding obligations
immediately due and payable. Borrowings under the Loan Agreement are collateralized by substantially all of the
Company’s assets, other than its intellectual property.
As of December 31, 2021, the estimated future principal payments due were as follows (in thousands):
Year ending December 31,
2022
$
—
2023
—
2024
18,750
2025
37,500
2026 and thereafter
18,750
$
75,000
7. Equity
Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s
stockholders. Common stockholders are not entitled to receive dividends, unless declared by the board of directors.
On July 20, 2018, the Company filed a restated certificate of incorporation in the State of Delaware, which, among other
things, restated the number of shares of all classes of stock that the Company has authority to issue to 160,000,000 shares,
consisting of (i) 150,000,000 shares of common stock, $0.001 par value per share, and (ii) 10,000,000 shares of preferred
stock, $0.001 par value per share. The preferred stock will have such rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be
determined by the Company’s board of directors upon issuance. The shares of preferred stock are currently undesignated.
On August 1, 2019, the Company entered into a Distribution Agreement (the “Distribution Agreement”) with J.P. Morgan
Securities LLC, Jefferies LLC and SVB Leerink LLC (the “Sales Agents”), pursuant to which the Company may issue and
sell, from time to time, shares of its common stock having an aggregate offering price of up to $100.0 million through the
Sales Agents. The Company’s registration statement on Form S-3 filed on August 1, 2019 was declared effective on
August 21, 2019. The Sales Agents may sell common stock by any method permitted by law deemed to be an “at the
market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including sales made directly on
or through the Nasdaq Global Select Market or any other existing trade market for the common stock, in negotiated
transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other
method permitted by law. The Sales Agents will be entitled to receive 3.0% of the gross sales price per share of common
stock sold pursuant to the Distribution Agreement. As of December 31, 2021, no shares of common stock have been issued
and sold pursuant to the Distribution Agreement.
On March 18, 2021, the Company completed the March 2021 Offering, pursuant to which it issued and sold 6,896,552
shares of common stock. The aggregate net proceeds received by the Company from the March 2021 Offering were $187.2
million, after deducting underwriting discounts and commissions and other offering costs.
8. Stock-Based Compensation
2018 Equity Incentive Plan
On July 6, 2018, the Company’s board of directors adopted, and its stockholders approved, the 2018 Plan, which became
effective on July 16, 2018. The 2018 Plan provides for the grant of incentive stock options, non-qualified options, stock
appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares
initially reserved for issuance under the 2018 Plan is 5,708,931, which shall be cumulatively increased on January 1,
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2019 and each January 1 thereafter by 4% of the number of shares of the Company’s common stock outstanding on the
immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or
compensation committee of the board of directors. The shares of common stock underlying any awards that are forfeited,
cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by
the Company prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated (other than by
exercise) under the 2018 Plan. As of December 31, 2021, 3,290,353 shares remained available for issuance under the 2018
Plan. The number of authorized shares reserved for issuance under the 2018 Plan was increased by 3,152,231 shares
effective as of January 1, 2022.
2018 Employee Stock Purchase Plan
On July 6, 2018, the Company’s board of directors adopted and its stockholders approved the 2018 Employee Stock
Purchase Plan (the “ESPP”), which became effective on July 16, 2018. A total of 951,488 shares of common stock were
reserved for issuance under this plan. In addition, the number of shares of common stock that may be issued under the
ESPP will automatically increase on January 1, 2019, and each January 1 thereafter through January 1, 2028, by the least of
(i) 951,488 shares of common stock, (ii) 1% of the number of shares of the Company’s common stock outstanding on the
immediately preceding December 31 or (iii) such lesser number of shares as determined by the administrator of the
Company’s ESPP. As of December 31, 2021, 1,717,392 shares remained available for issuance under the 2018 ESPP. The
number of authorized shares reserved for issuance under the ESPP was not increased on January 1, 2022.
Stock Option Valuation
Service-Based and Performance-Based Stock Options
The fair value of stock option grants with service-based and performance-based vesting conditions is estimated using the
Black-Scholes option-pricing model. The Company estimates expected volatility based on the historical volatility of
publicly traded peer companies. The Company expects to continue to do so until such time as it has adequate historical data
regarding the volatility of its traded stock price following our July 2018 IPO. 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 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.
The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model
to determine the fair value of stock-based awards granted to employees, directors, and non-employees:
Year ended December 31,
2021
2020
2019
Risk-free interest rate
0.81 %
1.10 %
2.07 %
Expected volatility
77.4 %
69.4 %
76.9 %
Expected dividend yield
—
—
—
Expected term (in years)
6.08
6.05
6.06
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The following table summarizes the Company’s service-based and performance-based option activity since December 31,
2021:
Weighted
Weighted
average
average
Aggregate
Number of
exercise
contractual
intrinsic
shares
price
term
value
(in years)
(in thousands)
Outstanding as of December 31, 2020
15,960,324
$ 10.17
7.38
$
15,018
Granted
4,138,080
15.80
Exercised
(1,933,523)
5.53
Forfeited
(1,026,109)
10.37
Outstanding as of December 31, 2021
17,138,772
$ 12.04
7.22
$
23,511
Vested and expected to vest as of December 31, 2021
17,138,772
$ 12.04
7.22
$
23,511
Options exercisable as of December 31, 2021
10,554,855
$ 11.52
6.42
$
18,126
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 aggregate intrinsic value of stock options exercised during the years ended
December 31, 2021, 2020 and 2019 was $34.6 million, $5.7 million and $17.7 million, respectively.
The weighted average grant-date fair value of stock options granted during the years ended December 31, 2021, 2020 and
2019 was $10.55 per share, $4.51 per share and $8.58 per share, respectively.
Market-Based Stock Options
The fair value of stock option grants with market-based vesting conditions is estimated using a Monte Carlo simulation
model.
In October 2018, the Company granted to an executive officer an option to purchase 164,400 shares of common stock
(“Option A”) at an exercise price of $16.43 per share, vesting upon the achievement of a specified thirty-day average
closing price of its common stock and the satisfaction of service-based vesting conditions, and an option to purchase
193,400 shares of common stock (“Option B”) at an exercise price of $16.43 per share, vesting upon the achievement of a
specified thirty-day average closing price of its common stock and the achievement of certain other performance-based
vesting conditions. The Company used a Monte Carlo simulation model to estimate the grant-date fair value of the awards.
Assumptions and estimates utilized in the model include the risk-free interest rate, dividend yield, expected stock volatility
based on a combination of the Company’s historical stock volatility since its July 2018 IPO and the historical volatility of a
publicly traded set of peer companies and the estimated period to achievement of the market condition. Stock-based
compensation expense for Option A is being recognized using the graded-vesting method over the longer of the derived
service period from the market condition or the explicit service period required to be completed for each vesting tranche.
Stock-based compensation expense for Option B is being recognized using the graded-vesting method over the longer of
the derived service period from the market condition or the estimated achievement of performance-based conditions. For
Option B, stock-based compensation expense is recognized when the achievement of each performance-based vesting
condition becomes probable regardless of whether the market condition has been achieved. The aggregate grant date fair
value of these options was $4.3 million. During the years ended December 31, 2021, 2020 and 2019 the Company recorded
stock-based compensation expense on Option A of $0.2 million, $0.6 million and $0.9 million, respectively. During the
years ended December 31, 2021 and 2020, the Company recorded stock-based compensation expense on Option B of $1.1
million and $1.1 million, respectively, as a performance-based vesting condition was determined to be probable during
each year. No stock-based compensation expense on Option B was recorded during the year ended December 31, 2019.
The Company did not grant market-based stock options during the years ended December 31, 2021, 2020 and 2019. During
the years ended December 31, 2021, 2020 and 2019, none of the outstanding stock options with market-based vesting
conditions were exercised, forfeited or vested and they had no intrinsic value at December 31, 2021.
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162
Restricted Stock Units
The Company has also granted restricted stock units to its employees. During the years ended December 31, 2021 and
2019, the Company granted restricted stock units to employees that were subject to time-based vesting conditions that lapse
over four years and three years, respectively, from date of grant. No restricted stock units were granted during the year
ended December 31, 2020. Restricted stock units with time-based vesting conditions are valued on the grant date using the
grant date market price of the underlying shares. The following table summarizes the Company’s restricted stock unit
activity since December 31, 2021:
Weighted average
grant‑date
Shares
fair value
Unvested restricted common stock as of December 31, 2020
252,000
$
10.660
Issued
787,107
15.505
Vested
(153,600)
10.660
Forfeited
(91,263)
11.660
Unvested restricted common stock as of December 31, 2021
794,244
$
15.346
Stock-Based Compensation
The Company recorded stock-based compensation expense in the following expense categories of its consolidated
statements of operations and comprehensive loss (in thousands):
Year ended December 31,
2021
2020
2019
Research and development expenses
$ 12,338
$
8,023
$
9,011
General and administrative expenses
23,272
25,642
32,260
$ 35,610
$ 33,665
$ 41,271
As of December 31, 2021, total unrecognized compensation cost related to unvested stock-based awards was $57.3 million,
which is expected to be recognized over a weighted average period of 2.5 years.
9. Income Taxes
During the years ended December 31, 2021, 2020 and 2019, the Company recorded no income tax benefits for the net
operating losses incurred or for the research and development tax credits generated in each year, due to its uncertainty of
realizing a benefit from those items.
All of the Company’s operating losses since inception have been generated in the United States.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:
Year ended
December 31,
2021
2020
Federal statutory income tax rate
(21.0)%
(21.0)%
State taxes, net of federal benefit
(6.2)
(6.2)
Federal and state research and development tax credits
(6.4)
(5.9)
Stock‑based compensation expense
(1.6)
0.4
Section 162(m) compensation deduction limitation
1.6
—
Other
(0.4)
0.5
Increase in deferred tax asset valuation allowance
34.0
32.2
Effective income tax rate
— %
— %
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163
Net deferred tax assets consisted of the following (in thousands):
December 31,
2021
2020
Deferred tax assets:
Net operating loss carryforwards
$ 145,990
$
97,791
Research and development tax credit carryforwards
36,161
23,524
Accrued expenses
2,137
2,241
Capitalized intellectual property costs
1,746
1,123
Capitalized research and development expense
86
97
Operating lease liabilities
10,194
11,394
Stock‑based compensation expense
21,483
15,847
Total deferred tax assets
217,797
152,017
Deferred tax liabilities:
Operating lease assets
(9,590)
(11,050)
Depreciation and other
(1,500)
(1,090)
Total deferred tax liabilities
(11,090)
(12,140)
Valuation allowance
(206,707)
(139,877)
Net deferred tax assets
$
—
$
—
As of December 31, 2021, the Company had U.S. federal and state net operating loss (“NOL”) carryforwards of
$534.2 million and $534.8 million, respectively, which may be available to offset future taxable income. The federal NOLs
include $37.2 million which expire at various dates through 2037 and $497.0 million which carryforward indefinitely. The
state NOLs expire at various dates through 2041. As of December 31, 2021, the Company also had U.S. federal and state
research and development tax credit carryforwards of $22.7 million and $15.6 million, respectively, which may be
available to offset future tax liabilities and begin to expire in 2034 and 2026, respectively. During the year ended December
31, 2021, deferred tax assets, before valuation allowance, increased by approximately $65.8 million mainly due to the
operating loss incurred by the Company during that period.
Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax credit
carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code
of 1986, 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 carryforwards that can be utilized annually to offset
future taxable income or tax liabilities. In general, an ownership change, as defined by Section 382, results from
transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than
50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred
or whether there have been multiple changes of control since inception due to the significant complexity and cost
associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time
since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards
would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the
Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be
subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss
carryforwards or research and development tax credit 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.
The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets.
Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of
commercialization of any products or generation of any revenue from product sales since inception and has concluded that
it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full
valuation allowance has been established against the net deferred tax assets as of December 31, 2021 and 2020.
Management reevaluates the positive and negative evidence at each reporting period.
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164
Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2021, 2020 and 2019
related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards
and were as follows (in thousands):
Year ended December 31,
2021
2020
2019
Valuation allowance as of beginning of year
$ 139,877
$
85,884
$ 33,666
Decreases recorded as benefit to income tax provision
—
—
—
Increases recorded to income tax provision
66,830
53,993
52,218
Valuation allowance as of end of year
$ 206,707
$ 139,877
$ 85,884
As of December 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
December 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 U.S., Massachusetts and Rhode Island, 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 federal and
state jurisdictions, where applicable. There are currently no pending tax examinations. The Company is open to future tax
examination under statute from 2016 to the present; however, carryforward attributes that were generated prior to
January 1, 2016 may still be adjusted upon examination by federal, state or local tax authorities if they either have been or
will be used in a future period.
10. Commitments and Contingencies
License Agreement with the Whitehead Institute for Biomedical Research
The Company has a license agreement with the Whitehead Institute for Biomedical Research (“WIBR”), as amended,
under which the Company has been granted an exclusive, sublicensable, nontransferable license under certain patent
families related to the development of the Company’s red blood cell therapies (the “WIBR License”). The Company is
obligated to pay WIBR annual license maintenance fees of less than $0.1 million, as well as patent-related costs, including
legal fees, and low single-digit royalties based on annual net sales of licensed products and licensed services by the
Company and its sublicensees. Based on the progress the Company makes in the advancement of products covered by the
licensed patent rights, the Company is required to make aggregate milestone payments of up to $1.6 million upon the
achievement of specified preclinical, clinical and regulatory milestones. In addition, the Company is required to pay to
WIBR a percentage of the non-royalty payments that it receives from sublicensees of the patent rights licensed by WIBR.
This percentage varies from low single-digit to low double-digit percentages and will be based upon the clinical stage of
the product that is the subject of the sublicense. Royalties shall be paid by the Company on a licensed product-by-licensed
product and country-by-country basis, beginning on the first commercial sale of such licensed product in such country until
expiration of the last valid patent claim covering such licensed product in such country.
The Company has the right to terminate the WIBR License in its entirety, on a patent-by-patent or country-by-country
basis, at will upon three months’ notice to WIBR. WIBR may terminate the agreement upon breach of contract or in the
event of the Company’s bankruptcy, liquidation, insolvency or cessation of business related to the license.
401(k) Plan
In January 2018, the Company established a defined-contribution plan under Section 401(k) of the Internal Revenue Code
(the “401(k) Plan”). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and
allows participants to defer a portion of their annual compensation on a pre-tax basis. The Company makes matching
contributions at a rate of 50% of each employee’s contribution up to a maximum employee contribution of 6% of eligible
plan compensation. For the years ended December 31, 2021, 2020 and 2019, the Company made matching contributions of
$0.9 million, $0.8 million and $0.6 million, respectively.
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165
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors,
lessors, contract research organizations, 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 board of directors
and executive officers 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 to make under these indemnification agreements is, in many cases, unlimited. The
Company has not incurred any material costs as a result of such indemnifications and is not currently aware of any
indemnification claims.
Legal Proceedings
The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates
whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the
provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred
the costs related to such legal proceedings.
11. Leases
Operating Leases
During the year ended December 31, 2021, the Company leased office and laboratory facilities in Cambridge,
Massachusetts under two noncancelable operating leases. The first lease expired in September 2021. The second lease is
subject to two expiration dates based on two distinct leased spaces, expiring in January 2027 and August 2028. The lease
agreements include lease incentives and payment escalations.
In January 2018, the Company entered into a lease for office and laboratory space in Cambridge, Massachusetts (the
“Initial Space”). The lease term commenced on January 28, 2019 and expires eight years from the commencement date.
The Company is entitled to one five-year option to extend, which is not included in the lease term. The initial annual base
rent is approximately $3.8 million, and such amount will increase during the initial term by 3% annually on the anniversary
of the commencement date. The Company is obligated to pay its portion of real estate taxes and costs related to the
premises, including costs of operations, maintenance, repair, replacement and management of the new leased premises. In
connection with the lease, the Company maintains a letter of credit for the benefit of the landlord in the amount of
$0.9 million, which is collateralized by a cash deposit of the same amount. The lease agreement allows for a landlord-
provided tenant improvement allowance of $9.4 million to be applied to the costs of the construction of the leasehold
improvements, of which $0.5 million is repayable to the landlord over the term of the lease.
In November 2018, the Company entered into a lease amendment for office and laboratory space in the same building (the
“Expansion Space”). The lease term for the Expansion Space commenced on August 8, 2019 and expires approximately
nine years from the commencement date. The initial annual base rent for the Expansion Space is approximately $2.5
million and such amount will increase by 3% annually on the anniversary of the commencement date. The Company is
obligated to pay its portion of real estate taxes and costs related to the Expansion Space, including costs of operations,
maintenance, repair, replacement and property management. In connection with the lease amendment, the Company
increased the letter of credit held for the benefit of the landlord by $0.6 million, which is collateralized by a cash deposit of
the same amount. The lease amendment increased the landlord-provided tenant improvement allowance by $9.2 million, of
which $2.0 million is repayable to the landlord over the term of the lease.
The Company evaluated its vendor contracts to identify embedded leases, if any, and noted that an agreement with a
contract manufacturing supplier constituted a lease under ASC 842 as the Company has the right to substantially all the
economic benefits from the use of the asset and can direct the use of the asset. The Company entered into the agreement
during the first quarter of 2019. The lease commenced during March 2019 and was scheduled to expire 22 months from
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166
commencement date with no stated option to extend the term. The lease was cancelled prior to expiration during the first
quarter of 2020, resulting in derecognition of the lease assets and operating lease liabilities.
As the Company’s leases do not provide an implicit rate, the Company utilized its incremental borrowing rate based on
information available at the lease commencement date, which represents an internally developed rate that would be
incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar
economic environment. The Company has elected to account for each lease component and its associated non-lease
components as a single lease component and, therefore, has allocated all the contract consideration across lease
components only. This may result in the initial and subsequent measurement of the balances of the right-of-use asset and
lease liability for leases being greater than if the policy election was not applied. Assets under operating lease at December
31, 2021 were $35.1 million. The leases do not include any restrictions or covenants that had to be accounted for under the
lease guidance.
As of December 31, 2021, minimum lease payments under the Company’s operating leases are as follows (in thousands):
Year ending December 31,
2022
$
9,015
2023
7,447
2024
7,601
2025
7,818
2026
8,041
Thereafter
6,199
46,121
Less: imputed interest
(8,815)
$
37,306
The Company has not entered any material financing leases as of December 31, 2021.
Lease Portfolio
The components of lease cost and supplemental balance sheet information for the Company’s lease portfolio were as
follows (in thousands, except term and discount rate amounts):
Year ended December 31,
2021
2020
2019
Lease cost:
Operating lease cost
$
8,173
$
9,240
$
7,208
Short-term lease cost
41
24
127
Variable lease cost
3,723
1,916
1,976
Sublease income
(719)
(1,017)
(908)
Total lease cost
$
11,218
$
10,163
$
8,403
Operating leases:
Operating lease, right-of-use-asset
$
35,095
$
40,447
$
46,559
Operating lease liabilities
$
9,015
$
8,945
$
10,540
Operating lease liabilities, net of current portion
$
28,291
$
32,762
$
36,867
Other information:
Weighted average remaining lease term - operating leases
5.8 years
6.70 years
7.47 years
Weighted-average discount rate - operating leases
7.60%
7.60%
7.58%
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167
12. Net Loss per Share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except
share and per share amounts):
Year ended December 31,
2021
2020
2019
Numerator:
Net loss
$
(196,547)
$
(167,731)
(163,458)
Denominator:
Weighted average common shares outstanding, basic and diluted
87,950,440
80,624,608
78,688,878
Net loss per share, basic and diluted
$
(2.23)
$
(2.08)
$
(2.08)
The Company’s potential dilutive securities 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 from the periods in the table above, presented based 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:
Year ended December 31,
2021
2020
2019
Unvested restricted common stock
794,244
252,000
376,514
Stock options to purchase common stock
17,496,572
16,318,124
15,103,907
18,290,816
16,570,124
15,480,421
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal
executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and
procedures as of December 31, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act means controls and other procedures of an issuer that are designed to ensure that
information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to
the issuer’s management, including its principal executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-
benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures
as of December 31, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our
disclosure controls and procedures were effective at the reasonable assurance level.
Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our management
conducted an assessment of the effectiveness of our internal control over financial reporting, as of December 31, 2021,
based on the criteria described in “Internal Control-Integrated Framework” (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, management concluded that, as of December 31,
2021, our internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of December 31, 2021, has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included
herein.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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169
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders,
which we expect to file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on
Form 10-K relates.
Item 11. Executive Compensation
Incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders,
which we expect to file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on
Form 10-K relates.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders,
which we expect to file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on
Form 10-K relates.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders,
which we expect to file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on
Form 10-K relates.
Item 14. Principal Accounting Fees and Services
Incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders,
which we expect to file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on
Form 10-K relates.
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170
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) 1. Financial Statements
For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page 142 of
this Annual Report on Form 10-K, incorporated into this Item by reference.
2. Financial Statement Schedules
Financial statement schedules have been omitted because they are either not required or not applicable or the information is
included in the consolidated financial statements or the notes thereto.
3. Exhibits
The exhibits required by Item 601 of Regulation S-K and Item 15(b) of this Annual Report on Form 10-K are listed in the
Exhibit Index below. The exhibits listed in the Exhibit Index are incorporated by reference herein.
(b) Exhibit Index
3.1
Amended and Restated Certificate of Incorporation of Rubius Therapeutics, Inc. (Incorporated by reference
to Exhibit 3.1 to the Registrant’s Form 8-K (File No. 001-38586) filed on July 23, 2018).
3.2
Amended and Restated Bylaws of Rubius Therapeutics, Inc. (Incorporated by reference to Exhibit 3.2 to
the Registrant’s Form 8-K (File No. 001-38586) filed on July 23, 2018).
4.1
Description of Registrant’s Securities (Incorporated by reference to Exhibit 4.1 to the Registrant’s Form
10-K (File No. 001‑38586) filed on March 12, 2020).
4.2
Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Registrant’s
Registration Statement on Form S-1, as amended (File No. 333-225840) filed on July 2, 2018).
4.3
Second Amended and Restated Investors' Rights Agreement among the Registrant and certain of its
stockholders, dated February 23, 2018 (Incorporated by reference to Exhibit 4.2 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-225840) filed on June 22, 2018).
10.1#
Amended and Restated 2014 Stock Incentive Plan, and form of award agreements thereunder (Incorporated
by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1, as amended (File No.
333-225840) filed on July 9, 2018).
10.2#
2018 Stock Option and Incentive Plan, and form of award agreements thereunder (Incorporated by
reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1, as amended (File
No. 333-225840) filed on July 9, 2018).
10.3#
2018 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.3 to the Registrant’s
Registration Statement on Form S-1, as amended (File No. 333-225840) filed on July 9, 2018).
10.4#
Senior Executive Cash Incentive Bonus Plan (Incorporated by reference to Exhibit 10.4 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-225840) filed on June 22, 2018).
10.5#*
Non-Employee Director Compensation Policy dated February 24, 2021.
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171
10.6#
Second Amended and Restated Chairman Agreement dated as of June 21, 2018 by and between Rubius
Therapeutics, Inc. and David Epstein (Incorporated by reference to Exhibit 10.10 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-225840) filed on June 22, 2018).
10.7#
Form of Director Indemnification Agreement (Incorporated by reference to Exhibit 10.14 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-225840) filed on June 22, 2018).
10.8#
Form of Officer Indemnification Agreement (Incorporated by reference to Exhibit 10.15 to the Registrant’s
Registration Statement on Form S-1 (File No. 333-225840) filed on June 22, 2018).
10.9
Form of Senior Indenture between Rubius Therapeutics, Inc. and one or more trustees to be named
(Incorporated by reference to Exhibit 4.3 to the Registrant’s Form S-3 (File No. 333-232955) filed on
August 1, 2019).
10.10
Form of Subordinated Indenture between Rubius Therapeutics, Inc. and one or more trustees to be named
(Incorporated by reference to Exhibit 4.4 to the Registrant’s Form S-3 (File No. 333-232955) filed on
August 1, 2019).
10.11
Distribution Agreement dated August 1, 2019 by and among Rubius Therapeutics, Inc. and J.P. Morgan
Securities LLC, Jefferies LLC and SVB Leerink LLC (Incorporated by reference to Exhibit 1.2 to the
Registrant’s Form S-3 (File No. 333-232955) filed on August 1, 2019).
10.12
Loan and Security Agreement between Rubius Therapeutics, Inc. and Solar Capital Ltd. dated December
21, 2018 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8‑K (File No. 001-38586)
filed on December 21, 2018)
10.13
First Amendment to the Loan and Security Agreement dated as of September 16, 2019 between Rubius
Therapeutics, Inc. and Solar Capital Ltd. (Incorporated by reference to Exhibit 10.2 to the Registrant’s
Form 10-Q (File No. 001-38586) filed on November 14, 2019).
10.14
Second Amendment to Loan and Security Agreement between Rubius Therapeutics, Inc. and SLR
Investment Corp. (formerly Solar Capital Ltd.) dated June 22, 2021 (Incorporated by reference to Exhibit
10.1 to the Registrant’s Form 10-Q (File No. 001-38586) filed on August 9, 2021).
10.15˄
Lease Agreement dated January 18, 2018 by and between Rubius Therapeutics, Inc. and ARE-MA Region
No. 58, LLC (Incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on
Form S-1 (File No. 333-225840) filed on June 22, 2018).
10.16˄˄
First Amendment to Lease dated November 9, 2018 by and between Rubius Therapeutics, Inc. and ARE-
MA Region No. 58, LLC (Incorporated by reference to Exhibit 10.11.1 to Amendment No. 1 to
Registrant’s Annual Report on Form 10-K(File No. 001-38586) filed on May 15, 2019).
10.17˄
Exclusive Patent License Agreement dated January 28, 2016 by and between Rubius Therapeutics, Inc. and
the Whitehead Institute for Biomedical Research (Incorporated by reference to Exhibit 10.13 to the
Registrant’s Registration Statement on Form S-1 (File No. 333-225840) filed on June 22, 2018).
10.18˄
First Amendment to the Exclusive Patent License Agreement between the Registrant and the Whitehead
Institute for Biomedical Research, dated December 12, 2017 (Incorporated by reference to Exhibit 10.13 to
the Registrant’s Registration Statement on Form S‑1 (File No. 333‑225840) filed on June 22, 2018).
10.19˄˄
Second Amendment to Exclusive Patent License Agreement dated July 25, 2018 by and between Rubius
Therapeutics, Inc. and the Whitehead Institute for Biomedical Research (Incorporated by reference to
Exhibit 10.12.1 to Amendment No. 1 to Registrant’s Annual Report on Form 10-K (File No. 001-38586)
filed on May 15, 2019).
Table of Contents
172
10.20#
Employment Agreement between Rubius Therapeutics, Inc. and Pablo Cagnoni, M.D. dated July 2, 2018
(Incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1, as
amended (File No. 333-225840) filed on July 9, 2018).
10.21#
Employment Agreement between Rubius Therapeutics, Inc. and Maiken Keson-Brookes, dated October 7,
2019 (Incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on 10-K (File No. 001-
38586) filed on March 12, 2020).
10.22#
Employment Agreement between Rubius Therapeutics, Inc. and Laurence Turka, dated January 4, 2020.
(Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q (File No. 001-38586) filed on
May 11, 2020).
10.23#
Employment Agreement between Rubius Therapeutics, Inc. and Jose Carmona, dated September 23,
2020. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 001-38586) filed
on September 28, 2020).
10.24#
Employment Agreement between Rubius Therapeutics, Inc. and Dannielle Appelhans, dated July 26, 2021.
(Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (File No. 001-38586) filed on July
29, 2021).
21.1*
List of Subsidiaries of Rubius Therapeutics, Inc.
23.1*
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm
24.1*
Power of Attorney (included on signature page to this Annual Report on Form 10-K)
31.1*
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*†
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*†
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*
Inline XBRL Instance Document.
101.SCH*
Inline XBRL Taxonomy Extension Schema Document.
101.CAL*
Inline XBRL Taxonomy 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.
104*
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension
information contained in Exhibits 101)
Table of Contents
173
*
Filed herewith.
#
Indicates a management contract or any compensatory plan, contract or arrangement.
˄
Confidential treatment has been granted with respect to redacted portions of this exhibit. Redacted portions of this
exhibit (indicated by asterisks) have been filed separately with the Securities and Exchange Commission.
˄˄
Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the SEC.
†
This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be
deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange
Act, except to the extent specifically incorporated by reference into such filing.
Item 16. Form 10-K Summary
The company has elected not to include summary information.
Table of Contents
174
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RUBIUS THERAPEUTICS, INC.
February 25, 2022
By: /s/ Pablo J. Cagnoni
Pablo J. Cagnoni
Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and appoints Pablo Cagnoni and Jose Carmona,
and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her
true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on
behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual
report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents
or any of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Pablo J. Cagnoni
Chief Executive Officer, Director
February 25, 2022
Pablo J. Cagnoni, M.D.
(Principal Executive Officer)
/s/ Jose Carmona
Chief Financial Officer
February 25, 2022
Jose Carmona
(Principal Financial Officer and Principal Accounting Officer)
/s/ David R. Epstein
Chairman of the Board of Directors
February 25, 2022
David R. Epstein
/s/ Noubar B. Afeyan
Director
February 25, 2022
Noubar B. Afeyan, Ph.D.
/s/ Francis Cuss
Director
February 25, 2022
Francis Cuss, M.B., B.Chir., FRCP
/s/ Natalie Holles
Director
February 25, 2022
Natalie Holles
/s/ Anne Prener
Director
February 25, 2022
Anne Prener, M.D., Ph.D.
/s/ Michael Rosenblatt
Director
February 25, 2022
Michael Rosenblatt, M.D.
/s/ Catherine A. Sohn
Director
February 25, 2022
Catherine A. Sohn, Pharm.D.
/s/ Jonathan R. Symonds
Director
February 25, 2022
Jonathan R. Symonds, CBE
Exhibit 10.5
RUBIUS THERAPEUTICS, INC.
AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
The purpose of this Amended and Restated Non-Employee Director Compensation Policy (the “Policy”) of Rubius
Therapeutics, Inc., a Delaware corporation (the “Company”), is to provide a total compensation package that enables
the Company to attract and retain, on a long-term basis, high-caliber directors who are not employees or officers of the
Company. This Policy will become effective as of the effective time of the registration statement for the Company’s
initial firm commitment underwritten public offering of equity securities (the “Effective Date”) and will apply to all
non-employee directors of the Company other than the Chairman of the Board of Directors (such directors, the
“Eligible Directors”) of the Company (the “Board”). In furtherance of this purpose, except as otherwise provided in
any written agreement between the Company and an Eligible Director, all Eligible Directors shall be paid
compensation for services provided to the Company as set forth below:
Cash Retainers
Annual Retainer for Board Membership: $40,000 for general availability and participation in meetings and conference
calls of our Board. No additional compensation for attending individual Board meetings.
Additional Annual Retainers for Committee Membership:
Audit Committee Chairperson:
$15,000
Audit Committee member:
$7,500
Compensation Committee Chairperson:
$10,000
Compensation Committee member:
$5,000
Nominating and Corporate Governance Committee Chairperson:
$8,000
Nominating and Corporate Governance Committee member:
$4,000
Science and Technology Committee Chairperson:
$8,000
Science and Technology Committee member:
$0
No additional compensation for attending individual committee meetings. For the avoidance of doubt, the
Chairman of the Board shall not be eligible for cash retainers for his service on the Board or any committee thereof
under this Policy.
All cash retainers will be paid quarterly, in arrears, or upon the earlier of resignation or removal of the Eligible
Director. Cash retainers owing to Eligible Directors shall be annualized, meaning that with respect to Eligible
Directors who join the Board during the calendar year, and with respect to all Eligible Directors for 2018, such
amounts shall be pro-rated based on the number of calendar days served by such Eligible Director following the
Effective Date.
Equity Retainers
Initial Equity Grant: Upon the Effective Date, each Eligible Director serving as of such date shall receive a one-time
equity grant of an option to purchase 25,000 shares of the Company’s common stock, par value $0.001 per share
(the “Common Stock”). Such initial equity grant shall vest in equal quarterly installments during the twelve
quarters following the grant date, subject to the Eligible Director’s continued service on the Board through each such
date. For each Eligible Director joining the Board after the Effective Date, upon his or her initial appointment to the
Board, each such Eligible Director shall receive a one-time equity grant of an option to purchase 50,000 shares of
Common Stock. Such initial equity grant shall vest in equal quarterly installments during the twelve quarters
following the grant date, subject to the Eligible Director’s continued service on the Board through each such date.
Annual Equity Grant: Immediately following each annual meeting of the Company’s stockholders, each continuing
Eligible Director who has served as a director for the previous six months will receive an annual equity grant of an
option to purchase 25,000 shares of Common Stock. Such annual equity grant shall vest on the earlier of the one-year
anniversary of the grant date and the Company’s next annual meeting of stockholders, subject to the Eligible Director’s
continued service on the Board through such date.
All of the foregoing option grants will become immediately exercisable upon the death, disability of an Eligible
Director or upon a Sale Event (as defined in the Company’s 2018 Stock Option and Incentive Plan). In addition,
Eligible Directors will have until the earlier of one year following cessation of service as a director or the original
expiration date of the option to exercise the option (to the extent vested at the date of such cessation), provided
that the Eligible Director has not been removed for cause.
Any stock option granted to an Eligible Director pursuant to this Policy will be granted at an exercise price equal
to the fair market value of a share of Common Stock on the date of grant.
Expenses
The Company shall reimburse all reasonable out-of-pocket expenses incurred by Eligible Directors in attending Board
and committee meetings.
ADOPTED: February 24, 2021
Exhibit 21.1
SUBSIDIARIES
Subsidiary
Jurisdiction of Incorporation
Rubius Therapeutics Securities Corporation
Massachusetts
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-255942, 333-237103, 333-
231478 and 333-226226) and Form S-3 (No. 333-232955) of Rubius Therapeutics, Inc. of our report dated February 25, 2022 relating to
the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 25, 2022
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECURITIES AND EXCHANGE ACT OF 1934
RULE 13A-14 AS ADOPTED PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Pablo J. Cagnoni, M.D., certify that:
1.
I have reviewed this Annual Report on Form 10-K of Rubius Therapeutics, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 25, 2022
By:/s/ Pablo J. Cagnoni
Pablo J. Cagnoni, M.D.
Chief Executive Officer and President
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECURITIES AND EXCHANGE ACT OF 1934
RULE 13A-14 AS ADOPTED PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Jose Carmona, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Rubius Therapeutics, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant's internal control over financial reporting.
Date: February 25, 2022
By:/s/ Jose Carmona
Jose Carmona
Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Rubius Therapeutics, Inc. (the “Company”) for the fiscal year
ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned, Pablo J. Cagnoni, M.D., 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 his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: February 25, 2022
By: /s/ Pablo J. Cagnoni
Pablo J. Cagnoni, M.D.
Chief Executive Officer and President
(Principal Executive Officer)
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Rubius Therapeutics, Inc. (the “Company”) for the fiscal
year ended December 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
the undersigned, Jose Carmona, 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 his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: February 25, 2022
By: /s/ Jose Carmona
Jose Carmona
Chief Financial Officer
(Principal Financial Officer)