Annual
Report
2024
2024 was a transformational year
for Scholar Rock. With the success of
SAPPHIRE, our pivotal Phase 3 trial
evaluating the safety and efficacy of
apitegromab in spinal muscular atrophy
(SMA), we are on our way to fulfilling our
mission to deliver life changing therapies
and create new possibilities for people
living with serious diseases starting with
those living with SMA. We entered 2025
on the threshold of commercialization
of apitegromab for SMA, which if
approved, will mark our transition
into a fully-integrated commercial-
stage biotechnology company. Our
achievements in the past year have set
the foundation for continued success,
giving our team tremendous momentum
to potentially launch our first product and
expand our pipeline of clinical programs,
and brought us closer to making a
meaningful difference in the lives of
people with serious disease.
SMA is a progressive neuromuscular
disorder. Despite the innovation and
improvements achieved with the current
standard of care treatments, all of which
address the SMN protein deficiency,
muscle weakness remains a core unmet
need. Those living with SMA need and
want more: more gain in motor function,
more muscle strength.
We designed and conducted SAPPHIRE
to see if we could help address the
unmet need and create new treatment
possibilities for those living with SMA. We
were thrilled to report that SAPPHIRE
achieved its primary endpoint of
statistically significant and clinically
meaningful improvement in motor
function using a gold standard, SMA-
specific scale (Hammersmith Functional
Motor Scale Expanded), demonstrating
its potential to transform the lives of
people with SMA who are receiving
SMN-targeted therapies. Apitegromab
is now the first and only anti-myostatin
therapeutic candidate to demonstrate
a statistically significant functional
improvement in a pivotal Phase 3 study.
These positive results from SAPPHIRE
bring us closer to offering a much-needed
treatment option and the first muscle-
targeted therapy for SMA.
To support the potential
commercialization of apitegromab, we
completed an upsized public offering.
We also prepared and submitted the
biologics license application (BLA) in
the United States and the marketing
authorization application (MAA) in
Europe allowing us to be on track for a
U.S. commercial launch upon approval in
2025, with European launch anticipated
in 2026. In preparation, we are engaging
with the SMA community, leading the first
ever muscle focused disease education
in SMA, building a top-tier commercial
and medical affairs organization, and
establishing the infrastructure needed to
deliver apitegromab to SMA patients if
it is approved. SMA has benefited from
three SMN-targeted therapies and the
global market has grown to $4.5 billion
annually. Our team is making excellent
progress, and we are well positioned for
a successful commercial launch. We
believe we have the right medicine and
the right market and we are executing the
right plan.
Building on the success of SAPPHIRE, we
plan to initiate the Phase 2 OPAL clinical
trial in the third quarter of 2025
to evaluate apitegromab in SMA patients
under two years of age who have been
or are continuing to be treated with any
currently approved SMN therapy. This
trial will expand our efforts to provide
treatment options for SMA as early as
possible for people with SMA. As part of
our efforts to serve a growing number
of patients living with devastating
neuromuscular diseases, we are also
exploring development of apitegromab
in neuromuscular conditions where
progressive muscle weakness is present,
such as Duchenne muscular dystrophy
(DMD), Becker muscular dystrophy,
facioscapulohumeral muscular dystrophy
(FSHD), and amyotrophic lateral
sclerosis (ALS).
Last year, we also entered the next
frontier of our highly selective anti-
myostatin approach by leveraging our
platform to expand into cardiometabolic
disorders including obesity. We were
excited to initiate the Phase 2 EMBRAZE
trial exploring the combination of
apitegromab and GLP-1 receptor
agonists for people living with obesity.
Enrollment for EMBRAZE was completed
in September, and we expect to report
topline data from the trial in the second
quarter of 2025. These outcomes will
inform and guide our clinical development
plans for SRK-439, our highly selective
anti-myostatin program designed for
obesity and cardiometabolic disease,
for which we presented preclinical data
at multiple medical conferences. We
plan to submit an Investigational New
Drug (IND) Application for SRK-439
in the third quarter of 2025. We look
forward to demonstrating the potential
of our industry-leading approach to
selective myostatin inhibition to address
the ongoing challenges that patients
encounter with muscle loss and weakness
when being treated with GLP-1 receptor
agonist therapies for obesity.
As Scholar Rock evolves into a fully
integrated biotechnology company
and we prepare for our first anticipated
drug approval, I would like to express
my gratitude to our shareholders for
their support and trust in our vision, and
to recognize our employees for their
exceptional dedication to our mission of
creating possibilities for patients. I would
also like to sincerely thank the many
patients, families, and investigators who
participated, or are participating, in our
clinical programs.
With the potential for our first FDA-
approved medicine on the horizon, and
as we continue to advance and expand
our promising clinical programs, Scholar
Rock is well-positioned to accelerate
breakthroughs and deliver potentially life-
changing therapies for patients.
Sincerely,
Jay T. Backstrom, M.D., MPH
President & Chief Executive Officer
To Our
Shareholders:
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, 2024
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: 001-38501
SCHOLAR ROCK HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
82-3750435
(State or Other Jurisdiction of
(I.R.S. Employer
Incorporation or Organization)
Identification Number)
301 Binney Street, 3rd Floor
Cambridge, MA 02142
(857) 259-3860
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
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
SRRK
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 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. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒
As of June 30, 2024, the last day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the Common Stock held by non-affiliates of the registrant was
approximately $394.7 million based on the closing price of the registrant’s common stock on June 30, 2024. The calculation excludes shares of the registrant’s common stock held by current executive
officers, directors and stockholders that the registrant has concluded are affiliates of the registrant. This determination of affiliate status is not a determination for other purposes.
As of February 24, 2025, there were 94,676,763 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2024 Annual Meeting of Stockholders, 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 ended December 31, 2024, are incorporated by reference into Part III of this Annual Report on Form 10-K.
□
Page
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
3
PART I
5
5
57
107
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
107
Item 2.
Properties
108
Item 3.
Legal Proceedings
108
Item 4.
Mine Safety Disclosures
108
PART II
109
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity
Securities
109
Item 6.
Reserved
109
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
110
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
121
Item 8.
Financial Statements and Supplementary Data
121
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
121
121
123
123
124
124
124
124
124
124
125
125
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
128
TABLE OF CONTENTS
3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Annual Report”), including the documents incorporated by reference, contains
forward-looking statements within the meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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 are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as
“may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”,
“continue” or the negative of these terms or other comparable terminology. Some of the risks and uncertainties that may
cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-
looking statements include, among others, the following:
●
the success, cost and timing of clinical trials for apitegromab (such as our Phase 2 EMBRAZE clinical trial) and
SRK-181, including the progress, completion, timing of results, and actual results of our clinical trials;
●
the timing, scope, or likelihood of our ability to obtain and maintain regulatory approval from the U.S. Food and
Drug Administration (“FDA”), the European Commission (“EC”) and other regulatory authorities for
apitegromab, and any related restrictions, limitations or warnings in the label of any approval for apitegromab;
●
our success in identifying and executing a development program for our preclinical product candidates, including
SRK-439, SRK-373, SRK-256 and identifying additional product candidates from our preclinical programs and
research pipeline;
●
our success in identifying and executing development programs for additional indications for apitegromab and
SRK-181;
●
the clinical utility of our product candidates and their potential advantages over other therapeutic options;
●
the fact that topline or interim data from our clinical studies may not be predictive of the final or more detailed
results of such study or the results of other ongoing or future studies;
●
the potential benefit of orphan drug exclusivity, Orphan Drug Designation, Fast Track Designation and Rare
Pediatric Disease Designation for apitegromab, SRK-181 and any other of our product candidates that may
receive one or more of these designations;
●
our ability to obtain, generally or on terms acceptable to us, funding for our operations, including funding
necessary to complete further development and, upon successful development, if approved, commercialization of
apitegromab, SRK-181, SRK-439, SRK-373, SRK-256 or any of our future product candidates;
●
our ability to retain our executives and highly skilled technical and managerial personnel, which could be affected
due to any transition in management, or if we fail to recruit additional highly skilled personnel;
●
our expectations regarding our ability to obtain and maintain intellectual property protection for our product
candidates and the duration of such protection and our ability to operate our business without infringing on the
intellectual property rights of others;
●
our ability, through third party manufacturers, to successfully manufacture our product candidates for clinical
trials and for commercial use, if approved;
●
our ability to successfully build a commercial infrastructure to launch and market apitegromab, or otherwise
provide access to apitegromab, if and when it is approved or receives pricing or reimbursement approval;
●
the rate and degree of market acceptance of our product candidates, if approved;
4
●
our ability to establish or maintain collaborations or strategic relationships;
●
our expectations relating to the potential of our proprietary platform technology;
●
the size and growth potential of the markets for our product candidates, and our ability to serve those markets,
either alone or in combination with others;
●
the impact of new laws and regulations or amendments to existing laws and regulations in the United States and
foreign countries;
●
risks associated with the impact of global economic and political developments on our business, including rising
inflation and capital market disruptions, economic sanctions and economic slowdowns or recessions or public
health pandemics;
●
developments and projections relating to our competitors and our industry;
●
our estimates and expectations regarding cash, cash reserves, and expense levels, future revenues, capital
requirements and needs for additional financing, including our expected use of proceeds from our public
offerings, and liquidity sources;
●
our expectations regarding the period during which we qualify as a “smaller reporting company” as defined by
Rule 12b-2 of the Exchange Act; and
●
other risks and uncertainties, including those listed under the caption Part II, Item 1A “Risk Factors”.
The risks set forth above are not exhaustive. Other sections of this report may include additional factors that could
adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing
environment. New risk factors emerge from time to time and it is not possible for management to predict all risk factors,
nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
Investors should also refer to our most recent Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for
future periods and Current Reports on Form 8-K as we file them with the United States Securities and Exchange
Commission (the “SEC”), and to other materials we may furnish to the public from time to time through Current Reports
on Form 8-K or otherwise, for a discussion of risks and uncertainties that may cause actual results, performance or
achievements to differ materially from those expressed or implied by forward-looking statements. We expressly disclaim
any responsibility to update any forward-looking statements to reflect changes in underlying assumptions or factors, new
information, future events, or otherwise, and you should not rely upon these forward-looking statements after the date of
this report.
We may from time to time provide estimates, projections and other information concerning our industry, the general
business environment, and the markets for certain diseases, including estimates regarding the potential size of those
markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates,
forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events,
circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the
information reflected in this Annual Report. Unless otherwise expressly stated, we obtained this industry data, business
information, market data, prevalence information and other data from reports, research surveys, studies and similar data
prepared by market research firms and other third parties, industry, medical and general publications, government data, and
similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been
accurate.
5
PART I
Item 1. Business
I.
Overview
We are a late-stage biopharmaceutical company focused on the discovery, development and delivery of innovative
medicines for the treatment of serious diseases in which signaling by protein growth factors plays a fundamental role. As a
global leader in transforming growth factor beta (“TGFβ”) superfamily biology, our novel understanding of the molecular
mechanisms of growth factor activation enabled us to develop a proprietary platform for the discovery and development of
monoclonal antibodies that locally and selectively target the precursor, or latent, forms of growth factors. By targeting the
signaling proteins at the cellular level and acting in the disease microenvironment, we believe we may avoid the historical
dose-limiting safety challenges associated with inhibiting growth factors for therapeutic effect. We believe our focus on
biologically validated growth factors may facilitate a more efficient development path.
Based on this proprietary and scalable technology platform, we are building a growing portfolio of novel product
candidates with the aim of transforming the lives of patients suffering from a wide range of serious diseases, including
neuromuscular disorders, cardiometabolic disorders, cancer, fibrosis and iron-restricted anemia. We have discovered and
progressed the development of:
●
Apitegromab, an investigational, fully human monoclonal antibody that inhibits myostatin activation by
selectively binding the pro- and latent forms of myostatin in skeletal muscle and is being developed for the
treatment of spinal muscular atrophy (“SMA”). We also believe apitegromab could have potential in the treatment
of other neuromuscular disorders where the inhibition of myostatin may be beneficial.
●
SRK-439, a novel, preclinical, investigational myostatin inhibitor that has high in vitro affinity for pro- and latent
myostatin and maintains myostatin specificity and is being developed for the treatment of cardiometabolic
disorders.
●
SRK-181, an investigational inhibitor of the activation of latent transforming growth factor beta-1 (“TGFβ1”),
that is being developed for the treatment of cancers that are resistant to anti-PD-(L)1 antibody therapies.
●
SRK-373, a novel, preclinical, investigational TGFβ inhibitor that selectively inhibits the activation of latent
TGFβ1 isoform in the context of fibrotic extracellular matrix and that avoids perturbing TGFβ1 presented by cells
of the immune system and is being developed for the treatment of fibrotic diseases.
●
SRK-256, a novel, preclinical, investigational inhibitor that selectively inhibits RGMc or hemojuvelin, the co-
receptor of bone morphogenic protein 6 (“BMP6”) and hence inhibits BMP6 signaling. BMP6 signaling is critical
for iron homeostasis and SRK-256 has wide potential applicability in states of iron-restricted anemias.
●
Additional discovery and early preclinical programs related to the selective modulation of growth factor
signaling.
Our first product candidate, apitegromab, is a highly selective, fully human, monoclonal antibody, with a unique
mechanism of action that results in inhibition of the activation of the growth factor, myostatin, in skeletal muscle.
Apitegromab is being developed as a potential first muscle-targeted therapy for the treatment of SMA. We completed
SAPPHIRE, a pivotal Phase 3 clinical trial to evaluate the efficacy and safety of apitegromab in patients with
nonambulatory Type 2 and Type 3 SMA (which is estimated to represent the majority of the current prevalent SMA patient
population in the U.S. and Europe) and announced positive top-line results in October 2024. The study achieved its
primary endpoint (see “Phase 3 SAPPHIRE Pivotal Trial” below). We submitted a U.S. Biologics License Application
(“BLA”) to the FDA in January 2025 and are planning to submit a European Union marketing authorization application to
the European Medicines Agency (“EMA”) in the first quarter of 2025. If apitegromab is approved, we
6
expect to initiate a commercial product launch in the fourth quarter of 2025 in the United States, with a commercial launch
of apitegromab in Europe to follow.
Apitegromab was evaluated in our Phase 2 TOPAZ proof-of-concept clinical trial for the treatment of patients with Type 2
and Type 3 SMA. Positive 12-month top-line results were initially announced in April 2021. We have subsequently
presented data from the TOPAZ trial over 24-months (2022), 36-months (2023) and 48-months (2024). At 48-months over
90% of TOPAZ patients with nonambulatory Type 2 and 3 SMA receiving a survival motor neuron (“SMN”) therapy
remained on apitegromab treatment and showed sustained clinical benefit, a continued favorable safety profile with no new
safety findings (see “Phase 2 TOPAZ Proof-of-Concept Trial” below). Additionally, we are conducting a long-term
extension study, ONYX, for patients from both the TOPAZ and SAPPHIRE studies, who were receiving apitegromab in
conjunction with an approved SMN therapy. The FDA granted Fast Track designation, Rare Pediatric Disease designation
and Orphan Drug designation to apitegromab for the treatment of SMA in May 2021, August 2020 and March 2018,
respectively. The EMA granted Priority Medicines (“PRIME”) designation in March 2021 and the EC granted orphan
medicinal product designation in December 2018 to apitegromab for the treatment of SMA.
In October 2023, we announced an expansion of our therapeutic focus into cardiometabolic disorders by advancing our
anti-myostatin program with SRK-439, a novel, fully human anti-myostatin monoclonal antibody, for evaluation in
cardiometabolic disorders, including obesity. We are developing SRK-439 towards a potential investigational new drug
application (“IND”) submission in the third quarter of 2025. In 2024, we presented preclinical data at scientific conferences
which support the potential of SRK-439 to increase lean mass and contribute to a favorable body composition in
conjunction with a GLP-1 receptor agonist (“GLP-1 RA”) treatment. To inform the development of SRK-439, in May 2024
we initiated the Phase 2 EMBRAZE proof-of-concept trial, designed to assess the safety and efficacy of apitegromab to
preserve muscle mass in individuals living with obesity and on background therapy of a GLP-1 RA. In September 2024,
we announced that we completed enrollment in the Phase 2 EMRAZE proof-of-concept trial. Top-line results from this trial
are expected in the second quarter of 2025.
We believe that apitegromab has the potential to be the first muscle-targeted therapy that is aimed at improving motor
function in patients with SMA who are receiving an SMN therapy. We have identified multiple other diseases for which the
selective inhibition of the activation of myostatin may offer therapeutic benefit, including additional patient populations in
SMA (such as patients with SMA under 2 years of age) and indications for other neuromuscular disorders beyond SMA.
Our second product candidate, SRK-181, a highly selective inhibitor of the activation of latent TGFβ1, is being developed
for the treatment of cancers that are resistant to checkpoint inhibitor therapies (“CPI therapies”), such as anti-PD-1 or anti-
PD-L1 antibody therapies (referred to together as anti-PD-(L)1 antibody therapies). SRK-181 is being evaluated in our
Phase 1 DRAGON proof-of-concept clinical trial in patients with locally advanced or metastatic solid tumors that exhibit
resistance to anti-PD-(L)1 antibody therapies. We completed enrollment of the DRAGON trial in December 2023 and
continue to treat patients who remain on study. This two-part clinical trial consists of a dose escalation portion (Part A) and
a dose expansion portion evaluating SRK-181 in combination with an approved anti-PD-(L)1 antibody therapy (Part
B). Part B commenced in 2021 and includes the following active cohorts: urothelial carcinoma, cutaneous melanoma, non-
small cell lung cancer, clear cell renal cell carcinoma (“ccRCC”) and head and neck squamous cell carcinoma (“HNSCC”).
Safety, efficacy and biomarker data were presented in June 2024 at the American Society of Clinical Oncology (“ASCO”)
annual meeting and in November 2024 at the Society for Immunotherapy of Cancer (“SITC”) 39th Annual Meeting. The
data showed encouraging responses in heavily pretreated and anti-PD-(L)1 resistant patients across multiple tumor types.
We believe that the DRAGON trial achieved its study objectives by showing objective, durable clinical responses in
patients with ccRCC resistant to PD-1 therapy above what is expected from continuing PD-1 alone. We anticipate that
emerging data from the DRAGON trial will be presented at medical meetings in the future.
Beyond these programs, we continue to discover and develop highly specific monoclonal antibodies to selectively
modulate growth factor signaling. Growth factors are naturally occurring proteins that typically act as signaling molecules
between cells and play a fundamental role in regulating a variety of normal cellular processes, including cell growth and
differentiation. Current therapeutic approaches to treating diseases in which growth factors play a fundamental role involve
directly targeting the active form of the growth factor or its receptor systemically throughout
7
the body. These approaches have suffered from a variety of shortcomings, including lack of pathway selectivity, lack of
target selectivity, and non-localized target inhibition.
Our innovative approach is rooted in our structural biology insights into the mechanism by which certain growth factors are
activated in close proximity to the cell surface. We integrate these insights with sophisticated protein expression,
monoclonal antibody discovery capabilities, and assay development to test the characteristics of our monoclonal
antibodies. We believe our proprietary platform can address the challenges of treating diseases in which growth factors
play a fundamental role by:
●
targeting the natural activation mechanism to prevent activation of the growth factor rather than attempting to
inhibit the growth factor after activation;
●
achieving heightened specificity for the targeted growth factor while minimizing interactions with structurally
similar and related growth factors, thereby potentially reducing the risk of unintended systemic adverse events;
and
●
targeting the disease microenvironment, where we believe we can interfere with the disease process while
minimizing the effects on the normal physiological processes mediated by the same growth factors.
Our structural insights and unique antibody discovery capabilities can be applied to other protein classes beyond growth
factors, with an aim of generating differentiated candidates targeting cell surface receptors such as immune cell receptors or
G-protein coupled receptors, where selectivity remains challenging.
II. Our Approach and Proprietary Platform
Our innovative approach is rooted in our novel understanding of the molecular mechanisms of growth factor activation and
signaling and is designed to discover and develop monoclonal antibody product candidates that can inhibit the activation of
a growth factor with an unprecedented degree of selectivity. Our proprietary platform is designed to generate highly
selective antibodies that target the growth factor’s latent precursor form prior to its activation within the disease
microenvironment, or tissue where it is localized.
Growth factors are naturally occurring proteins that typically act as signaling molecules between cells and play a
fundamental role in regulating a variety of normal cellular processes. Members of the TGFβ superfamily of growth factors,
for example, can mediate diverse biological functions, including cell growth and differentiation, tissue homeostasis,
immune modulation and extracellular matrix remodeling. Growth factors have also been shown to play a fundamental role
in a variety of disease processes. Because of the importance of growth factors in multiple diseases, the pharmaceutical
industry has made many attempts to inhibit growth factors in a variety of therapeutic settings. However, products utilizing
conventional approaches have seen only limited success. Current therapeutic approaches to treating diseases in which
growth factors play a fundamental role involve directly targeting an activated growth factor or its receptor systemically
throughout the body and have suffered from a variety of shortcomings:
●
Lack of pathway selectivity—multiple growth factors often signal through the same or overlapping sets of related
receptors, making it difficult to specifically modulate one pathway over another;
●
Lack of target selectivity—members of the same growth factor superfamily share considerable structural
similarities, making it difficult to achieve specific inhibition of the targeted growth factor; this can result in broad
systemic inhibition that can cause undesirable, and in many cases toxic, side effects; and
●
Lack of disease microenvironment localization—systemic and non-selective inhibition of a growth factor can
block the growth factor’s role in the disease process, but can also simultaneously interfere with its other normal
physiological roles.
Our approach to the discovery and development of growth factor targeted drugs is new and different from traditional
approaches. Our approach of targeting the precursor, or latent forms of growth factors is based on the breakthrough
discovery by the laboratory of our cofounder, Timothy A. Springer, Ph.D. of Harvard Medical School and Boston
Children’s Hospital.
8
Unlike many other proteins that are produced and secreted by cells in a mature, or active, form, many growth factors are
expressed by cells in a latent form. For example, TGFβ1 is produced by cells as a single protein which is then
enzymatically processed by the cells into two distinct and physically separated domains — the mature growth factor and
the remaining portion of the original protein, referred to as the prodomain — which remain associated as part of a complex.
This secreted complex is latent, or inactive, and must first be activated to carry out its normal function in a highly localized
tissue or disease microenvironment. In a seminal peer-reviewed publication in 2011, Dr. Springer elucidated a new
understanding of the mechanism of activation of the latent growth factor complex among members of the TGFβ
superfamily by solving a high-resolution x-ray crystal structure of this latent form of TGFβ1 (as illustrated in the graphic
below).
Structural representation of the latent form of TGFβ1 wherein the prodomain wraps around the active growth factor
This research explained at a molecular level why the secreted form of TGFβ1 is inactive. The prodomain, though
physically separated from the mature growth factor domain, forms a “cage” around the active form of TGFβ1, blocking the
growth factor from signaling through its receptor. Only when the cage is “unlocked” by a precursor activation event can the
growth factor be released and mediate its effects in the local microenvironment. Dr. Springer further hypothesized that this
phenomenon likely holds true for most members of the TGFβ superfamily, though the exact nature of the activation event,
such as integrin binding or enzymatic cleavage, may differ among members of the superfamily. Importantly, while many
growth factors are structurally very similar, their cages are structurally diverse, and this provides the basis for our approach
to improved selectivity.
We believe that there are several important advantages to our approach of targeting the precursor, or latent, forms of growth
factors over conventional therapeutic approaches, which inhibit mature growth factors or their receptors systemically
throughout the body:
●
targeting the latent precursor allows intervention at the site of action, within the microenvironment of the diseased
tissue. Because our antibodies specifically bind the latent forms of the growth factors, we can prevent the
activation of the growth factors. Given that many growth factors act primarily within the microenvironment
where they are activated, as opposed to exerting their effects systemically, we believe that prevention of
9
activation is a preferred mode of action for achieving improved outcomes. In contrast, traditional approaches to
targeting growth factor signaling are focused on inhibiting the growth factor after it has been activated and
released systemically;
●
targeting the latent precursor allows heightened selectivity among structurally related growth factors, which we
believe could limit off target effects. For example, two members of the TGFβ superfamily, myostatin and GDF11,
are 90% identical in their growth factor domains. Therefore, many of the traditional inhibitors that target
myostatin also inadvertently inhibit GDF11. Similarly, most of the known inhibitors of TGFβ are pan inhibitors,
meaning that they do not distinguish among the three isoforms of TGFβ, namely, TGFβ1, TGFβ 2 and TGFβ3.
Despite the sequence similarities of the active forms of these growth factors, their cages are structurally diverse.
We have been able to harness this diversity to generate antibodies that specifically bind the inactive growth factor
precursors and inhibit activation of a particular growth factor of interest, but not others that are closely related;
and
●
targeting these precursor forms in the disease microenvironment, we believe we can interfere with the disease
process while minimizing the effects on the normal physiological processes mediated by growth factors.
To enable our novel approach, we have built a proprietary platform that is rooted in our structural biology insights into
activation of latent growth factor precursors. We integrate these insights with sophisticated protein expression, monoclonal
antibody discovery capabilities, and assay development to test the characteristics of our monoclonal antibodies. In addition
to this know-how, our proprietary platform is covered by patents projected to expire well into the 2030s, excluding any
patent term adjustments or extensions. The key elements of our proprietary platform include the following:
●
focusing on growth factor targets with a high degree of evidence implicating them in a disease process or
processes;
●
utilizing structural biology insights to generate recombinant versions of the latent forms of targeted growth
factors, as well as versions of closely related growth factors utilizing proprietary technology and in-house
expertise;
●
developing proprietary assays in which we are able to recapitulate the natural activation mechanism that these
growth factors undergo in the human body;
●
designing sophisticated selection strategies utilizing recombinant antibody libraries such as phage and yeast
display that allow us to identify monoclonal antibodies, a well-established therapeutic modality, that can
modulate the activation of these growth factors without having an effect on the activation of other closely related
growth factors; and
●
optimizing the output of such selections to ensure that our product candidates have the appropriate characteristics
for manufacturability and further development.
Using our innovative approach and proprietary platform, we are creating a pipeline of novel product candidates that
selectively modulate the activation of growth factors implicated in a variety of serious diseases. Our structural insights and
unique antibody discovery capabilities can also be applied to other protein classes beyond growth factors, with an aim of
generating differentiated candidates targeting cell surface receptors such as immune cell receptors or G-protein coupled
receptors, where selectivity remains challenging.
III. Our Expertise
We have assembled an experienced management team, board of directors, and scientific founders who bring extensive
industry experience to our company. The members of our team have deep experience in discovering, developing and
commercializing therapeutics, having worked at companies such as: Acceleron Pharma, Inc.; Alnylam Pharmaceuticals,
10
Inc.; AMAG Pharmaceuticals, Inc.; Celgene Corporation; Foundation Medicine, Inc.; and Novartis Pharmaceuticals. We
were founded by internationally respected scientists, Drs. Timothy A. Springer and Leonard I. Zon of Harvard Medical
School and Boston Children’s Hospital.
IV. Our Strategy
Using our proprietary platform to unlock the therapeutic potential of targeting growth factor signaling in the disease
microenvironment, our goal is to deliver novel therapies to underserved patients suffering from a wide range of serious
diseases, including neuromuscular disorders, cardiometabolic disorders, cancer, fibrosis and iron-restricted anemia. To
achieve this goal, we plan to:
●
Continue advancing apitegromab in SMA to characterize its potential to offer meaningful benefit to patients.
We are developing our first product candidate, apitegromab, for the treatment of patients with SMA. By targeting
the latent form of myostatin and specifically inhibiting its activation in muscle, we believe apitegromab holds
considerable promise in improving motor function in patients with SMA. We recently completed SAPPHIRE, a
pivotal Phase 3 trial to evaluate the efficacy and safety of apitegromab in patients with nonambulatory Type 2 and
Type 3 SMA being treated with SMN therapy (e.g., therapies that upregulate the expression of SMN, such as
SMN splicing modulators). In October 2024, the Company announced positive top-line results that showed the
study achieved its primary endpoint. See “Phase 3 SAPPHIRE Pivotal Trial” below.
●
Identify the next indication(s) for apitegromab. Our goal is to maximize the value of apitegromab by exploring
its potential across SMA types and in other myostatin-related indications. We believe that the role of apitegromab
as a muscle-targeted therapy could have broad potential beyond SMA, spanning multiple muscle disorders in
which muscle atrophy is a key feature of disease pathogenesis. There is also increasing recognition of the
important role of skeletal muscle in modulating metabolic physiology, highlighting a potential therapeutic
opportunity for myostatin blockade. We have efforts underway to evaluate these opportunities, including
preclinical and translational research, development path assessments, and commercial evaluations.
●
Leverage anti-myostatin expertise to expand into cardiometabolic disorders. Muscle plays a key role in
metabolic functions and energy homeostasis. Leveraging the effect of anti-myostatin on increasing muscle mass
and our expertise in selectively targeting anti-myostatin, we have been developing myostatin-selective inhibitors
to address cardiometabolic disorders, including obesity. Our platform has generated multiple anti-myostatin
antibodies, including apitegromab, that selectively target pro- and latent forms of myostatin. SRK-439, a novel
anti-myostatin antibody in preclinical development by us, has attractive properties, including high in vitro affinity
for pro- and latent myostatin, maintenance of myostatin specificity (i.e., no GDF11 or Activin-A binding), and
robust in vivo efficacy in preclinical models. We believe the selectivity of these product candidates enables a
favorable risk-benefit profile for patients with cardiometabolic disorders.
●
Advance our TGFβ1 product candidate, SRK-181, through clinical proof-of-concept. Our second antibody
program is focused on the discovery and development of potent and selective inhibitors of the activation of latent
TGFβ1. We believe that the selectivity of SRK-181, as observed in preclinical studies, is a significant
differentiator in our efforts to address the historical dose-limiting safety challenges resulting from non-selectively
inhibiting multiple isoforms that activate the TGFβ signaling pathway. We completed enrollment of the Phase 1
DRAGON proof-of-concept clinical trial of SRK-181 in patients with locally advanced or metastatic solid tumors
that are experiencing resistance to anti-PD-(L)1 antibody therapy in December 2023 and continue to treat patients
who remain on study. Data from the DRAGON trial supports proof-of-concept for SRK-181 in heavily pre-
treated patients with ccRCC resistant to anti-PD-(L)1 therapy. Additionally, we believe that SRK-181 has the
potential to address unmet medical needs in other oncology indications, and we will endeavor to maximize the
value of this product candidate.
●
Continue to leverage our proprietary platform to expand our pipeline beyond current lead programs. We will
continue to leverage and expand our proprietary platform to selectively target the activation of additional growth
factors, both within and beyond the TGFβ superfamily. Given the established role of signaling by
11
protein growth factors in numerous diseases, we believe that these efforts could result in new opportunities to
treat diseases with unmet medical need. In order to support our pipeline expansion and intention to be the leader
in the field of growth factor-targeted drug development, we are investing in the technologies supporting our
proprietary platform. We have designed a proprietary, state of the art, antibody display library to more efficiently
identify differentiated candidate antibodies. Furthermore, we believe that our structural insights have applicability
beyond growth factor activation to include other cell signaling mechanisms.
We believe that additional product candidates in the TGFβ portfolio have the potential to address other disorders
associated with increased TGFβ signaling, including tissue and organ fibrosis. To advance the discovery and
development of selected inhibitors originating from our TGFβ program that we believe have the potential to
address unmet medical needs in non-oncology indications, we entered into a three-year fibrosis-focused
collaboration with Gilead Sciences, Inc. (“Gilead”) in 2018. At the conclusion of the agreement in January 2022,
the rights to the respective antibodies reverted to us. We have identified a suite of anti-fibrotic antibodies with
novel selectivity profiles that were discovered over the course of the collaboration including those which may
have therapeutic potential for the treatment of organ fibrosis by inhibiting TGFβ1 function in connective tissue
while having no impact on the activation or signaling of TGFβ1 in the immune system. We plan to continue the
advancement of these assets as part of our growing preclinical pipeline.
In addition, using our structural insight, we have identified modulators of BMP6 (a TGFβ superfamily growth
factor) by selectively inhibiting its co-receptor RGMc or hemojuvelin which is required for activation. BMP6
functions as a critical control point in iron modulation via regulation of hepcidin. Traditional approaches to
inhibiting the signaling of BMP6 systemically would likely perturb the numerous different physiological
processes in which BMP6 is involved. Our approach could provide the potential for tissue specific modulation of
BMP signaling and iron regulation.
●
Selectively seek strategic collaborations to maximize the value of our proprietary platform and pipeline. Given
the potential of our proprietary platform to generate novel product candidates that could treat a wide variety of
diseases, we believe that we can maintain in-house discipline with respect to our key development and
commercialization efforts, while at the same time maximizing the full potential of our proprietary platform for
other disease areas and indications. As a result, we may seek additional strategic collaborations around certain
targets, product candidates or disease areas that we believe could benefit from the resources of either larger
biopharmaceutical companies or those specialized in a particular area of relevance.
V.
Our Pipeline
Using our innovative approach and proprietary platform, we are creating a differentiated pipeline of novel product
candidates that selectively inhibit the activation of latent growth factors believed to be important drivers in a variety of
diseases, including neuromuscular disorders, cardiometabolic disorders, cancer, fibrosis, and iron-restricted anemia. Our
proprietary platform includes (i) our know-how enabling expression and purification of latent protein growth factor
complexes in quantity and quality sufficient to enable antibody discovery; (ii) strategies to identify rare antibodies that
selectively bind targeted latent protein growth factor complexes; and (iii) assays developed by us to test the highly selective
antibodies’ ability to modulate the activation of specific latent growth factors. We have worldwide rights to our proprietary
platform and all of our product candidates.
The following summarizes our pipeline programs:
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VI. Our Product Candidates
a.
Latent Myostatin
Utilizing our proprietary platform, we targeted the precursor form of myostatin and generated two novel antibodies, each
with a design tailored for specific patient populations: apitegromab for SMA and SRK-439 for obesity. Both antibodies are
novel, highly selective inhibitors of the activation of myostatin from its inactive precursor in skeletal muscle, where
myostatin resides and signals upon activation. While mature myostatin is 90% identical in the growth factor domain to its
most closely related TGFβ superfamily member, GDF11, the prodomain that cages mature myostatin and keeps it in its
latent precursor form is only 52% identical to the GDF11 prodomain.
In preclinical studies, we have shown that apitegromab selectively avoids interaction with other closely related growth
factors that play distinct physiological roles. We observed multi-fold increases in serum latent myostatin levels in mouse
models of both early and late SMN restoration and that apitegromab promoted increased strength (as measured by torque
generation) in SMN-deficient mice. In a Phase 1 clinical trial designed to evaluate the safety, tolerability, and
pharmacokinetic (“PK”) /pharmacodynamic (“PD”) profile of apitegromab in adult healthy volunteers, there were no dose-
limiting toxicities and we observed robust and sustained target engagement following administration of apitegromab.
SRK-439 has also shown robust preclinical efficacy, as detailed in “Cardiometabolic Disorders – SRK-439 (inhibitor of
latent myostatin)” section below. We believe that these results, from two diet-induced obesity (“DIO”) mice models
provide the scientific rationale and support the hypothesis that inhibition of myostatin in combination with GLP-1 RA-
driven weight loss may lead to retention of lean muscle.
i. Role of Myostatin
Myostatin, also known as growth differentiation factor 8 (“GDF8”), is a member of the TGFβ superfamily and is produced
by skeletal muscle cells. As with other tissues and organs in the human body, healthy muscle homeostasis is maintained by
a proper balance of growth signals, or anabolic stimuli, and breakdown signals, or catabolic stimuli. In humans, the
anabolic stimuli that drive muscle growth are proteins, such as the human growth hormone and the insulin
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like growth factor 1. In contrast, myostatin is a catabolic agent that functions as a negative regulator of muscle mass.
Animals lacking functional myostatin genes, or its receptor, have larger muscles and increased strength compared to
normal animals. Such animals are otherwise healthy and live a normal lifespan.
ii. Traditional Approaches and Challenges
Because of its role in regulating muscle mass, myostatin has been a popular target for a variety of drug development
programs. There have been two general approaches to trying to inhibit the signaling of myostatin in humans. The first is to
develop an antibody, or an antibody-like molecule, that binds to mature myostatin in circulation and prevents its ability to
signal through its receptor, the ActRIIb receptor. The second is to develop an antibody to the ActRIIb receptor itself, or a
soluble decoy of the ActRIIb receptor, with a goal of preventing myostatin signaling through its receptor. Both of these
approaches, however, have significant limitations.
As a member of the TGFβ superfamily, mature myostatin shares considerable structural similarity with other family
members. For example, the active form of myostatin and its most closely related family member, GDF11, are 90% identical
in the growth factor domains, making it extremely challenging to identify antibodies that are truly specific for myostatin
and do not interfere with other targets. Moreover, attempts to interrupt myostatin signaling through its receptor are
complicated by the fact that the ActRIIb receptor, in addition to being the receptor for myostatin, is also the receptor for a
number of related family members, including GDF11, activins and other growth factors. Attempts to block the signaling of
myostatin by targeting its receptor therefore inevitably interfere with the signaling of these other growth factors, many of
which are involved in normal biological processes unrelated to muscle.
There are multiple examples of clinical trials demonstrating the risk of non-selective inhibition of myostatin. For example,
in a Phase 2 clinical trial in Duchenne Muscular Dystrophy reported in 2017, a soluble decoy of the ActRIIb receptor
resulted in bleeding side effects believed by the sponsor to be unrelated to inhibition of myostatin signaling, but instead
related to the inhibition of signaling by certain other members of the TGFβ superfamily known to be important in the
maintenance of vascular integrity. These side effects resulted in termination of the clinical program. More recently, results
from a clinical trial were reported showing that treatment of patients with an antibody to the ActRIIb receptor resulted in
suppression of the levels of follicle stimulating hormone, an important reproductive hormone. In this clinical trial, the
sponsor believed that these effects were likely related to inhibition of signaling through the ActRIIb receptor.
iii. Spinal Muscular Atrophy: Apitegromab (inhibitor of latent myostatin activation)
We believe that the therapeutic potential for apitegromab in improving motor function is more optimal when a given
disease bears certain features, including neuromuscular disorders with muscle atrophy as a key component of disease
pathogenesis, presence of intact or partially intact muscle innervations, absence of significant muscle structural
abnormalities, and where validated clinical outcome measures are available to assess muscle function in a clinical trial.
SMA is a genetic disorder with onset commonly in childhood and where there is a significant but incomplete loss of motor
neurons, ensuring at least some intact signaling between skeletal muscle and nerve. In addition, generally, there are also no
apparent structural abnormalities in the skeletal muscle. The partial loss of motor neurons causes substantial muscle
atrophy that in turn leads to many of the motor function impairments. Validated outcome measures, such as the
Hammersmith Functional Motor Scale Expanded (“HFMSE”), are available for SMA clinical trials that are relevant to
muscle function. These endpoints therefore measure an outcome that may be more likely to be directly affected by
apitegromab.
Key disease features of SMA are aligned with Scholar Rock’s guiding principles for neuromuscular indication selection
for apitegromab
We are developing apitegromab as a selective muscle-targeted therapy for the treatment of SMA. Myostatin, a member of
the TGFβ superfamily of growth factors, is expressed primarily in skeletal muscle cells and the absence of its gene is
associated with an increase in muscle mass and strength in multiple animal species. We believe that inhibition of the
activation of myostatin may promote a clinically meaningful increase in motor function.
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Apitegromab was evaluated in our Phase 2 TOPAZ proof-of-concept clinical trial for the treatment of patients with Type 2
and Type 3 SMA and positive 12-month top-line results were announced in April 2021. We have subsequently presented
data from the TOPAZ trial over 24-months (2022), 36-months (2023) and 48-months (2024). See “Phase 2 TOPAZ Proof-
of-Concept Trial” below. In October 2024, we announced positive top-line results from SAPPHIRE, a pivotal Phase 3
clinical trial to evaluate the efficacy and safety of apitegromab in patients with nonambulatory Type 2 and Type 3 SMA
receiving SMN therapy. We reported that the study achieved its primary endpoint. See “Phase 3 SAPPHIRE Pivotal Trial”
below. We submitted a BLA to the FDA in January 2025 and requested priority review, and we plan to submit a marketing
authorization application to the EMA in the first quarter of 2025. Assuming marketing approval is obtained, we plan to
commercially launch apitegromab in the U.S. in the fourth quarter of 2025 with a commercial launch of apitegromab in
Europe to follow.
We believe that apitegromab has the potential to be the first muscle-targeted therapy that is aimed at improving motor
function in patients with SMA who are receiving an SMN therapy. We have identified multiple other diseases for which the
selective inhibition of the activation of myostatin may offer therapeutic benefit, including additional patient populations in
SMA (such as patients under the age of two with SMA and ambulatory patients with SMA) and indications for other
neuromuscular disorders beyond SMA.
1. Background on SMA
SMA is a rare, and often fatal, genetic disorder that typically manifests in young children. It is characterized by the loss of
motor neurons, atrophy of the voluntary muscles of the limbs and trunk and progressive muscle weakness. Disease severity
in SMA can range from patients who die soon after birth to patients who live into adulthood with varying degrees of
morbidity. The underlying pathology of SMA is caused by insufficient production of a protein known as “survival of motor
neuron,” or SMN. The SMN protein, essential for the survival of motor neurons, is encoded by two genes, SMN1 and
SMN2.
●
SMN1 genes produce the majority of functional SMN protein; healthy individuals have one or two functional
copies of SMN1, while patients with SMA have mutations in or deletions of both copies of the gene.
●
SMN2 genes produce only 10% to 20% of functional SMN protein and an individual’s copy number of the SMN2
gene can range from zero to eight. In SMA patients, the number of SMN2 genes present in their genome is
correlated with disease onset and severity; patients who have a lower number of SMN2 gene copies generally
develop earlier and more severe SMA, because they produce less SMN protein.
2. SMA Natural History and Epidemiology
SMA, the most common monogenic cause of death in infants, is a rare neuromuscular disorder. An estimated 20,000
patients suffer from SMA in the U.S. and Europe alone. Patients with SMA can be categorized as one of four types, Type 1
through Type 4. The majority of SMA patients currently living in the U.S. and Europe are estimated as having Type 2 or
Type 3 disease, although it should be noted that this percentage may evolve over time and the definitions of traditional
SMA types are themselves evolving. Nonambulatory Type 2 and Type 3 SMA, as they have traditionally been defined, is
the initial focus of investigation in our SMA development program.
3. Unmet Medical Need in SMA
We view the emerging landscape for the development of novel medicines for SMA as being classified into two distinct but
complementary therapeutic strategies: 1) SMN therapy (also known as SMN corrector therapy or SMN-directed therapy)
and 2) muscle-targeted therapy. Despite progress in the development of SMN therapies, a high unmet medical need to
improve motor function remains. We believe that the advancement of muscle-targeted therapy will be necessary to address
this important gap.
SMN therapies are aimed at addressing the SMN deficiency to prevent further motor neuron deterioration thus modifying
the course of disease. This category includes antisense oligonucleotide and small molecule approaches to increase SMN2
expression as well as gene therapy to deliver the SMN1 gene. Early intervention at a very young age is therefore thought to
be essential to prevent significant motor functional deterioration. However, for the vast majority of
15
SMA patients living today, this early intervention window has been missed, and such individuals suffer from severe
functional impairment. Thus, regardless of the precise nature or mechanism of action for any given SMN therapy, we
believe that most SMA patients will continue to experience clinically significant functional deficits.
To address this need, apitegromab is being developed as a potential first muscle-targeted therapy for SMA. We envision the
potential for apitegromab to be standard use with any SMN therapy in patients with Type 2 and 3 SMA in order to drive
absolute increases in functional performance over baseline.
4. Clinical Development Overview
We completed SAPPHIRE, a pivotal Phase 3 clinical trial to evaluate the efficacy and safety of apitegromab in patients
with nonambulatory Type 2 and Type 3 SMA being treated with SMN therapy. In October 2024, the Company announced
positive top-line results that showed the study achieved its primary endpoint.
Beyond Type 2 and Type 3 SMA, we believe that apitegromab has the potential for therapeutic benefit in patients with
either more or less severe forms of SMA, as well as pre-symptomatic patients receiving early intervention with a SMN
therapy.
Our aim is to develop apitegromab for the broadest group of patients suffering from SMA. The FDA granted Fast Track
designation, Rare Pediatric Disease designation and Orphan Drug designation to apitegromab for the treatment of SMA in
May 2021, August 2020 and March 2018, respectively. The EMA granted PRIME designation in March 2021 and the EC
granted orphan medicinal product designation in December 2018 to apitegromab for the treatment of SMA.
5. Phase 3 SAPPHIRE Pivotal Trial
On October 7, 2024, we announced positive top-line data from our Phase 3 SAPPHIRE clinical trial evaluating the efficacy
and safety of apitegromab, an investigational muscle-targeted therapy, in patients with SMA.
SAPPHIRE was a randomized, double-blind, placebo-controlled, Phase 3 clinical trial that evaluated the safety and
efficacy of apitegromab in nonambulatory patients with Types 2 and 3 SMA who are receiving current standard of care
therapies (either nusinersen or risdiplam). SAPPHIRE enrolled 156 patients ages 2–12 years old in the main efficacy
population. These patients were randomized 1:1:1 to receive either apitegromab 10 mg/kg, apitegromab 20 mg/kg, or
placebo by intravenous infusion every 4 weeks. An exploratory population that enrolled 32 patients ages 13–21 years old
was also evaluated. These patients were randomized 2:1 to receive either apitegromab 20 mg/kg or placebo.
The study achieved its primary endpoint, demonstrating a statistically significant and clinically meaningful improvement
for apitegromab compared to placebo in motor function as measured by the HFMSE in SMA patients on chronic dosing of
standard of care therapies (either nusinersen or risdiplam). Based upon the similar pharmacological profiles of the 20
mg/kg and 10 mg/kg doses of apitegromab, the statistical analysis plan was prespecified to analyze both the combined dose
(10 mg/kg and 20 mg/kg) and the 20 mg/kg dose, each compared to placebo, as the primary analysis. Statistical
significance was achieved per the prespecified statistical analysis plan (Hochberg multiplicity adjustment) for the primary
analysis where the p-value needs to be ≤0.025 if only one prespecified analysis crosses the statistical significance boundary
of ≤ 0.05.
●
In the main efficacy population (ages 2–12), the mean difference in change from baseline in HFMSE was 1.8
points (p =0.0192) for all patients receiving apitegromab 10 mg/kg and 20 mg/kg (n=106) compared to placebo
(n=50). Patients receiving 20 mg/kg of apitegromab (n=53) showed a 1.4 point mean difference compared to
placebo (p=0.1149).
●
The prespecified analysis of the 10 mg/kg dose showed that patients receiving 10 mg/kg of apitegromab (n=53)
showed an improvement of 2.2 points (nominal p=0.0121) compared to placebo.
●
Based upon PK/PD data from the SAPPHIRE trial, similar levels of target engagement were observed for the 10
mg/kg and 20 mg/kg dose groups.
Motor function outcomes were meaningful and consistent across the main efficacy population and in the ages 13–21
exploratory population, and favored apitegromab (n=22) compared to placebo (n=10).
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The table below summarizes the changes from baseline in HFMSE total score at month 12 across the various dose and age
groups studied in SAPPHIRE.
Change from Baseline in HFMSE Total Score at Month 12*
Abbreviations: CI, Confidence Interval; LS, Least Squares.
*n values at 12-month endpoint
30.4% of patients receiving apitegromab in the main efficacy population (ages 2-12) had ≥3 point improvement in HFMSE
at Month 12 versus 12.5% of patients on placebo, as shown below.
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Proportion of Patients With ≥3 Point Improvement at Month 12 in HFMSE
Proportion of patients achieving ≥3 Point Improvement in HFMSE was higher for apitegromab vs. placebo in combined dose (odds ratio 3.0, p=0.0256)
Abbreviation: SOC = standard of care.
Patients receiving apitegromab in the main efficacy population (ages 2–12) demonstrated early motor function
improvement compared to placebo from the first measured time point at 8 weeks, and clinical benefit expanded at 52
weeks as measured by HFMSE, as shown below.
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HFMSE Improvement vs. Placebo in SAPPHIRE
Abbreviations: CI=Confidence Interval; HFMSE=Hammersmith Functional Motor Scale Expanded; LS=Least Squares; SOC=standard of care.
Treatment with apitegromab was well-tolerated across all age groups. There were no clinically relevant differences in the
adverse event profile by dose, 10 mg/kg versus 20 mg/kg. No new safety findings were observed in the SAPPHIRE clinical
trial; the profile was consistent with that observed in the Phase 2 TOPAZ clinical trial, including an extension study which
had over four years of treatment as of the cut-off date. Serious adverse events (“SAEs”) were consistent with the
underlying disease and the current standard of care received by patients; no SAEs were assessed as related to apitegromab.
There were no study drug discontinuations due to adverse events. The most common adverse events were pyrexia,
nasopharyngitis and cough, observed in 29.2%, 24.5% and 24.5% of patients in the main efficacy population (10 mg/kg
and 20 mg/kg combined), respectively. The table below summarizes the adverse events observed in the trial.
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Summary of Adverse Events in SAPPHIRE
We are also continuing our long-term extension study, ONYX, for patients from both the TOPAZ and SAPPHIRE studies,
who are receiving apitegromab in conjunction with current standard of care. Following trial completion, 98% of
SAPPHIRE patients (185/188) enrolled in the ONYX open-label expansion study.
6. Phase 2 TOPAZ Proof-of-Concept Trial
We completed enrollment in our Phase 2 TOPAZ proof-of-concept trial of apitegromab in SMA in January 2020. TOPAZ
was a Phase 2 active treatment study evaluating the safety, efficacy, PK, and PD of apitegromab 2 and 20 mg/kg in 58
patients ages 2 to 21 years old with Type 2 and Type 3 SMA (nonambulatory and ambulatory). One patient discontinued
from the 12-month treatment period for reasons that were determined to be unrelated to apitegromab treatment. All
remaining patients completed the 12-month treatment period and opted into the extension period.
The clinical trial consisted of three distinct cohorts of patients with Type 2 or Type 3 SMA and evaluated the safety and
efficacy of apitegromab over a 12-month treatment period. All patients in the clinical trial received apitegromab dosed
every four weeks (Q4W) either as a monotherapy or in conjunction with an approved SMN therapy. The primary efficacy
objectives evaluated in the TOPAZ trial, HFMSE and Revised Hammersmith Scale (“RHS”), are clinically meaningful
outcome measures validated for SMA. The HFMSE is a validated measure for the assessment of gross motor function in
SMA, while the RHS is a revised version and used for ambulatory patients in TOPAZ.
Results of the primary analysis showed that improvement in motor function, as measured by RHS or HFMSE, was
observed at Month 12 in the majority of patients, regardless of age, SMA type, or time of SMN therapy initiation
(Crawford Neurology 2024). Ambulatory patients ages 5 to 21 years old showed stabilization in RHS scores over the 12
months of treatment, while nonambulatory patients showed overall improvement. Substantial improvement in motor
function, a mean improvement of 6.2 points for HFMSE total score at Month 12, was observed in Cohort 3, with dose
response between those randomized to 20 mg/kg and 2 mg/kg (7.1 points and 5.3 points, respectively).
Treatment with apitegromab was well tolerated. Incidence and severity of adverse events were consistent with the
underlying patient population and SMN therapy. The most frequently reported treatment-emergent adverse events included
headache (24%), pyrexia (22%), upper respiratory tract infection (22%), cough (22%), and nasopharyngitis (21%). Five
patients experienced a serious treatment-emergent adverse event, all assessed by the respective trial investigator as
unrelated to apitegromab.
In August 2024, the Company reported that long-term apitegromab data continued to show sustained motor function
benefit over 48 months (Crawford WMS 2024). Over 90 percent of nonambulatory patients remained on treatment in the
extension study over 48 months. Treatment-emergent adverse events (“TEAEs”) were consistent with previous reports at
12 months, with no new findings.
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7. Phase 1 Healthy Volunteer Clinical Trial Results
The randomized, double-blind, placebo-controlled, first-in-human, Phase 1 clinical trial was designed to evaluate the safety
and tolerability, immunogenicity, PK, and PD of IV administered apitegromab in adult healthy volunteers. A total of 66
subjects were enrolled, including 40 subjects in the single ascending dose (“SAD”) and 26 subjects in the multiple
ascending dose portions of the study. Full results from the Phase 1 clinical trial were presented at the Cure SMA Annual
Conference in June 2019.
Safety and immunogenicity results. Apitegromab was shown to be well-tolerated with no apparent safety signals. There
were no dose-limiting toxicities identified up to the highest tested dose of 30 mg/kg, treatment-related serious adverse
events or hypersensitivity reactions. Immunogenicity was assessed by anti-drug antibody testing, and all subjects tested
negative.
Pharmacokinetics and pharmacodynamics results. Apitegromab displayed a PK profile generally consistent with that
commonly observed with monoclonal antibodies. Drug exposure was dose proportional, and the serum half-life was
approximately 23 to 33 days across the apitegromab dose groups. The findings supported the investigation of a once every
4-week dosing regimen in the Phase 2 TOPAZ clinical trial.
Mean serum concentrations of latent myostatin in the SAD were < 20 ng/ml in the pre-treatment baselines for apitegromab
treated subjects as well as in placebo subjects throughout the study. Following placebo treatment, there was no meaningful
change in the latent myostatin biomarker concentrations. Following single doses of apitegromab at dose levels of 3 mg/kg
or greater, marked increases in latent myostatin biomarker concentrations in the serum, by at least an order of magnitude,
were observed following apitegromab treatment. This finding demonstrates successful target engagement and provides
initial proof-of-mechanism in humans of our therapeutic approach of targeting the latent form of growth factors. The
observation also corroborates our biological understanding that the vast majority of drug target (pro and latent forms of
myostatin) resides within skeletal muscle rather than within the systemic circulation.
21
Apitegromab engages latent myostatin in Phase 1 clinical trial subjects
8. Apitegromab in Other Disorders Where the Inhibition of Myostatin May Be Beneficial
We see potential for apitegromab broadly across SMA (such as patients under the age of two with SMA and ambulatory
patients with SMA) and our intention is to further investigate this potential. We also believe that the role of apitegromab as
a muscle-targeted therapy has broad potential beyond SMA, spanning a number of muscle disorders where muscle atrophy
is a key component of disease pathogenesis. In some settings, we believe that disease-stabilizing therapy may be necessary
to address the underlying defect, which can then be complemented by the potential motor function-building benefit of
apitegromab. In settings in which the defect may be less severe and/or the disease may have a slower rate of progression,
apitegromab may have the potential to serve as a monotherapy.
Based on this evidence, we believe a wide range of potential therapeutic applications may be envisioned for apitegromab.
We are considering the investigation of apitegromab in multiple indications beyond SMA and have efforts underway to
evaluate these opportunities (including preclinical and translational research, clinical development and regulatory path
assessments, and commercial assessments).
iv. Cardiometabolic Disorders – SRK-439 (inhibitor of latent myostatin)
1. The Current State of Obesity and Obesity Treatment
Obesity is now recognized as a top global public health issue, representing a large market with growing numbers: By the
year 2030, it’s estimated that obesity will affect over 1 billion adults and over 250 million children and adolescents. This is
a costly chronic disease, associated with more than $170 billion in excess costs annually in the US given serious
comorbidities associated with obesity primarily cardiometabolic including cardiovascular disease and type 2 diabetes.
22
The GLP-1 RAs, and other incretin therapies, have been highly effective in reducing overall weight, but that weight loss
includes a significant amount—an estimated 25-40%—of lean muscle mass loss as well. Importantly, there is rebound
weight gain upon discontinuation of treatment that is primarily fat with lean muscle mass lagging behind. In addition to the
weight gain rebound, patients taking GLP-1 RA therapies have experienced issues with tolerability that influence the
duration of treatment and can lead to high rates of discontinuation for these therapies.
2. The Role of Muscle and The Opportunity for Myostatin Inhibition
Muscle plays a key role in metabolic functions and energy homeostasis, and given that important role, we believe that
maintaining lean muscle mass is essential for healthy and sustainable weight loss management. The preservation of lean
mass has many benefits for overall health above and beyond maintaining strength, especially in the setting of obesity with
associated co-morbidities. Specifically, muscle is a metabolic organ and increases basal metabolic rate, enhances glucose
uptake, enhances insulin sensitivity, and given the cross talk between adipose tissue and muscle, reduces visceral body fat.
All of these functions are important for healthy weight loss management.
The increasing recognition of the important role of skeletal muscle in modulating metabolic physiology highlights a
potential therapeutic opportunity for myostatin blockade. For example, data emerging from our preclinical experiments
support the hypothesis that blockade of the myostatin pathway has the potential to reduce the mass of visceral fat, a
significant driver of cardiometabolic pathophysiology. Excessive fat mass and metabolic abnormalities have been observed
in many muscle atrophy states, such as SMA and spinal cord injury. More broadly, reducing visceral fat mass, or improving
body compositions (e.g., enhanced muscle-to-fat ratios), may be a potential therapeutic strategy to address a wide range of
disorders, such as non-alcoholic steatohepatitis (“NASH”), diabetes, and obesity.
3. SRK-439: A Novel Anti-myostatin Antibody for the Treatment of Obesity
In addition to our work to advance apitegromab in SMA, we have leveraged our expertise in anti-myostatin and its effect
on increasing muscle mass to develop myostatin-selective inhibitors for cardiometabolic disorders, including obesity.
SRK-439, a novel anti-myostatin antibody developed by Scholar Rock, has attractive properties that we believe make it
specifically suited for the patient population with obesity. These properties include high in vitro affinity for pro- and latent
myostatin, maintenance of myostatin specificity (i.e., no GDF11 or Activin-A binding), and a developability profile,
including suitability for subcutaneous dosing and a low dosing volume. We believe the selectivity of these antibodies
enables a favorable risk-benefit profile for patients with cardiometabolic disorders.
In addition to these properties, SRK-439 has shown robust preclinical efficacy. In two models of DIO mice, SRK-439
maintained lean mass when combined with a GLP-1 RA therapy, either semaglutide or liraglutide. In both cases, adding
SRK-439 to semaglutide or liraglutide alone demonstrated dose dependent increase and reversal of lean muscle mass loss
with improvement in fat mass loss as well compared to a GLP-1 RA alone (results for SRK-439 used in combination with
semaglutide shown below). These results provide the scientific rationale and support the hypothesis that inhibition of
myostatin in combination with GLP-1 RA-driven weight loss may lead to retention of lean muscle.
We are advancing this preclinical program and plan to submit an IND in the third quarter of 2025.
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SRK-439 Reversed Lean Mass Loss and Enhanced Fat Mass Loss Induced by Semaglutide Treatment. Shown in the
plot on the left is the percent change in lean mass from baseline in diet-induced obesity mice as measured by
quantitative nuclear magnetic resonance, and on the right, percent change in fat mass in DIO mice.
4. Apitegromab in Obesity: Proof-of-Concept
We see potential for apitegromab as a muscle-targeted therapy broadly across disorders in which the role of muscle is
critical for function. To inform the development of SRK-439, in May 2024 we initiated the Phase 2 EMBRAZE proof-of-
concept trial, designed to assess the safety and efficacy of apitegromab to preserve muscle mass in individuals living with
obesity and on background therapy of a GLP-1 RA. In September 2024, we announced that we completed enrollment and
top-line results from this trial are expected in the second quarter of 2025.
b.
Inhibiting TGFβ – SRK -181 (context-independent latent TGFβ1 inhibitor) and LTBP (matrix-
selective latent TGFβ1 inhibitor).
We have been a pioneer in developing a differentiated approach to harnessing the therapeutic potential of the TGFβ
superfamily of growth factors. The foundation of our industry-leading platform is targeting the TGF superfamily of growth
factors with the desired selectivity for both the target (i.e., latent- or pro- form) and disease-specific context. While we are
building our experience from this approach with our anti-myostatin pipeline, we have also observed promising preclinical
and early clinical data that supports targeting other forms of TGFβ, including for oncology and fibrosis.
The TGFβ superfamily plays a central role in a wide range of cellular processes including growth and differentiation,
immune regulation and fibrosis. TGFβ1 is produced by cells as a single protein chain and is then enzymatically processed
by the cells into two distinct and physically separated domains — the mature, active growth factor and the remaining
portion of the original protein, referred to as the prodomain, or latency associated peptide (“LAP”) — which remains
associated with and keeps the growth factor in an inactive state. This complex is further associated with one of a number of
“presenting molecules” which when secreted serve to tether the latent precursor in specific locations in the body. TGFβ1 is
produced by a variety of cell types, including fibroblasts, which deposit latent TGFβ1 in connective tissue, as well as
regulatory T cells, cancer cells and macrophages, which display latent TGFβ1 on their cell surfaces.
In a seminal peer-reviewed publication in 2011, by solving a high-resolution x-ray crystal structure of the latent form of
TGFβ1, our founder, Dr. Springer elucidated a new understanding of the mechanism that underlies the activation of latent
precursor forms of members of the TGFβ superfamily of protein growth factors. This research explained at a molecular
level why the secreted form of TGFβ1 is inactive. The prodomain, though physically separated from the mature growth
factor domain, forms a “cage” around the active form of TGFβ1, blocking the ability of the growth factor to signal through
its receptor. Integrin proteins are able to unlock the “cage” by binding to the prodomain of the latent
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TGFβ1 complex and applying force to pull the complex open, allowing the mature growth factor to be released and signal
in its microenvironment. While mature TGFβ1 shares a high degree of structural similarity with its closely related family
members, TGFβ2 and TGFβ3, their respective cages are structurally diverse. By taking advantage of the differences among
the prodomains, together with our understanding of the activation mechanism and ability to recapitulate the activation
mechanism in vitro, we were able to identify multiple highly selective inhibitors of the activation of latent TGFβ1. By
specifically targeting the TGFβ1 isoform, we believe we have the key to unlock the power of checkpoint inhibitors and
meaningfully increase response rates across multiple solid tumor types. In March 2019, we selected SRK-181 as a product
candidate in our TGFβ1 cancer immunotherapy program based on the strength of preclinical data and human translational
insights. In vitro and in vivo studies of SRK-181 showed that it binds to latent TGFβ1 with high affinity and high
selectivity, which is evidenced by minimal or no binding to latent TGFβ2 or latent TGFβ3 isoforms. Integrins, such as
αVβ6 and αVβ8, can trigger the activation of TGFβ1 and TGFβ3. In addition, biochemical evidence suggests that certain
proteases (e.g., Plasmin and Kallikreins) may also induce TGFβ activation. Notably, these integrins and proteases have
been implicated in tumor biology in a number of human cancers. SRK-181 is capable of inhibiting both integrin-
dependent- and protease-induced activation of TGFβ1.
SRK-181 selectively binds to proTGFβ1complexes with minimal or no binding to proTGFβ2 or proTGFβ3 complexes.
i. TGFβ1 in Cancer Therapy
We believe that specific inhibition of TGFβ1 may have a significant impact on the treatment of patients in certain oncology
settings.
Immune checkpoints are cellular mechanisms that act as a brake on the immune system, and expression of these proteins in
the tumor microenvironment creates an immunosuppressive environment that allows tumor cells to evade being killed by
the immune system. Immune checkpoint proteins, such as PD-1/PD-L1, have therefore become key therapeutic targets in
the tumor microenvironment. By inhibiting these proteins, the brakes on the immune system are released, allowing the T
cells to kill the cancer cells. There are currently multiple approved checkpoint inhibitor therapies that target the PD-1/PD-
L1 pathway.
A significant proportion of patients, in many cases the majority, fail to respond to these checkpoint inhibitor therapies,
because they have what appears to be a pre-existing, or primary, resistance to immunotherapy. Other patients’ cancers
appear to initially respond but subsequently progress (e.g., acquired resistance). In many human cancers, TGFβ signaling is
associated with lack of response to PD(L)-1 blockade, particularly in patients with tumors harboring an immune excluded
phenotype (i.e., CD8+ T cells present in nearby stroma but excluded from the tumor parenchyma). Gene expression
analysis of pre-treatment melanoma tumors identified multiple TGFβ-related signaling signatures associated
25
with pre-existing or primary resistance to anti-PD-(L)1 antibody therapy. Similarly, it has also been reported that
retrospective pathway analysis of tumor samples from an atezolizumab bladder cancer trial identified the TGFβ pathway as
a major determinant of primary resistance to atezolizumab.
Our analysis of publicly available human tumor data has identified TGFβ1 as the predominant TGFβ isoform expressed in
many human solid tumors.
National Cancer Institute - Cancer Genome Atlas Program RNAseq analysis of >10,000 samples spanning 33 tumor
types show high expression of the TGFβ1 isoform in many tumor types
ii. SRK-181 in Cancer Immunotherapy - Inhibitor of Latent TGFβ1 Activation
Our second product candidate, SRK-181, a highly selective inhibitor of the activation of latent TGFβ1, is in clinical
development for the treatment of locally advanced or metastatic solid tumors that are resistant to anti-PD-(L)1 therapies.
We estimate at least 750,000 cancer patients in the U.S. are eligible for treatment with checkpoint inhibitor therapies every
year, of which the majority of patients will develop progression to the treatment.
Increased signaling by TGFβ1 is a key driver of a number of disease-relevant processes, including immune system evasion
by cancer cells, bone marrow fibrosis associated with hematological disorders, and tissue and organ fibrosis. Historically,
selectively targeting TGFβ1 signaling has been challenging due to the inability of either small molecule inhibitors or
antibodies to avoid off-target inhibition of other, closely related growth factors, TGFβ2 and TGFβ3. Treatment of animals
with these non-selective TGFβ inhibitors has been associated with a range of toxicities, most notably cardiac toxicity.
Furthermore, since each of these growth factors signals through the same TGFβ receptor, ALK5, inhibitors of the TGFβ
receptor kinase suffer from similar dose-limiting toxicities. In preclinical studies of our antibodies, we have observed
selective inhibition of TGFβ1 activation in vitro and immunomodulatory and antifibrotic activity in multiple disease
models in vivo. A 28-day pilot nonclinical toxicology study in rats of our leading antibody did not observe any drug-related
toxicity up to the highest dose (100 mg/kg weekly) tested in the study. In the same study, we tested non-selective TGFβ
inhibitors and observed the published toxicities, including cardiac toxicity as well as death. We have also completed four-
week GLP toxicology studies in rats and non-human primates and no SRK-181 related adverse effects were observed up to
the highest evaluated dose of 200 mg/kg per week and 300 mg/kg per week, respectively.
In many human cancers, TGFβ signaling is associated with lack of response to PD-(L)1 blockade, particularly in patients
with tumors harboring an immune excluded phenotype (i.e., CD8+ T cells present in nearby stroma but excluded from the
tumor parenchyma). We have observed multiple mouse models that recapitulate the immune-excluded phenotype and are
resistant to PD-1 blockade become responsive to the combination of SRK-181-mIgG1, the murine analog of SRK-181, and
an anti- PD-1 antibody. These models, including the MBT-2 bladder cancer model, the Cloudman S91 melanoma model
and the EMT6 breast cancer model, were poorly responsive or unresponsive to single agent treatment with either anti-PD-1
or SRK-181-mIgG1, with little or no effect on tumor growth. However, in representative
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experiments, the combination of SRK-181-mIgG1 and anti-PD-1 resulted in tumor regressions of 72%, 57% and 70% in
these three mouse models, respectively. Furthermore, the combination treatment led to statistically significant survival
benefit in all three models.
Our Phase 1 DRAGON clinical trial is intended to initially evaluate our therapeutic hypothesis that SRK-181 in
combination with anti-PD-(L)1 therapy may overcome resistance to anti-PD-(L)1 therapy and lead to anti-tumor responses.
This clinical trial in patients with locally advanced or metastatic solid tumors is ongoing and investigates the safety, PK and
efficacy of SRK-181. The DRAGON trial consists of two parts: Part A (dose escalation of SRK-181 as a single-agent or in
combination with an approved anti-PD-(L)1 therapy) and Part B (dose expansion evaluating SRK-181 in combination with
an approved anti-PD-(L)1 antibody therapy). Part B encompasses five active cohorts, including urothelial carcinoma,
cutaneous melanoma, non-small cell lung cancer, clear cell renal cell carcinoma and head and neck squamous cell
carcinoma, and commenced in 2021 and completed enrollment in December 2023. We continue to treat patients who
remain on study. Safety, efficacy and biomarker data were presented in June 2024 at the ASCO annual meeting and in
November 2024 at the SITC 39th Annual Meeting. The data showed encouraging responses in heavily pretreated and anti-
PD-(L)1 resistant patients across multiple tumor types. Data presented continues to support proof-of-concept for SRK-181
in 30 heavily pretreated patients with ccRCC resistant to anti-PD-1. SRK-181 was generally well tolerated and showed
promising anti-tumor activity in this patient population. Of 30 patients in the ccRCC cohort, seven patients treated with
SRK-181 in combination with pembrolizumab had documented response, achieving a best tumor reduction of 40% to
100%, with an objective response rate of 23.3%. In the biomarker analysis, SRK-181 combined with pembrolizumab
established proof of mechanism in patients by creating a proinflammatory tumor microenvironment across multiple tumor
types. Safety data from ccRCC cohort continue to show SRK-181 is generally well tolerated. In ccRCC patients,
responders had higher basal levels of activated CD8+ T cells, higher T-regs, as well as higher TGFβ1 expression. The data
cutoff for all analyses was September 9, 2024.
We believe that the DRAGON trial achieved its study objectives by showing objective, durable clinical responses in
patients with ccRCC resistant to PD-1 therapy beyond what is expected from continuing PD-1 alone. We anticipate that
emerging data from the DRAGON trial will be presented at medical meetings in the future.
1. Potential Applications of SRK-181 in Additional Oncology Settings
In addition to cancer immunotherapy, we believe SRK-181 has the potential for use in other oncology settings, such as in
immunotherapy-naïve patients, in combination with other therapies beyond checkpoint inhibitors and in myelofibrosis.
iii. Fibrosis: LTBP-49247
Fibrosis is a pathological feature of many diseases and can occur in virtually all organs. It is characterized by excessive
accumulation of extracellular matrix in the affected tissue and accounts for substantial morbidity and mortality. TGFβ
signaling pathway is a well-established central driver in the pathogenesis of fibrotic diseases and inhibition of this pathway
has been shown to improve outcomes in relevant animal models of hepatic, renal, pulmonary, and other fibrotic diseases. In
addition, a non-selective inhibitor of TGFβ signaling that inhibits all 3 isoforms (isoform 1, 2, and 3) of TGFβ showed
clinical improvement in patients with systemic sclerosis, a fibrotic connective tissue disease. However, non-selective
inhibition of all TGFβ isoforms is known to be associated with serious safety findings, most notably bleeding episodes, and
cardiac toxicities. Based on knock out animal models (a model where researchers have inactivated, or "knocked out," an
existing gene by replacing it or disrupting it with an artificial piece of DNA), these safety findings are believed to be
associated with inhibition of the TGFβ2, and TGFβ3 isoforms. These data suggest that novel approaches to targeting TGFβ
signaling may have broad applicability to the treatment of fibrotic disease, where more selective approaches may offer an
improved safety profile. In addition, given that immune cell activation may play a key role in fibrotic disease development,
selective targeting of only matrix associated TGFβ1, at the primary site of fibrosis manifestation, while avoiding immune
cell associated TGFβ1 is key to maintaining efficacy while avoiding potential long-term liabilities of immune cell
activation.
Based on this scientific rationale, we utilized our platform to discover and develop antibodies that selectively inhibit the
activation of latent TGFβ1 in the context of fibrotic extracellular matrix and that avoid perturbing TGFβ1 presented by
cells of the immune system. We selected SRK-373, a highly potent, anti-latent TGFβ1 antibody that selectively inhibits
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TGFβ1 activation within the extracellular matrix by targeting latent TGFβ1 associated with latent TGFβ-binding proteins
(LTBPs), thus enabling specific inhibition of TGFβ1 in fibrotic tissue. This antibody demonstrated significant antifibrotic
activity in a variety of preclinical rodent models. It also demonstrated robust therapeutic index at all doses tested in a non-
GLP mouse safety study. We plan to advance this program to IND-enabling studies.
When latent TGFβ1 is secreted from cells (top center), it is further associated with another protein, referred to as a
presenting molecule (examples of which are shown in each image). The presenting molecules are covalently bound to
the prodomain and serve to tether the latent TGFβ1 complex in a particular microenvironment. Unlike TGFβ1, a given
presenting molecule's expression pattern is restricted to particular cellular and tissue environments. For example, the
presenting molecule GARP (right) is found primarily on regulatory T cells, the presenting molecules LTBP1 and
LTBP3 (bottom center) are localized to the connective tissue in the extracellular matrix, and the presenting molecule
LRRC33 (left) is found primarily on certain myeloid lineage cells such as macrophages.
c.
SRK-256: A High-Affinity Antibody Demonstrating Selective Inhibition of HJV/RGMc
A number of disease states as well as rare genetic mutations can cause disruptions in iron homeostasis and can result in
either iron deficiency or overload. These imbalances in iron levels can lead to detrimental complications and are the basis
of mortalities and morbidities in many diseases. Hepcidin is a peptide hormone that is produced in the liver and plays a
major role in regulating systemic iron homeostasis. Aberrantly increased hepcidin expression is a hallmark of several
chronic and devastating diseases where it causes iron-restricted anemia, contributing to the morbidity and mortality of
these diseases. Hepcidin expression is controlled via the bone morphogenetic protein (BMP) signaling pathway, with
BMP2/6 being the predominant ligands signaling through a large protein receptor complex containing BMP receptors
(BMPR) and a BMP co-receptor, repulsive guidance molecule c/ hemojuvelin (RGMc/HJV). The RGM family consists of
three members, RGMa, RGMb and RGMc/HJV, and owing to their role as BMP co-receptors, has been shown to be
involved in the development and maintenance of many tissues and organs throughout the body. Human mutations as well
as knockout animal studies have demonstrated the predominant role of RGMc/HJV to be in the
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regulation of iron homeostasis. These data suggest that novel approaches to specifically target the BMP pathway in the liver
may have a broad applicability to the treatment of anemia, especially in chronic diseases where hepcidin is upregulated.
In contrast to the far-reaching roles of BMP-BMPRs throughout the body, the specific role of RGMc/HJV isoform in iron
homeostasis, provided an opportunity to utilize our platform to discover and develop antibodies that selectively bind to and
inhibit RGMc. We selected SRK-256, a highly potent and selective RGMc/HJV inhibitor that has demonstrated significant
suppression of hepcidin expression and resultant mobilization of stored iron in vivo in mice, rats, and non-human primates.
SRK-256 may provide a novel approach to treating iron-restricted anemia in patients with chronic diseases driven by hepcidin
overexpression. We plan to advance this program to IND-enabling studies.
d. Additional Potential Areas of Exploration
Additional therapeutic areas and targets in which we could potentially apply our scientific platform and expertise include:
●
Exploring opportunities to develop other context-dependent inhibitors of TGFβ1 to modulate immune cell
activation within the context of specific immune diseases.
●
Exploring opportunities in modulating metabolic physiology including understanding the important role of
skeletal muscle in modulating metabolism. This is highlighted by potential therapeutic opportunity for myostatin
blockade. For example, evidence is emerging that blockade of the myostatin pathway can reduce the mass of
visceral fat, a significant driver of cardiometabolic pathophysiology. We have efforts underway to evaluate these
opportunities, including preclinical and translational research, development path assessments, and commercial
evaluations.
We continue to enhance our internal biologics discovery capabilities including the acquisition and development of our own
proprietary single-domain antibody libraries. These new capabilities allow us to more efficiently discover antibodies and
furthers our commitment to building a differentiated portfolio of product candidates.
VII.
License Agreements
a. Gilead Collaboration
On December 19, 2018 (the “Effective Date”), we entered into a three-year collaboration with Gilead to discover and
develop therapeutics that target TGFβ-driven signaling, a central regulator of fibrosis (“the Collaboration Agreement”). In
connection with the Collaboration Agreement, we received an upfront payment of $50 million and an equity investment of
$30 million.
In December 2019, we achieved a $25 million preclinical milestone under the Gilead Collaboration Agreement for the
successful demonstration of efficacy in preclinical in vivo proof-of-concept studies.
On January 6, 2022, we entered into a letter agreement with Gilead which (i) confirmed that the collaboration period under
the Collaboration Agreement had expired as of December 19, 2021, and (ii) agreed the option exercise period for all
programs under the Collaboration Agreement had been terminated as of January 6, 2022.
b. Adimab Agreement
On March 12, 2019, we entered into an amended and restated collaboration agreement (“Adimab Agreement”) with
Adimab, LLC (“Adimab”). Under the Adimab Agreement, as amended, we selected a number of biological targets against
which Adimab used its proprietary platform technology to discover and/or optimize antibodies based upon mutually agreed
upon research plans, and we have the ability to select a specified number of additional biological targets against which
Adimab will provide additional antibody discovery and optimization services. During the research term
and evaluation term for a given research program with Adimab (“Research Program”), we have a non-exclusive worldwide
license under Adimab’s technology to perform certain research activities and to evaluate the program antibodies to determine
whether we want to exercise our option to obtain an exclusive license to exploit such antibodies (a
“Development and Commercialization Option”).
Pursuant to the Adimab Agreement, we previously paid Adimab a one-time, non-creditable, non-refundable technology access
fee. We are also obligated to make certain technical milestone payments to Adimab on a Research Program-by-Research Program
basis. Upon exercise of a Development and Commercialization Option, we are obligated to pay to Adimab a non-creditable,
nonrefundable option exercise fee of either (i) a low seven-digit dollar amount or (ii) a mid- six-digit dollar amount, based on
the antibodies in the given Research Program, plus, in either case, an amount equal to any technical milestone payment which
was not previously paid with respect to such Research Program and less, in either case, any option extension fees paid with
respect to such Research Program. On a Product (as defined in the Adimab Agreement)-by-Product basis, we will pay Adimab
upon the achievement of various clinical and regulatory milestone events with total milestone payments not to exceed mid-teen
millions in the aggregate for a given Product. For any Product that is commercialized, on a country-by-country and Product-by-
Product basis, we are obligated to pay to Adimab a low-to-mid single-digit percentage of annual worldwide net sales of such
Product during the applicable royalty period in each country.
SRK-181 is subject to the terms of the Adimab Agreement, and in March 2019, we exercised our Development and
Commercialization Option for the Research Program from which SRK-181 was generated. In January 2020 and December 2020,
we exercised our Development and Commercialization Option for additional Research Programs.
VIII.
Intellectual Property
Our commercial success depends in part on our ability to protect intellectual property for our product candidates, including
apitegromab and SRK-181, and related methods, as well as our novel approach and proprietary platform for generating
monoclonal antibodies; to secure freedom-to-operate to enable commercialization of our product candidates, if approved; and to
prevent others from infringing upon our patent rights. Our policy is to seek to protect our intellectual property position by filing
patent applications in key jurisdictions, including the U.S., Europe, Canada, Japan and Australia, covering our proprietary
technology, inventions and improvements that are important to innovate, develop, sustain and implement our business.
We file patent applications directed to compositions comprising our antibodies, classes of antibodies covering our product
candidates, use of such antibodies for treating diseases, as well as related manufacturing methods. As of December 31, 2024, we
have 30 pending patent families across multiple programs. Among the pending families, 24 have been nationalized, from which
24 applications have matured into U.S. issued patents with additional issued patents in multiple jurisdictions globally.
Collectively, there are 337 national or direct utility applications pending or issued. In addition, there are four patent family filings
which are in the priority year. We continue to review and harvest new inventions for new patent filings.
As of December 31, 2024, three granted patents, EP2981822, EP2981822 and EP3368069, are the subject of ongoing opposition
proceedings before the European Patent Office (“EPO”). We have no other contested proceedings relating to any patents as of
that date, but we cannot provide any assurances that we will not have such proceedings at a later date. For more information
regarding the risks related to our intellectual property, please see “Risk factors—Risks Related to Our Intellectual Property.”
a. Platform
Our novel approach to generating selective modulators of supracellular activation of growth factors is broadly embodied in our
earliest “platform” patent family, PCT/US2014/036933 (published as WO 2014/182676). This patent family is directed to
methods for modulating the activation of the TGFβ superfamily of growth factors and methods for screening for a monoclonal
antibody that specifically targets an inactive form of the growth factor, thereby preventing activation (e.g., release) of mature
growth factor. The TGFβ superfamily is a group of more than 30 related growth
29
factors/cytokines that mediate diverse biological processes and includes TGFβ1 and myostatin (also known as GDF-8).
Issued U.S. patents in the platform family include: U.S. Patents Nos. 9,573,995 (issued 02/21/2017); 9,758,576 (issued
09/12/2017); 9,580,500 (issued 02/28/2017); 9,399,676 (issued 07/26/2016); 9,758,577 (issued 09/12/2017); 10,597,443
(issued 03/24/2020); 10,981,981 (issued 04/20/2021); and 11,827,698 (issued 11/28/2023). There is also a granted
European (“EP”) platform patent: EP2981822 (granted on 09/02/2020). These U.S. and EP patents are projected to expire
in 2034.
Specifically, EP2981822 originally granted with composition of matter claims directed to an antibody capable of binding a
recombinant antigen comprising pro-TGFβ1 or a growth factor-prodomain complex which comprises the TGFβ1 LAP
complex, in addition to claims directed to methods of making such antibodies. EP2981822 is the subject of ongoing
opposition proceedings before the EPO. It was revoked by the opposition division in November 2024, but the revocation
decision is subject to appeal.
U.S. Patent No. 9,573,995 has issued composition of matter claims directed to an antibody that specifically binds to GARP
associated with a human TGFβ1 LAP complex.
U.S. Patent No. 9,758,576 has issued composition of matter claims directed to an isolated monoclonal antibody, or a
fragment thereof, that specifically binds the prodomain of a pro/latent GDF-8/myostatin complex, thereby preventing
proteolytic cleavage between residues Arg 75 and Asp 76 of GDF-8/myostatin prodomain, so as to inhibit the release of
mature GDF-8/myostatin growth factor from the complex.
U.S. Patent No. 9,580,500 has issued claims directed to phage display library-based antibody production methods for
identifying an antibody that binds a GARP/proTGFβ1 complex.
U.S. Patent No. 9,399,676 has issued claims directed to phage display library-based antibody production methods for
identifying an antibody that binds a pro/latent GDF-8 complex that has been subjected to enzymatic cleavage. Related
product-by-process claims are included in issued U.S. Patent No. 9,758,577.
U.S. Patent No. 10,597,443 has issued claims that broadly cover manufacturing methods for a pharmaceutical composition
containing an antibody that binds a large latent complex of TGFβ, thereby modulating TGFβ signaling.
U.S. Patent No. 10,981,981 has issued claims that broadly cover manufacturing methods for a pharmaceutical composition
containing an antibody that binds pro/latent GDF-8, but does not bind to mature GDF-8, and inhibits GDF-8 signaling.
In addition, U.S. Patent No. 11,827,698 has issued claims that broadly cover manufacturing methods for a pharmaceutical
composition containing an antibody that binds pro/latent GDF-8, and inhibits release of mature GDF8 from the pro/latent
GDF8 complex.
b. Myostatin Activation Inhibitors
Thirteen patent families have been filed to date to cover proprietary myostatin inhibitors and their use in the treatment of
various muscle and metabolic diseases. Patent prosecution of these pending patent families is ongoing but relatively early.
Three families are directed to composition of matter claims that cover our proprietary antibodies. PCT/US2015/059468
(published as WO 2016/073853) broadly covers a class of monoclonal antibodies that specifically bind inactive precursors
thereby preventing activation of myostatin. This patent family is projected to expire in November 2035. U.S. Patents
10,307,480, 11,135,291, and 11,925,683 issued in June 2019, October 2021, and March 2024, respectively, with claims
directed to Scholar Rock proprietary antibodies that specifically bind pro/latent myostatin, including 29H4, the parental
clone of apitegromab, and variants, as well as host cells and methods of making antibodies with pH sensitive binding to
pro/latent myostatin.
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A second family, PCT/US2016/052014 (published as WO 2017/049011), discloses the specific amino acid sequence of
apitegromab and is projected to expire in September 2036. U.S. Patent 10,751,413 issued in August 2020, with claims
directed to antibodies and pharmaceutical compositions comprising the heavy and light chain sequences of apitegromab,
while U.S. Patent 11,439,704 issued in September 2022, with claims directed to a method of preventing muscle loss and/or
reducing muscle atrophy or treating SMA by administering an antibody having the heavy and light chain sequences of
apitegromab. The European counterpart also granted as EP 3350220 B1 in May 2021. The granted claims relate to
antibodies comprising the heavy and light chain variable region and full chain sequences of apitegromab, and
pharmaceutical compositions of the antibodies.
A third family, PCT/US2023/085574 (published as WO2024138076), was filed with claims directed to specific amino acid
sequences of additional antibodies in our proprietary myostatin inhibitor portfolio. If granted, this family is projected to
expire in December 2043.
The following patent families are directed to therapeutic uses/methods:
PCT/US2017/012606 (published as WO 2017/120523) broadly covers treatment methods for a number of muscle and
neuromuscular disease and disorders using an antibody that specifically blocks the activation step of myostatin. This family
is projected to expire in September 2036. The first U.S. application issued in May 2019 as U.S. Patent 10,287,345 with
claims drawn to methods for inhibiting myostatin activation using our proprietary activation inhibitors (such as
apitegromab) to cause specified pharmacological effects to treat a variety of conditions including, muscle and metabolic
disorders. A second U.S. application issued as U.S. Patent 10,882,904 in January 2021. The issued claims recite methods
for inhibiting myostatin activation using an antibody comprising the heavy and light chain sequences of apitegromab for
various indications. A third U.S. application issued as U.S. Patent 12,006,359 in June 2024. The issued claims are directed
to a method of improving body composition by administering an antibody comprising heavy and light chain sequences of
our proprietary activation inhibitors (such as apitegromab) or variants thereof.
PCT/US2017/037332 (published as WO 2017/218592) is directed to methods for treating neuromuscular diseases and
selecting patient populations that are likely to respond to myostatin inhibition. This filing includes the treatment of SMA in
patients who are on SMN therapies (e.g., SMN correctors/upregulators). This patent family is projected to expire in June
2037. The PCT application was nationalized in 11 jurisdictions, and applications in the three key jurisdictions (i.e., U.S.,
Europe and Japan) have granted, as well as in other countries. Specifically, the U.S. application granted in March of 2021
as U.S. Patent 10,946,036. The granted claims are directed to add-on or combination therapy for treating spinal muscular
atrophy with a myostatin inhibitor and a neuronal corrector (such as smn upregulator therapy). Similar claims have also
granted in other countries including Japan (JP Patent No. 6823167, JP Patent No. 7161554, and JP Patent No. 7344337).
Likewise, the European counterpart granted as EP 3368069B1 and has been validated in 37 states. The originally granted
European claims are directed to add-on therapy and combination therapy for the treatment of SMA using a myostatin-
selective inhibitor, in conjunction with an SMN corrector therapy. EP 3368069B1 is currently the subject of ongoing
opposition proceedings before the EPO. It was revoked by the opposition division in April 2024, but the revocation
decision is being appealed.
PCT/US2018/012686 (published as WO 2018/129395) relates to the treatment of metabolic diseases with a myostatin
activation inhibitor and is projected to expire in January 2038. The PCT was nationalized in 2019 and is in the early stages
of prosecution. A U.S. patent issued in October of 2021 as U.S. 11,155,611, with claims directed to methods of making a
pharmaceutical composition comprising a myostatin-selective inhibitor, comprising screening for an antibody that is
capable of decreasing expression of pyruvate dehydrogenase kinase 4 (PDK4) and increasing expression of pyruvate
dehydrogenase phosphatase 1 (PDP1). A Japanese patent (JP 7198757) issued in December 2022 with claims directed to a
pro/latent myostatin-specific inhibitor for use in treating or preventing obesity or metabolic disorder in a subject on a
calorie restriction diet. Similar claims have issued in Europe in 2023 (EP 3565592).
In addition to the five pending patent families listed above, there are also two PCT applications related to the phase 2 and
phase 3 clinical trials of apitegromab in SMA. PCT/US2021/056517 (published as WO2022/093724) is directed to
inventions deriving from the phase 2 clinical trial of apitegromab. This PCT was nationalized broadly. If granted, patents
deriving from this PCT would expire in 2041. Another PCT application was filed in 2023, PCT/US2023/020843
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(published as WO 2023/215384) with claims directed to therapeutic methods for treating SMA deriving from the phase 2 and
phase 3 clinical trials of apitegromab. If granted, patents from this family would expire in 2043. Both of these families are in
early stages of prosecution.
A further PCT application PCT/US2022/034588 (published as WO2022/2271867) was filed with claims directed to a myostatin
pathway inhibitor for use in treating metabolic disorders. If granted, patents deriving from this PCT would expire in 2042.
Finally, five other myostatin-related patent families have been filed and are in the priority year.
c. TGFβ1 Activation Inhibitors
In addition to the patent families discussed above in the “Intellectual Property-Platform” section that generically cover certain
aspects of the TGFβ1 program, fifteen patent families have been filed to date, covering various specific aspects of our TGFβ1
programs.
Isoform-specific inhibitors of TGFβ1 which confer improved safety profile and related methods are described in
PCT/US2017/021972 (published as WO 2017/156500). A U.S. patent (11,643,459) issued in May 2023, with claims directed to
methods for identifying TGFβ1-specific inhibitors. A European patent granted in May of 2023 as EP3365368, with claims to
the use of isoform-selective and context-independent anti-TGFβ1 antibodies, defined by CDR sequences or by cross-
competition, in the treatment of cancer or myelofibrosis. EP3365368 is the subject of ongoing opposition proceedings before
the EPO. Additional patents in this family have been granted in other jurisdictions. This family is projected to expire in March
2037.
Among TGFβ1 inhibitors, one of our context-independent antibodies is separately claimed and related preclinical data are
described in PCT/US2018/012601 (published as WO 2018/129329). This patent application is projected to expire in January
2038. For this latter family, a Japanese patent (JP Patent No. 7157744) issued in October 2022 with claims covering certain
isoform-selective, context-independent antibodies and their use in the treatment of fibrotic diseases.
In addition, high-affinity, isoform-selective TGFβ1 inhibitors are disclosed in PCT/2019/041373 (published as WO
US2020/014460, and patents have issued in April 2024 in Columbia, June 2024 in the Gulf Cooperation Council, and August of
2024 in Japan). Patents of this family are projected to expire in 2039. Separately, direct national/regional applications covering
related subject matter have been filed, in the U.S., Europe and Hong Kong, and are projected to expire in 2039. Two U.S.
patents issued in September of 2021 as U.S. 11,130,803 and in October of 2024 as U.S. 12,122,823, with claims which cover
the SRK-181 clinical candidate and pharmaceutical compositions thereof; and a European patent issued in November of 2021
as EP3677278; and the corresponding Hong Kong patent issued in June of 2022, with claims that cover the SRK-181 clinical
candidate, pharmaceutical compositions, use for treating cancer and myelofibrosis, and methods for manufacturing.
Additionally, PCT/US2021/012969 (published as WO 2021/142448) discloses data related to biomarkers for the high-affinity,
isoform-selective TGFβ1 inhibitors and, if granted, patents deriving from this PCT application are projected to expire in 2041.
Additional biomarkers are disclosed in
PCT/US2022/022063 (published as WO2022/204581). If granted, patents deriving from these PCT applications would expire in
2042. Another PCT application, PCT/US2024/018970 (published as WO 2024/187051) discloses methods of treating certain
cancers and identification of patient populations using biomarkers. If granted, patents derived from this PCT is expected to
expire in 2044. One additional patent family to our TGFβ1 inhibitor program is currently in the priority year. Antibodies
claimed in these patent families protect our SRK-181 clinical candidate.
Separately, other improved isoform-selective, context-independent inhibitors of TGFβ1 are disclosed in
PCT/US2019/041390 (published as WO 2020/014473). This family is projected to expire in 2039. PCT/US2021/12930
(published as WO 2021/142427) is directed to optimized isoform-selective, context-independent inhibitors of TGFβ1. This
family is projected to expire in 2041.
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LTBP complex-specific inhibitors of TGFβ1 are described in four patent families: PCT/US2018/44216 (published as WO
2019/023661) which is expected to expire in July of 2038; and PCT/US2020/15915 (published as WO2020/160291), which
is expected to expire in 2040; PCT/US2022/73740 (published as WO 2023/288277), which is expected to expire in 2042.
Three U.S. patents (U.S. Pat. Nos. 11,214,614, 11,365,245 and 12,173,059) and one Columbian patent have been issued in
the second patent family with claims directed to antibodies and pharmaceutical compositions.
LRRC33-specific inhibitors are described in a further patent family: PCT/US2018/031759 (published as WO 2018/208888)
which is expected to expire in May of 2038. EP3621694 granted in July 2023, with claims directed to therapeutic use of
LRRC33 inhibitors for the treatment of various indications. PCT/US2017/042162 (published as WO 2018/013939) was
exclusively licensed to Janssen but, as explained below, the license agreement was terminated in July 2022. Scholar Rock is
now in control of prosecution. This patent family covers antibodies that specifically inhibit GARP-associated TGFβ, and is
projected to expire in July 2037. A Japanese patent (JP Patent No. 7128801) issued in August 2022 with claims directed to
antibodies and antigen-binding fragments which specifically bind human pro-TGFβ1-GARP complex, a process for their
production and related compositions. Additional patents have also granted in other jurisdictions including in Australia (AU
2017294772).
d. RGMc-Selective Inhibitors
PCT/US2019/057687 (published as WO2020/086736) is directed to RGMc-selective inhibitors and is projected to expire in
2039. A Japanese patent application was allowed in December 2024 and will grant in early 2025. The Japanese patent will
have claims which cover a pharmaceutical composition comprising the SRK-256 clinical candidate and the use thereof for
treating anemia, including anemia of chronic disease and anemia in subjects diagnosed with cancer, such as myelofibrosis.
Also, a Chinese patent application was allowed in December 2024, with similar claims. Applications are pending in other
jurisdictions, including U.S. and EP.
e. Intellectual Property Protection
We cannot predict whether the patent applications we pursue will issue as patents in any particular jurisdiction or whether the
claims of any issued patents will provide any proprietary protection from competitors. Even if our pending patent
applications are granted as issued patents, those patents, as well as any patents we license from third parties, may be
challenged, circumvented or invalidated by third parties. As mentioned above, three granted patents, EP2981822, EP3365368
and EP3368069, are the subject of ongoing opposition proceedings before the EPO, as of December 31, 2024. While there
are no contested proceedings or third-party claims relating to any of the other patents described above, as of that date, we
cannot provide any assurances that we will not have such proceedings or third-party claims at a later date.
Additionally, the Unitary Patent/Unified Patent Court system in Europe became fully operational in June 2023. As such,
European patents which are subject to the jurisdiction of the Unified Patent Court (“UPC”) face limited precedent for the
court, increasing the uncertainty of any litigation.
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most
countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In
the U.S., the patent term of a patent that covers an FDA-approved drug or biologic may also be eligible for patent term
extension, which permits patent term restoration as compensation for the patent term lost during FDA regulatory review
process. The Hatch-Waxman Amendments permit a patent term extension of up to five years beyond the expiration of the
patent. The length of the patent term extension is related to the length of time the drug or biologic is under regulatory review.
Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product
approval and only one patent applicable to an approved drug or biologic may be extended. Similar provisions are available in
Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug or biologic or provide an
additional period of protection for the approved pharmaceutical product following expiry of the patent. In the future, if our
products receive FDA approval, we expect to apply for patent term extensions on patents covering those products. We plan to
seek patent term extensions to any of our issued patents in any
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jurisdiction where these are available, however there is no guarantee that the applicable authorities, including the U.S. Patent and
Trademark Office in the U.S. and the national patent offices in Europe, will agree with our assessment of whether such extensions
should be granted, and if granted, the length of such extensions.
In addition to our reliance on patent protection for our inventions, product candidates and research programs, we also rely on trade
secret protection for our confidential and proprietary information. For example, certain elements of our proprietary platform may be
based on unpatented trade secrets that are not publicly disclosed. Although we take steps to protect our proprietary information and
trade secrets, including through contractual means with our employees and consultants, third parties may independently develop
substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology.
Thus, we may not be able to meaningfully protect our trade secrets. It is our policy to require our employees, consultants, outside
scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of
employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or
financial affairs developed or made known to the individual or entity during the course of the party's relationship with us is to be kept
confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all
inventions conceived by the individual, and which are related to our current or planned business or research and development or made
during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property. In
addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation
of our proprietary technology by third parties. We have also adopted policies and conduct training that provides guidance on our
expectations, and our advice for best practices, in protecting our trade secrets.
IX. Manufacturing
We do not own or operate facilities for clinical drug manufacturing, storage, distribution or quality testing. Currently, all of our clinical
manufacturing is outsourced to third-party manufacturers. Certain third party manufacturers may require us to enter in manufacturing
agreements with them that include substantial milestone payments and royalties. As our development programs expand and we build
new process efficiencies, we expect to continually evaluate our strategy of utilizing third party manufacturers with the objective of
satisfying demand for our registration trials and, if approved, the manufacture, sale and distribution of commercial products.
X. Antibody Discovery
We have internal antibody display and discovery capabilities; however, at times we may continue to rely on third parties to conduct
antibody discovery and optimization services for us based on criteria and specifications provided by us. Certain antibody discovery and
optimization vendors require us to enter into a license with them for the right to use antibodies discovered by them in human use or for
commercial purposes. Such license could include substantial milestone payments and royalties to the extent we choose to use an
antibody discovered by such vendor. On March 12, 2019, we exercised an option to receive such a license from Adimab pursuant to our
Adimab Agreement. Please see the description above in
“License Agreements – Adimab Agreement” for more details on the terms of this agreement.
XI. Competition
The biotechnology and pharmaceutical industries are characterized by rapid evolution of technologies, fierce competition, and strong
defense of intellectual property. Although we believe that our product candidates, discovery programs, technology, knowledge,
experience and scientific resources provide us with competitive advantages, we face competition from major pharmaceutical and
biotechnology companies, academic institutions, governmental agencies and public and private research institutions, among others.
Many of the companies against which we may compete have significantly greater financial resources and expertise than we do in
research and development, manufacturing, and commercialization of approved products. These competitors compete with us in
recruiting and retaining qualified scientific and management personnel and may compete with us in establishing clinical trial sites and
patient recruitment for clinical trials.
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The availability of reimbursement from government and other third-party payors will also significantly affect the pricing
and competitiveness of our products. Our competitors also may obtain FDA or other regulatory approval for their products
more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market
position before we are able to enter the market.
a. Competition for Apitegromab
In the SMA market, there are three approved SMN targeted treatments and no approved muscle-targeted treatments for
SMA to date. The SMA drug development pipeline reflects a focus on addressing the significant remaining unmet needs of
individuals living with SMA as well as the life cycle management of the existing approved SMN targeted treatments. To
address the remaining unmet needs to further improve and sustain muscle function by contributing to the impact on the
overall disease progression in SMA, we are pioneering a novel approach by developing the first muscle-targeted treatment
in SMA.
We are developing apitegromab, an investigational fully human monoclonal antibody designed to inhibit myostatin
activation by selectively binding the pro- and latent forms of myostatin in the skeletal muscle, for the treatment of patients
with SMA. If apitegromab receives marketing approval, we may face competition from other companies conducting
clinical trials to develop anti-myostatin molecules or other treatments for SMA, including Roche, Biogen, and NMD
Pharma. Moreover, we may also compete with smaller or earlier-stage companies, and other research institutions that have
developed, are developing or may be developing current and future anti-myostatin inhibitors or other treatments for SMA.
In addition, Novartis, Roche and Biogen are in late-stage development of alternate formulations or dosing regimen of their
respective approved SMN treatments, including an additional formulation of Novartis’ onasemnogene abeparvovec, an oral
tablet for Roche’s risdiplam, as well as a high dose formulation of Biogen’s antisense oligonucleotide (ASO), nusinersen.
Apitegromab is being developed with the intention to be used in individuals living with SMA who are currently on an
approved SMN targeted treatment.
b. Competition for SRK-181
Our competitors for SRK-181 may include other companies developing inhibitors of the TGFβ signaling pathway, such as
antifibrotic therapies and cancer immunotherapies to be used in combination with CPI therapy.
For the latter, many companies, including AbbVie Inc, Roche, Bicara Therapeutics, Novartis, Bristol Myers Squibb
(acquired Forbius) and Merck KGaA, Merck (acquired Tilos Therapeutics) are developing therapies for cancer
immunotherapy in combination with CPI therapy, that are intended to work, at least in part, through inhibition of the TGFβ
signaling pathway.
Our competitors may also include companies that are or will be developing therapies for the same therapeutic areas that we
are targeting within our early pipeline, including other neuromuscular disorders, cancer, fibrosis and iron-restricted anemia.
XII. Government Regulation
Government authorities in the U.S. 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 apitegromab, SRK-181, SRK-439 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.
a. U.S. Biological Product Development
In the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”), and its implementing
regulations and biologics under the FDCA, the Public Health Service Act (“PHSA”), and their implementing regulations.
Both drugs and biologics also are subject to other federal, state and local statutes and regulations. The process of
36
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.
Apitegromab, SRK-181, and any future product candidates regulated as biologics must be approved by the FDA through a
BLA process before they may be legally marketed in the U.S. The process generally involves the following:
●
Completion of extensive preclinical studies in accordance with applicable regulations, including studies
conducted in accordance with good laboratory practice (“GLP”) requirements;
●
Manufacture of drug substance and drug product in accordance with applicable regulations, including
manufacturing activities performed in accordance with current good manufacturing practice (“cGMP”)
requirements;
●
Submission to the FDA of an IND application, which must become effective before human clinical trials may
begin;
●
Approval by an institutional review board (“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 (“GCP”) requirements and other clinical trial related regulations to establish the safety and
efficacy of the investigational product for each proposed indication;
●
Submission of a BLA to the FDA;
●
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 to assure that the facilities, methods and
controls are adequate to preserve the biologic’s identity, strength, quality and purity;
●
Potential FDA inspection of Scholar Rock and of the clinical trial sites that generated the data in support of the
BLA; and
●
FDA review and approval of the BLA, including consideration of the views of any FDA advisory committee,
prior to any commercial marketing or sale of the biologic in the U.S.
i. Preclinical Studies and IND
Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal
studies to assess the potential for adverse events 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/toxicology
studies.
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 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. Some long-term preclinical testing may continue after the IND
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is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time, the FDA
raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a
case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result,
submission of an IND may not result in the FDA allowing clinical trials to commence.
ii. 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 patients 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. 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 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 U.S. 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 study not conducted under an IND if the study 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 product
candidate.
●
Phase 2 clinical trials generally involve studies in disease affected patients to evaluate proof-of-concept and/or
determine the dosing regimen(s) for subsequent investigations. At the same time, safety and further PK and PD
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/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 suspected unexpected
serious adverse reactions (“SUSARs”), 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.
The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the
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 (“DSMB”) or committee. The
DSMB provides recommendations 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, among other things, companies must develop methods for
testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and
tested and stability studies must be conducted to demonstrate that the product candidates do not undergo unacceptable
deterioration over their shelf life.
iii. 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. Chemistry, manufacturing and controls ("CMC") information, preclinical studies and clinical
trials results, and proposed labeling are submitted to the FDA as part of the BLA. The BLA is a request for approval to market the
biologic for one or more specified indications and must contain proof of safety, purity and potency for a biologic. 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 U.S.
Under the Prescription Drug User Fee Act (“PDUFA”) as amended, each BLA must be accompanied by a user fee. The FDA
adjusts the PDUFA user fees on an annual basis. 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 rather than
accepting the BLA for filing. The FDA must make a decision on accepting a BLA for filing within 60 days of receipt, and such
decision could include a refusal to file (“RTF”) by the FDA. 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 10 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 FDA requests for additional information or clarification.
Before approving a BLA, the FDA will conduct a preapproval inspection of the manufacturing facilities for the new product to
determine whether they comply with cGMP requirements. The FDA will not approve the product unless it determines that the
manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of
the product within required specifications. 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, which could result in extensive discussions between the FDA and the applicant
during the review process. After the FDA evaluates a BLA, it will issue an Approval Letter or a Complete Response Letter. An
Approval Letter authorizes commercial marketing of the biologic with specific prescribing information for specific indications.
The Approval Letter
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may also include post-marketing requirements or commitments, such as the conduct of additional clinical trials or CMC
studies. A Complete Response Letter indicates that the review cycle of the application is complete and the application will not
be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the BLA
identified by the FDA. The Complete Response Letter may require additional clinical data, additional pivotal Phase 3 clinical
trial(s) and/or other significant and time consuming requirements related to clinical trials, preclinical studies or manufacturing.
If a Complete Response Letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies
identified in the letter, or withdraw the application. Even if such data and information are submitted, 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.
iv. Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or 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 U.S., or more
than 200,000 individuals in the U.S. and for which there is no reasonable expectation that the cost of developing and making
the product available in the U.S. for this type of disease or condition will be recovered from sales of the product.
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 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, such as a showing of clinical superiority to the product with orphan exclusivity by means of greater
effectiveness, greater safety or providing a major contribution to patient care or in instances of drug supply issues. Competitors,
however, may receive approval of either a different product for the same indication or the same product for a different
indication but that 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 a product 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. Orphan drug status in
the European Union (“EU”) has similar, but not identical, requirements and benefits.
v. Rare Pediatric Disease Designation
The FDA grants Rare Pediatric Disease designation for serious and life-threatening diseases that primarily affect children ages
18 years or younger and fewer than 200,000 individuals in the United States. Eligibility for a priority review voucher may be
issued upon approval of a BLA or New Drug Application for therapies developed to treat such rare pediatric diseases. Priority
review vouchers may be redeemed to obtain priority review for any subsequent marketing application or be sold or transferred.
Under current statutory provisions, FDA may award a priority review voucher for an approved rare pediatric disease product
application only if the sponsor has received rare pediatric disease designation for the drug by December 20, 2024, and after
September 30, 2026, the FDA may not award any rare pediatric disease priority review vouchers. Congress may vote to
reauthorize this program, but its future remains uncertain.
vi. Expedited Development and Review Programs
The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs and biologics
that meet certain criteria. Specifically, new drugs and 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
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any time before receiving BLA approval, but ideally no later than the pre-BLA meeting. 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. Any product is 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.
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. Accelerated approval may also be granted in the case that there
are no alternative treatments available. 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
(“IMM”), that is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA
may require that a sponsor of a drug or biologic receiving accelerated approval perform adequate and well-controlled post-
marketing clinical trials with due diligence and, under the Food and Drug Omnibus Reform Act of 2022 (“FDORA”), the
FDA is now permitted to require that such trials be underway prior to approval or within a specific time period after, the date
accelerated approval is granted. In addition, for products being considered for accelerated approval, the FDA currently
requires, unless otherwise informed by the agency, that all advertising and promotional materials intended for dissemination
or publication within 120 days of marketing approval be submitted to the agency for review during the pre-approval review
period. 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. Under
FDORA, the FDA has increased authority for expedited procedures to withdraw approval of a product or indication
approved under accelerated approval if, for example, the confirmatory trial fails to verify the predicted clinical benefit 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 guidance from the FDA to ensure an efficient drug development program.
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.
vii. Pediatric Information
Under the Pediatric Research Equity Act (“PREA”), as amended, a BLA or supplement 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. Unless otherwise required by regulation, PREA does not apply to
any biological product for an indication for which orphan designation has been granted. 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 submits an initial Pediatric Study Plan (“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 study. The
initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study
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.
viii. 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,
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complying with promotion and advertising requirements, which include restrictions on promoting products 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 products for off-label uses, manufacturers may not market or
promote such uses. Prescription drug and biologic 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 (“REMS”) 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. Newly discovered or developed safety or
effectiveness data may require changes to a drug’s approved labeling, including the addition of new warnings and
contraindications, and also may require the implementation of other risk management measures, including a REMS or the
conduct of post-marketing studies to assess a newly discovered safety issue. Product approvals may be withdrawn for non-
compliance with regulatory standards or if problems occur following initial marketing.
FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP
regulations. These manufacturers must comply with cGMP 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. 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 requirements and other laws, as well as
applicable tracking and tracing requirements. Accordingly, manufacturers must continue to expend time, money and effort in
the area of production and quality control to maintain cGMP compliance. The discovery of violative conditions, including
failure to conform to cGMP regulations, could result in enforcement actions, and the discovery of problems with a product
after approval may result in restrictions on a product, manufacturer or holder of an approved BLA, including recall.
ix. Other Regulatory Matters
Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous
regulatory authorities in the U.S. in addition to the FDA, including the Centers for Medicare & Medicaid Services
(“CMS”), other divisions of the Department of Health and Human Services (“HHS”), the Department of Justice, the Consumer
Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the
Environmental Protection Agency and state and local governments.
x. Other Healthcare and Privacy 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. Our future arrangements with third-party payors, healthcare providers
and physicians may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may
constrain the business or financial arrangements and relationships through which we market, sell and distribute any drugs for
which we obtain marketing approval. In particular, the research of our product candidates, as well as 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(s), 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. In the U.S., these laws include,
without limitation, state and federal anti-kickback, false
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claims, physician transparency, and patient data privacy and security laws and regulations, including but not limited to
those described below.
●
The Anti-Kickback Statute, which makes it illegal for among other things, any person or entity, including a
prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully solicit, receive, offer
or pay any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, that is intended to induce or
reward referrals, including the purchase, recommendation, order or prescription of a particular drug, for which
payment may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law
are punishable by individual imprisonment, criminal fines, administrative civil money penalties and exclusion
from participation in federal healthcare programs. In addition, a person or entity does not need to have actual
knowledge of the statute or specific intent to violate it to have committed a violation.
●
The federal civil and criminal false claims laws, including the False Claims Act (“FCA”), which prohibits
individuals or entities (including prescription drug manufacturers) from knowingly presenting, or causing to be
presented false or fraudulent claims for payment by a federal healthcare program or making a false statement or
record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to
the federal government. The government may deem manufacturers to have “caused” the submission of false or
fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a
product off label. Claims which include items or services resulting from a violation of the Anti-Kickback Statute
are false or fraudulent claims for purposes of the FCA. Our future marketing and activities relating to the
reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate
Medicaid rebate information and other information affecting federal, state and third-party reimbursement for our
products, and the sale and marketing of our product and any future product candidates, are subject to scrutiny
under this these laws.
●
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created additional federal
criminal statutes that prohibit among other things, knowingly and willfully executing a scheme, or attempting to
execute a scheme, to defraud any healthcare benefit program, including private payors, or knowingly and
willfully falsifying, concealing or covering up a material fact or making any materially false statements in
connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-
Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to
violate it in order to have committed a violation.
●
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009
(“HITECH”), and their respective implementing regulations, which impose, among other things, specified
requirements on covered entities, which include certain healthcare providers, health plans and healthcare
clearinghouses, and their business associates, which include individuals or entities that perform services for
covered entities involving the creation, use, maintenance or disclosure of, individually identifiable health
information, relating to the privacy and security of individually identifiable health information including
mandatory contractual terms and required implementation of technical safeguards of such information. HITECH
also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly
applicable to business associates, and gave state attorneys general new authority to file civil actions for damages
or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated
with pursuing federal civil actions.
●
The U.S. Physician Payments Sunshine Act (the “Sunshine Act”), enacted as part of the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the
“ACA”), which impose new annual reporting requirements for certain manufacturers of drugs, devices, biologics,
and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health
Insurance Program, for certain payments and “transfers of value” provided to physicians (defined to include
doctors, dentists, optometrists, podiatrists and chiropractors), non-physician providers (such as physician
assistants and nurse practitioners, among others), and teaching hospitals, as well as ownership and investment
interests held by physicians and their immediate family members.
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●
Analogous state and foreign fraud and abuse laws and regulations, such as state anti-kickback and false claims
laws, which may be broader in scope and apply regardless of payor. Such laws are enforced by various state
agencies and through private actions. Some state laws require pharmaceutical companies to comply with the
pharmaceutical industry’s voluntary compliance guidelines and the relevant federal government compliance
guidance, require drug manufacturers to report information related to payments and other transfers of value to
physicians and other healthcare providers, and restrict marketing practices or require disclosure of marketing
expenditures. Some state and local laws require the registration of pharmaceutical sales representatives.
●
The federal government and many state governments require pharmaceutical companies to submit periodic
reports on product pricing.
●
Many states in which we operate also have laws that protect the privacy and security of sensitive and personal
information. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with
respect to sensitive and personal information than federal, international or other state laws, and such laws may
differ from each other, which may complicate compliance efforts. Where state laws are more protective than
HIPAA, we must comply with the state laws we are subject to, in addition to HIPAA. In certain cases, it may be
necessary to modify our planned operations and procedures to comply with these more stringent state laws.
●
In some cases where we process sensitive and personal information of individuals from numerous states, we may
find it necessary to comply with the most stringent state laws applicable to any of the information. For example,
the California Consumer Privacy Act (the “CCPA”), which creates comprehensive individual privacy rights for
California consumers (as defined in the law) and places increased privacy and security obligations on entities
handling personal data of consumers or households, went into effect on January 1, 2020. The CCPA requires
covered companies to provide certain disclosures to consumers about its data collection, use and sharing
practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal
information. In addition, the California Privacy Rights Act, or CPRA, amendment to the CCPA was passed in
November 2020, and as of January 1, 2023 has imposed additional obligations on companies covered by the
legislation. The CPRA significantly modified the CCPA, including by expanding consumers’ rights with respect
to certain sensitive personal information. As currently written, the CCPA may impact our business activities and
as a result may increase our compliance costs and potential liability.
Similar comprehensive privacy laws have been passed in numerous other states and other states have proposed similar new
privacy laws. Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions
and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the
availability of previously useful data and could result in increased compliance costs and/or changes in business practices
and policies. The existence of comprehensive privacy laws in different states in the country would make our compliance
obligations more complex and costly and may increase the likelihood that we may be subject to enforcement actions or
otherwise incur liability for noncompliance. There are also states that are specifically regulating health information. For
example, Washington state recently passed a health privacy law that will regulate the collection and sharing of health
information, and the law also has a private right of action, which further increases the relevant compliance risk.
Connecticut and Nevada have also passed similar laws regulating consumer health data. In addition, other states have
proposed and/or passed legislation that regulates the privacy and/or security of certain specific types of information. For
example, a small number of states have passed laws that regulate biometric data specifically. These various privacy and
security laws may impact our business activities, including our identification of research subjects, relationships with
business partners and ultimately the marketing and distribution of our products. State laws are changing rapidly and there is
discussion in the U.S. Congress of a new comprehensive federal data privacy law to which we may likely become subject,
if enacted.
All of these evolving compliance and operational requirements impose significant costs, such as costs related to
organizational changes, implementing additional protection technologies, training employees and engaging consultants and
legal advisors, which are likely to increase over time. In addition, such requirements may require us to modify our data
processing practices and policies, utilize management’s time and/or divert resources from other initiatives and projects.
Any failure or perceived failure by us to comply with any applicable federal, state or foreign laws and
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regulations relating to data privacy and security could result in damage to our reputation, as well as proceedings or litigation by
governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would
subject us to significant fines, sanctions, awards, injunctions, penalties or judgments. Any of the foregoing could have a material
adverse effect on our business, financial condition, results of operations and prospects.
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. It is possible that governmental
authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law
involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of
any of these laws or any other related governmental regulations that may apply to us, we may be subject to significant civil,
criminal and administrative penalties, damages, fines, individual imprisonment, disgorgement, exclusion of drugs from
participation in state and federal healthcare programs, such as Medicare and Medicaid, reputational harm, additional oversight
and reporting obligations if we become subject to a corporate integrity agreement or similar settlement to resolve allegations of
non-compliance with these laws and the curtailment or restructuring of our operations. If any of the physicians or other
healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they
may be subject to similar actions, penalties and sanctions. Ensuring business arrangements comply with applicable healthcare
laws, as well as responding to possible investigations by government authorities, can be time and resource consuming and can
divert a company’s attention from the business.
xi. Current and Future Healthcare Reform Legislation
In the U.S. and foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes
regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate
post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.
We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more
rigorous coverage criteria and in additional downward pressure on the price that we, or any collaborators, may receive for any
approved products.
In the U.S., for example, in March 2010, the ACA was enacted. The ACA included provisions that address pharmaceutical
pricing. Among other things, for example, the FDA:
●
subjected biological products to potential competition by lower cost biosimilars;
●
increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and
extends the rebate program to individuals enrolled in Medicaid managed care organizations;
●
established annual fees and taxes on manufacturers of certain branded prescription drugs;
●
expanded healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute,
establishes new government investigative powers and enhanced penalties for non-compliance;
●
created a new Medicare Part D coverage gap discount program (later replaced under the Inflation Reduction Act
of 2022 (the “IRA”);
●
expanded eligibility criteria for Medicaid programs and for entities eligible for discounts under the PHS Act’s
340B Drug Pricing Program; and
●
created a new requirement to annually report the identity and quantity of drug samples that manufacturers and
authorized distributors of record provide to physicians.
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Some of the provisions of the ACA have been subject to judicial challenges as well as efforts to repeal, replace or
otherwise modify them or to alter their interpretation or implementation. For example:
●
As a result of the Budget Control Act of 2011 and subsequent legislation, there is an aggregate reduction to
Medicare payments to providers of, on average, 2% per fiscal year that went into effect on April 1, 2013 and will
remain in effect through 2031. As a result of the Statutory Pay-As-You-Go Act of 2010 and subsequent
legislation, Medicare payments to providers may be further reduced by 4% starting in 2025, absent further
legislation.
●
The American Rescue Plan Act of 2021 eliminated the statutory Medicaid drug rebate cap, previously set at
100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning
January 1, 2024.
●
In addition to these legislative efforts, on June 17, 2021, the U.S. Supreme Court dismissed the most recent
judicial challenge to the ACA.
●
Additionally, there has been increasing legislative, regulatory, and enforcement interest in the United States with
respect to drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and
proposed and enacted federal and state legislation designed to, among other things, bring more transparency to
drug pricing, reduce the cost of prescription drugs under Medicare, address the potential for importation of drugs
into the United States, review the relationship between pricing and manufacturer patient programs, and reform
government program reimbursement methodologies for drugs.
●
The IRA includes several provisions that may impact our business to varying degrees, including provisions that
create a $2,000 out-of-pocket cap for Medicare Part D beneficiaries on prescription drugs, impose new
requirements for manufacturers of all drugs to offer discounts under Medicare Part D, allow the U.S. government
to negotiate Medicare Part B and Part D pricing for certain high-cost drugs and biologics without generic or
biosimilar competition, and require companies to pay rebates to Medicare for drug prices that increase faster than
inflation. Drugs and biologics that have received orphan designation for one rare disease or condition and the
only approved indication is for that disease or condition are exempted from the IRA’s price negotiation
provisions. A drug or biologic with orphan designations for multiple diseases or conditions or with multiple
indications, however, will remain potentially subject to the price negotiation provisions.
Although a number of these and other proposed measures may require authorization through additional legislation to
become effective, and the Trump administration may reverse or otherwise change these measures, both the Trump
administration and Congress have indicated that they 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 by imposing price or patient assistance constraints, restrictions on certain
product access, marketing cost disclosure and other transparency measures, and, in some cases, measures designed to
encourage importation of pharmaceutical products from other countries and bulk purchasing.
xii. Packaging and Distribution in the U.S.
If our products are made available to authorized users of the Federal Supply Schedule of the General Services
Administration, additional laws and requirements apply. Products must meet applicable child resistant packaging
requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities also
are potentially subject to federal and state consumer protection and unfair competition laws.
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.
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The failure to comply with any of these laws or regulatory requirements subjects firms to possible legal or regulatory action.
Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or
other penalties, injunctions, exclusion from federal healthcare programs, requests for recall, seizure of products, total or partial
suspension of production, denial or withdrawal of product approvals, or refusal to allow a firm to enter into supply contracts,
including government contracts.
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.
xiii. Other U.S. Environmental, Health and Safety Laws and Regulations
We may be 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. From time
to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals
and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the
disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting
from these materials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials,
we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur
significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our
employees, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain
insurance for environmental liability or toxic tort claims that may be asserted against us.
xiv. U.S. Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of FDA approval of our current product candidates and any future
product candidates, 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 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 drug is eligible for
the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. PTO, in
consultation with the 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 biosimilar to, or interchangeable with, an FDA
licensed reference biological product was created by the Biologics Price Competition and Innovation Act of 2009 (“BPCI
Act”). 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.
A reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product, and 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. “First licensure” typically means the initial date the particular
product at issue was licensed in the U.S. 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. The first
biological product determined to be interchangeable with a reference product for any condition of use is also eligible for a period
of exclusivity during which time the FDA may not determine that another product is interchangeable with the same reference
product for any condition of use. The FDA may approve multiple “first” interchangeable products so long as they are all
approved on the same first day of marketing.
Pediatric exclusivity is another type of regulatory market exclusivity in the U.S. Pediatric exclusivity, if granted, adds six months
to existing regulatory exclusivity periods for all formulations, dosage forms, and indications of the biologic. This six-month
exclusivity may be granted based on the voluntary completion of a pediatric trial that fairly responds to an FDA issued “Written
Request” for such a trial.
b. European Union Drug Development
In the EU, our future products also may be subject to extensive regulatory requirements. As in the U.S., medicinal products can
be marketed only if a marketing authorization from the competent regulatory agencies has been obtained.
Similar to the U.S., the various phases of preclinical and clinical research in the EU are subject to significant regulatory controls.
In April 2014, the EU adopted the Clinical Trials Regulation EU No 536/2014, which replaced the Clinical Trials Directive
2001/20/EC on January 31, 2022. The main characteristics of the Clinical Trials Regulation include: a streamlined application
procedure via a single-entry point through the Clinical Trials Information System (“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 into 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 EU 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 EU Member State. However, overall related timelines will be defined by the Clinical Trials Regulation.
The transitory provisions of the Clinical Trial Regulation provide that, by January 31, 2025, all ongoing clinical trials must have
transitioned to the Clinical Trials Regulation.
In the EU the Paediatric Committee (“PDCO”) of the EMA must approve a pediatric investigation plan (“PIP”) prior to an
applicant filing a marketing authorization application (“MAA”), unless the EMA has granted a product-specific waiver or a class
waiver. The PIP outlines the pharmaceutical company’s strategy for investigation of the new medicinal product in the pediatric
population. Before an MAA can be filed, or an existing marketing authorization can be amended, the EMA determines whether
companies actually comply with the agreed studies and measures listed in each relevant PIP. If an applicant obtains a marketing
authorization in all EU Member States, or a marketing authorization granted in the centralized procedure by the EC, and the
study results for the pediatric population are included in the product information, even when negative, the medicine is then
eligible for an additional six-month period of qualifying patent protection through extension of the term of any supplementary
protection certificate (“SPC”), provided an application for such extension is made at the same time as filing the SPC application
for the product, or at any point up to 2 years before the SPC expires. The incentive in the case of orphan medicinal products is
that a two-year extension of the orphan market exclusivity may be available. This pediatric reward is subject to specific
conditions and is not automatically available when data in compliance with the PIP are developed and submitted.
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i. European Union Expedited Review and Development
PRIME is a scheme provided by the EMA to enhance support for the development of medicines that target an unmet
medical need and provides accelerated assessment of products representing substantial innovation where the MAA will be
made through the centralized procedure. To qualify for PRIME, product candidates require early clinical evidence that the
therapy has the potential to offer a major therapeutic advantage over existing treatments or benefits patients without
treatment options. Products from small-and medium-sized enterprises (“SMEs”) may qualify for earlier entry into the
PRIME scheme than larger companies. Among the benefits of PRIME are the appointment of a rapporteur to provide
continuous support and help build knowledge ahead of an MAA, early dialogue and scientific advice at key development
milestones, and the potential to qualify products for accelerated review earlier in the application process. The receipt of
PRIME designation does not change the standards for approval but may expedite the development or approval process.
Where, during the course of development, a product no longer meets the eligibility criteria, support under the PRIME
scheme may be withdrawn.
ii. European Union Drug Marketing
Much like the Anti-Kickback Statute prohibition in the U.S., 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 EU. The provision of benefits or advantages to physicians to induce or reward improper
performance generally is typically governed by the national anti-bribery laws of EU Member States, and the Bribery Act
2010 in the UK. Infringement of these laws could result in substantial fines and imprisonment. EU Directive 2001/83/EC,
which is the EU 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 UK despite its departure from the EU.
Payments made to physicians in certain EU 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 EU Member States. These requirements are
provided in the national laws, industry codes or professional codes of conduct, applicable in the EU Member States.
Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties,
fines or imprisonment.
iii. European Union Drug Review and Approval
In the EU, medicinal products can only be commercialized after obtaining a marketing authorization (“MA”). There are
two types of MAs.
Centralized MAs, which are issued by the EC through the centralized procedure, based on the opinion of the Committee
for Medicinal Products for Human Use (“CHMP”) of the EMA, are valid throughout the EU, and in the additional Member
States of the European Economic Area (“EEA”) (Iceland, Liechtenstein and Norway). The centralized procedure is
mandatory for certain types of products, such as medicinal products produced by certain biotechnological processes,
products designated as orphan medicinal products, advanced therapy medicinal products (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 EU.
National MAs, which are issued by the competent authorities of the EU Member States 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 an EU Member State, this national MA can be recognized in another EU
Member State through the mutual recognition procedure. If the product has not received a national MA in any EU Member
State at the time of application, it can be approved simultaneously in various EU Member States through the
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decentralized procedure. Under the decentralized procedure an identical dossier is submitted to the competent authorities of each
of the EU Member States in which the MA is sought, one of which is selected by the applicant as the reference Member State
(“RMS”). The competent authority of the RMS prepares a draft assessment report, a draft summary of the product characteristics
(“SmPC”), and a draft of the labeling and package leaflet, which are sent to the other Member States (referred to as the Member
States Concerned) for their approval. If the Member States Concerned 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 involved (i.e., in the RMS and the Member States Concerned).
Under the above described procedures, before granting the MA, the EMA or the competent authorities of the EU 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.
iv. European Union Data and Market Exclusivity
In the EU, innovative products authorized for marketing (i.e., reference products) qualify for eight years of data exclusivity and an
additional two years of market exclusivity upon marketing authorization. The data exclusivity, if granted, prevents applicants for
authorization of generics or biosimilars of these innovative products 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 EU, during a period of
eight years from the date on which the reference product was first authorized in the EU. During an 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 medicinal product can be placed on the EU market until the expiration of the market exclusivity. The overall 10-year
period will be extended to a maximum of 11 years if, during the first eight years of those 10 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, another company nevertheless could also market another version of the product if such company
obtained an MA based on an MAA with a complete and independent data package of pharmaceutical tests, preclinical tests and
clinical trials.
v. European Union Orphan Designation and Exclusivity
In the EU, after a recommendation from the EMA’s Committee for Orphan Medicinal Products (“COMP”), the European
Commission may grant orphan designation to a product if (1) the product is intended for the diagnosis, prevention or treatment of a
life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in
the EU when the application is made, or (b) it is unlikely that the product, without the benefits derived from orphan status, would
generate sufficient return in the EU to justify the necessary investment in its development; and (3) there exists no satisfactory
method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU or, if a method exists, the
product would be a significant benefit to those affected by that condition.
In the EU, orphan designation entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years of
market exclusivity is granted following medicinal product approval during which time no “similar medicinal product” may be
placed on the market. 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, at the end of the fifth year, it is determined that the orphan designation criteria are no longer
met, including where it is shown that the product is sufficiently profitable so as not to justify maintenance of market exclusivity.
Orphan designation must be requested before submitting an application for an MA. We will be required to apply for the
maintenance of the orphan designation granted to apitegromab for the treatment of SMA at the time of applying for an MA.
Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
The aforementioned EU rules are generally applicable in the EEA.
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vi. Reform of the Regulatory Framework in the European Union
The European Commission introduced legislative proposals in April 2023 that, if implemented, will replace the current regulatory
framework in the EU for all medicines (including those for rare diseases and for children). The European Commission has provided
the legislative proposals to the European Parliament and the European Council for their review and approval, and in April 2024, the
European Parliament proposed amendments to the legislative proposals. Once the European Commission’s legislative proposals are
approved (with or without amendment), they will be adopted into EU law.
vii. European General Data Protection Regulation
Since we conduct clinical trials in the EEA, we are subject to additional European data privacy laws. The General Data Protection
Regulation, (EU) 2016/679 (“GDPR”), became effective on May 25, 2018, and deals with the processing of personal data and on
the free movement of such data. The GDPR imposes a broad range of strict requirements on companies subject to the GDPR,
including requirements relating to having legal bases for processing personal data (such as health and other sensitive data,) relating
to identifiable individuals and transferring such information outside the EEA, including to the U.S., providing details to those
individuals regarding the processing of their personal information, keeping personal information secure, obtaining consent of the
individuals to whom the personal data relates, having data processing agreements with third parties who process personal
information, responding to individuals’ requests to exercise their rights in respect of their personal information, reporting security
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 increases substantially the
penalties to which we could be subject in the event of any non-compliance, including fines of up to 10,000,000 Euros or up to 2%
of our total worldwide annual turnover for certain comparatively minor offenses, or up to 20,000,000 Euros or up to 4% of our total
worldwide annual turnover for more serious offenses, whichever is greater. 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. The GDPR may increase our responsibility and liability in relation to personal data that we process where such
processing is subject to the GDPR, and we may be required to put in place additional mechanisms to ensure compliance with the
GDPR, including as implemented by individual countries. Given the limited enforcement of the GDPR to date, we face uncertainty
as to the exact interpretation of the new requirements on our trials and we may be unsuccessful in implementing all measures
required by data protection authorities or courts in interpretation of the new law. Compliance with the GDPR will be a rigorous and
time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those
efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with our
European activities.
National laws of member states of the EU are in the process of being adapted to the requirements under the GDPR, thereby
implementing national laws which may partially deviate from the GDPR and impose different obligations from country to country,
so that we do not expect to operate in a uniform legal landscape in the EEA. Also, as it relates to processing and transfer of genetic
data, the GDPR specifically allows national laws to impose additional and more specific requirements or restrictions, and European
laws have historically differed quite substantially in this field, leading to additional uncertainty. In addition, further to the UK’s exit
from the EU 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 EU’s data
protection regime. The UK has announced plans to reform the country’s data protection legal framework in its Data Reform Bill,
but these have been put on hold. 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 EU’s GDPR, the EC has
now issued a decision recognizing the UK as providing adequate protection under the EU GDPR and, therefore, transfers of
personal data originating in the EU to the UK remain unrestricted. Like the EU 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.
In the event we continue to conduct clinical trials in the EEA, we must also ensure that we maintain adequate safeguards to enable
the transfer of personal data outside of the EEA, in particular to the U.S., in compliance with European data protection laws. In the
past, companies in the U.S. were able to rely upon the EU-U.S. Privacy Shield framework to
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legitimize data transfers from the EU the U.S. In July 2020, the Court of Justice of the European Union (“CJEU”) in Case
C-311/18 (Data Protection Commissioner v Facebook Ireland and Maximillian Schrems [“Schrems II”]) invalidated the
EU-U.S. Privacy Shield on the grounds that the Privacy Shield failed to offer adequate protections to EU personal data
transferred to the U.S. The CJEU, in the same decision, deemed that the Standard Contractual Clauses (“SCCs”) published
by the EC are valid. However, the CJEU ruled that transfers made pursuant to the SCCs need to be assessed on a case-by-
case basis to ensure the law in the recipient country provides “essentially equivalent” protections to safeguard the
transferred personal data as the EU, and required businesses to adopt supplementary measures if such standard is not met.
Subsequent guidance published by the European Data Protection Board in June 2021 described what such supplementary
measures must be, and stated that businesses should avoid or cease transfers of personal data if, in the absence of
supplementary measures, equivalent protections cannot be afforded. On June 4, 2021, the EC issued new forms of standard
contractual clauses for data transfers from controllers or processors in the EU/EEA (or otherwise subject to the GDPR) to
controllers or processors established outside the EU/EEA (and not subject to the GDPR). The new standard contractual
clauses replace the standard contractual clauses that were adopted previously under the EU Data Protection Directive. The
UK is not subject to the EC’s new standard contractual clauses but has published a draft version of a UK-specific transfer
mechanism, which, once finalized, will enable transfers from the UK. We will be required to implement these new
safeguards when conducting restricted data transfers under the EU and UK GDPR and doing so will require significant
effort and cost. On March 25, 2022, the EC and the U.S. announced to have reached a political agreement on a new “Trans-
Atlantic Data Privacy Framework”, which will replace the invalidated Privacy Shield and on December 13, 2022, the EC
published a draft adequacy decision on the Trans-Atlantic Data Privacy Framework.
c. Regulation in the United Kingdom
The UK formally left the EU on January 31, 2020. The EU and the UK have concluded a trade and cooperation agreement
(“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 provide for
wholesale mutual recognition of UK and EU pharmaceutical regulations. At present, the UK has implemented EU
legislation on the marketing, promotion and sale of medicinal products through the Human Medicines Regulations 2012 (as
amended). The regulatory regime in the UK therefore currently aligns in many respects with EU medicines regulations,
however it is possible that these regimes will diverge in the future now that the UK’s regulatory system is independent
from the EU and the TCA does not provide for mutual recognition of UK and EU pharmaceutical legislation.
Notwithstanding that there is no wholesale recognition of EU pharmaceutical legislation under the TCA, under a new
international recognition procedure which was put in place by the Medicines and Healthcare products Regulatory Agency
(“MHRA”), the UK medicines regulator, on January 1, 2024, the MHRA may take into account decisions on the approval
of an MA from the EMA (and certain other regulators) when considering an application for a UK MA.
On February 27, 2023, the UK government and the European Commission announced a political agreement in principle to
replace the Northern Ireland Protocol with a new set of arrangements, known as the “Windsor Framework”. The Windsor
Framework was approved by the EU-UK Joint Committee on March 24, 2023, and the medicines aspects of the Windsor
Framework have applied since January 1, 2025. This new framework fundamentally changes the previous system under the
Northern Ireland Protocol, including with respect to the regulation of medicinal products in the UK. In particular, the
MHRA is now responsible for approving all medicinal products destined for the UK market (i.e., Great Britain and
Northern Ireland), and the EMA no longer has any role in approving medicinal products destined for Northern Ireland
under the EU centralized procedure. A single UK-wide MA will be granted by the MHRA for all novel medicinal products
to be sold in the UK, enabling products to be sold in a single pack and under a single authorization throughout the UK. In
addition, the new arrangements require all medicines placed on the UK market to be labelled “UK only”, indicating they
are not for sale in the EU.
i. Clinical Trials
The UK has implemented the now repealed Clinical Trials Directive 2001/20/EC into national law through the Medicines
for Human Use (Clinical Trials) Regulations 2004 (as amended). However, on December 12, 2024, the UK government
introduced a legislative proposal—the Medicines for Human Use (Clinical Trials) (Amendment) Regulations 2024—that, if
implemented, will replace the current regulatory framework for clinical trials in the UK. The legislative proposal aims to
provide a more flexible regime to make it easier to conduct clinical trials in the UK and
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increase the transparency of clinical trials conducted in the UK. This includes a notification scheme to enable lower-risk
clinical trials to be automatically approved by the MHRA, where the risk is similar to that of standard medical care
(although such trials would still require ethics committee approval). Such Regulations are expected to come into force in
early 2026.
ii. Orphan Designation
A separate process for orphan designation to the EU process now applies in the UK. There is no pre-marketing
authorization orphan designation (as there is in the EU) in the UK and the application for orphan designation will be
reviewed by the MHRA at the time of an application for a UK MA. The criteria for orphan designation remain the same as
in the EU, except that they apply to the UK only (e.g., there must be no satisfactory method of diagnosis, prevention or
treatment of the condition in the UK, as opposed to the EU).
d. Rest of the World Regulation
For other countries outside of the UK, the EU and the U.S., such as countries in Eastern Europe, Latin America or Asia, 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.
e. Additional Laws and Regulations Governing International Operations
If we further expand our operations outside of the U.S., 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 (“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 U.S. 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 U.S., 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 U.S., 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 U.S., 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 U.S. Securities and Exchange Commission
(“SEC”) also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting
provisions.
XIII.
Coverage and Reimbursement
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. In the United States, the principal
decisions about reimbursement for new medicines are typically made by CMS, an agency within the U.S.
Department of Health and Human Services. 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.
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 (i) a covered benefit under its health plan; (ii) safe, effective and medically
necessary; (iii) appropriate for the specific patient; (iv) cost-effective; and (v) neither experimental nor investigational.
In the U.S. no uniform policy of coverage and reimbursement for drugs or biological products exists, and one payor’s
determination to provide coverage and adequate reimbursement for a product does not assure that other payors will make a
similar determination. Accordingly, decisions regarding the extent of coverage and amount of reimbursement to be
provided for any of our products candidates, if approved, will be made on a payor by payor basis. The level of coverage
and reimbursement for products can differ significantly from payor to payor. One payor’s decision to cover a particular
medical product or service does not ensure that other payors will also provide coverage for the medical product or service,
or will provide coverage at an adequate reimbursement rate. The coverage determination process may be a time consuming
and costly process that will require us to provide scientific and clinical support for the use of our products to each payor
separately, with no assurance that coverage and adequate reimbursement will be obtained. In order to secure coverage and
reimbursement for any product that might be approved for sale, a company may need to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition
to the costs required to obtain FDA or other comparable regulatory approvals. Additionally, companies may also need to
provide discounts to purchasers, private health plans or government healthcare programs.
A third-party payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will
be approved. The containment of healthcare costs has become a priority of federal, state and foreign governments and
payors, and the prices of products have been a focus in this effort. Governments have shown significant interest in
implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for
substitution of generic products. Adoption of price controls and cost-containment measures and adoption of more
restrictive policies in jurisdictions with existing controls and measures, could further limit a company’s revenue generated
from the sale of any approved products.
Coverage policies and third-party payor reimbursement rates may change at any time. Even if favorable coverage and
reimbursement status is attained for one or more products for which a company or its collaborators receive regulatory
approval, less favorable coverage policies and reimbursement rates may be implemented in the future, which could affect
physician usage and patient demand.
Additional federal programs apply to pharmaceutical companies that affect coverage and reimbursement for drug products.
For example, the Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a
national rebate agreement with the Secretary of the HHS as a condition for states to receive federal matching funds for the
manufacturer’s outpatient drugs furnished to Medicaid patients. The ACA also expanded the universe of Medicaid
utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care
utilization and by enlarging the population potentially eligible for Medicaid drug benefits. Pricing and rebate programs
must also comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “MMA”) established the Medicare
Part D program to provide a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare
beneficiaries may enroll in prescription drug plans offered by private entities that prescription drug coverage. Part D
prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its
own drug formulary that identifies which drugs it will cover and at what tier or level. Although Part D prescription drug
formularies must include drugs within each therapeutic category and class of covered Part D drugs, not necessarily all the
drugs in each category or class must be included. 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 may increase demand for products for which we receive marketing approval. However, any negotiated
prices for our products covered by a Part D prescription drug plan likely will be lower than the prices we might otherwise
obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors
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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 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 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, with the exception of children’s hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on
orphan drugs. In addition, 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.
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.
In addition, in most foreign countries, 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 EU 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 EU Member States and parallel
distribution, or arbitrage between low priced and high priced member states, can further reduce prices. A member state may approve a
specific price for the medicinal product or it 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 study 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. Historically, products launched in the EU do not follow price structures of the U.S. 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.
XIV.
Human Capital
Our employees are relentlessly focused on the discovery and development of innovative medicines in which signaling by protein growth
factors plays a fundamental role. We believe that passion for science is what guides us to excellence. Our commitment to changing the
lives of people with serious disease is what motivates us to show up each and every day. Our people are our most important asset who
help us achieve extraordinary results and create new possibilities for patients. They embody our values and bring them to life in
everything we do. We are inspired and guided by these values of focusing on the patient, cultivating curiosity, collaborating with
purpose, upholding high standards and accelerating breakthroughs in making a difference in the lives of patients, families and
communities.
a. Employees
As of February 21, 2025, we had 196 full-time employees, of which 128 employees are engaged in research and development activities
and 68 are engaged in general and administrative activities. All of our employees are based in the U.S. and a majority are based in
Massachusetts. During 2024, we continued to make targeted hires to enhance our capabilities. The new employees were hired to support
a variety of functions and key initiatives, including strengthening our clinical development and starting to build our commercial
function, with hires in various areas of clinical development, operations and commercial leadership. We anticipate continuing to add
depth and new capabilities in key areas of our business in 2025, as well as hiring to support our infrastructure and overall anticipated
growth. None of our employees is represented by a labor union or covered by a collective bargaining agreement, and we believe our
relationship with our employees is good.
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b. Career Development and Growth
We emphasize employee development and training. To empower employees to unleash their potential individually and as a team,
we invest in our employees by providing development opportunities, and the necessary resources to support their success,
including mentorship guidelines, professional coaching, management and leadership training, online learning subscriptions and
access to industry events and conferences. The diversity of our employees and their skillsets also offers a unique opportunity for
us to learn from each other’s experiences.
c. Compensation and Benefits
Our competitive compensation programs are designed to align the compensation of our employees with our performance and to
provide the proper incentives to attract, retain and motivate employees to achieve superior results. The structure of our
compensation programs balances earnings for both short-term and long-term performance. We provide employee salaries that are
competitive within our industry based on position, skill level, experience and knowledge. Additionally, we offer both new hire
equity and annual equity grants to our employees to align the interests of our employees with the company’s mission.
We are committed to providing comprehensive benefit options and it is our intention to offer benefits that will allow our
employees and their families to live healthier and more secure lives. Some examples of the benefits we offer are: medical
insurance including prescription drug benefits, dental insurance, vision insurance, accident insurance, life insurance, disability
insurance, health savings accounts, flexible spending accounts, wellness programs, access to mental health support and benefits,
identity theft insurance and pet insurance.
In addition to ensuring our compensation programs are equitable, we also strive to provide employees with valuable recognition
for their contributions to our success. We have a multi-tier reward & recognition program that aligns with our company values at
all levels. Our rewards & recognition program begins with peer-to-peer recognition via an internal community board, followed
by quarterly awards for outstanding achievements, and ends with an annual award for each one of our values.
d. Employee Engagement
We routinely conduct confidential employee engagement surveys to obtain feedback on a variety of topics, including culture,
values, diversity, equity and inclusion, career development, employee satisfaction and tenure, and execution of our company
strategy. These survey results are reviewed by our people managers so that we can continue to increase employee satisfaction
and improve the well-being of our employees. We value and encourage fostering mechanisms and opportunities for two-way
dialogue. We actively strive to operationalize feedback provided by employees in ways that align with our business and culture.
We are also committed to communication and transparency, using multiple forums and channels to allow for the sharing of
appropriate, timely information to all employees.
e. Health & Safety
Ensuring the safety and wellbeing of our employees and communities is of the utmost importance to us, particularly following
the COVID-19 pandemic. What we have seen as a result of the pandemic is that flexibility is top of mind and a key
consideration. We continue to offer access to COVID tests and masks at no cost to our employees and visitors.
The need to provide the flexibility to work from home has refocused our work model. We’ve helped employees set up home
offices, provided them access to tools to perform their jobs remotely, provided ergonomic assessments of their working
environments, and helped them address IT connectivity. We’ve also found ways to continue to foster collaboration and
community through events like virtual trivia nights, scavenger hunts, coffee chats, charitable giving and lunch-n-learns, that we
would normally do in person.
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f. Diversity, Equity & Inclusion (“DE&I”)
We believe that fostering diversity, equity and inclusion is a business imperative which supports and encourages individuals to
show up as their whole selves. Investing in meaningful DE&I work enhances culture and employee experience. We are
committed to creating and maintaining a diverse, equitable, inclusive, and safe work environment. As we grow and mature, we
will continue to infuse DE&I within the business including: identifying barriers that impact recruitment, development, and
retention of underrepresented employees, identifying educational content, communicating the value and impact of DE&I on
goals and objectives, all while continuing to focus on hiring diverse talent at all levels of the company. Our ability to innovate
and meet people’s needs is strongest when all voices are heard and valued.
XV. Facilities
Our corporate headquarters and operations are located in Cambridge, Massachusetts.
In November 2019, we entered into a lease of laboratory and office space at 301 Binney Street in Cambridge, Massachusetts
and in 2021 we relocated our corporate headquarters to this location. The expiration date was originally in August 2025 and
included an option to extend the term by two years. In May 2024, we entered into the First Amendment to the Lease to extend
the term for approximately two years, commencing on August 19, 2025 with an option to extend the term by five years.
We believe that our facility at 301 Binney Street is adequate to meet our current needs, and that suitable additional space will
be available as and when needed.
XVL. Legal Proceedings
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations.
We are not currently a party to any material legal proceedings.
XVIL. Website Access to Reports
We are subject to the informational requirements of the Exchange Act and are required to file annual, quarterly and current
reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration
statement, at the SEC’s website at www.sec.gov. We also maintain a website at http://www.scholarrock.com. You may access,
free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any
amendments to those reports, as soon as reasonably practicable after such material is electronically filed with, or furnished to,
the SEC. The information that is posted on or is accessible through our website is not incorporated by reference into this
Annual Report on Form 10-K and should not be considered part of this or any other report that we file with or furnish to the
SEC.
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Item 1A. Risk Factors
Careful consideration should be given to the following risk factors, together with all other information set forth in this Annual
Report, including our consolidated financial statements and related notes, and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” and in other documents that we file with the SEC, in evaluating Scholar Rock
Holding Corporation and our subsidiaries (collectively, the “Company”, “we”, or “our”) and our business, before investing
in our common stock. Investing in our common stock involves a high degree of risk. If any of the following risks and
uncertainties actually occurs, our business, prospects, financial condition and results of operations could be materially and
adversely affected. The market price of our common stock could decline if one or more of these risks or uncertainties were to
occur, which may cause you to lose all or part of the money you paid to buy our common stock. The risk factors described
below disclose both material and other risks, and are not intended to be exhaustive and are not the only risks facing the
Company. New risk factors can emerge from time to time, and it is not possible to predict the impact that any factor or
combination of factors may have on our business, prospects, financial condition and results of operations. Certain statements
below are forward-looking statements. See “Special Note Regarding Forward-Looking Statements” in this Annual Report.
Summary of the Material Risks Associated with Our Business
Our business is subject to numerous risks and uncertainties that you should be aware of before making an investment decision,
including those highlighted in the section entitled “Risk Factors.” These risks include, but are not limited to, the following:
Risks Related to Product Development, Regulatory Approval and Commercialization
●
The regulatory approval process for our product candidates in the U.S., EU and other jurisdictions will be lengthy,
time-consuming and inherently unpredictable and we may fail to receive or be delayed in receiving regulatory
approval of apitegromab, SRK-181, SRK-439 and future product candidates.
●
We have never commercialized a product and are in the process of building and scaling our business for potential
commercialization of apitegromab in the United States and Europe, including building our compliance, medical
affairs and commercial organizations, which, if we are not able to do so successfully could negatively impact our
business, including the potential for a successful commercialization of apitegromab.
●
Changes or disruptions at the FDA and other government agencies caused by funding cuts, government
shutdowns, personnel reductions, substantial changes in leadership and policy, or other changes or disruptions to
these agencies’ operations could prevent these agencies from performing functions on which the operation of our
business relies, including the timely review and potential approval of our BLA application, and any such
disruptions and changes could negatively impact our business.
●
Product 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 apitegromab, SRK-181, SRK-439, or any future product candidates. Many of the factors
that cause, or lead to, a delay in the initiation or completion of clinical trials may also ultimately lead to the denial
of regulatory approval or limit market acceptance of our product candidates.
●
The results of preclinical studies and early-stage clinical trials may not be predictive of future results. Success of
a product candidate in an early-stage clinical trial may not be replicated in later-stage clinical trials.
●
Interim, initial and preliminary results from our clinical trials that we announce or publish from time to time may
change (e.g., from positive safety or efficacy results to poor or negative safety or efficacy results) as more patient
data become available and are subject to additional audit, validation and verification procedures that could result
in material changes in the final data.
●
We rely on third parties to conduct our clinical trials and to conduct certain aspects of our preclinical studies. If
these third parties do not successfully carry out their contractual duties or meet expected deadlines or comply
with legal and regulatory requirements, we may be delayed or unable to receive regulatory approval of or
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commercialize apitegromab, SRK-181, SRK-439 or any future product candidates, and our business could be
materially harmed.
●
Preclinical development is uncertain. Our preclinical programs, such as SRK-439, may experience delays or may
never advance to clinical trials, which would adversely affect our ability to develop our product pipeline and
receive regulatory approvals or commercialize these programs on a timely basis or at all, which would have an
adverse effect on our business.
Risks Related to Our Business and Operations
●
Because we rely on a limited number of third-party manufacturing and supply partners, our supply of research
and development, preclinical and clinical development materials, and, if approved, commercial materials, may
become limited or interrupted or may not be of satisfactory quantity or quality.
●
Our reliance on third parties, such as manufacturers, may subject us to risks relating to manufacturing scale-up
and may cause us to undertake substantial obligations, including financial obligations.
●
We will need to continue to grow our organization in certain areas, including our personnel, systems and
relationships with third parties, in order to develop our drug candidates and we may experience difficulties in
managing this growth.
●
Our executives and highly skilled technical and managerial personnel are critical to our business. If we have
transition in management, lose key personnel, or if we fail to recruit additional highly skilled personnel, our
ability to further develop apitegromab, SRK-181, SRK-439 and identify and develop new or next generation
product candidates may be impaired.
●
Failure to comply with health care privacy and data protection laws and regulations could lead to government
enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity
and could negatively affect our operation results and business.
Risks Related to Intellectual Property
●
Our success depends in part on our ability to protect our intellectual property. It is difficult and costly to protect
our proprietary rights and technology, and we may not be able to ensure their protection.
●
Our commercial success depends in part on our ability to develop, manufacture, market and sell our product
candidates and use our proprietary technologies without infringing the proprietary rights of third parties. Third-
party claims of intellectual property infringement may prevent or delay our product discovery, development, and
commercialization efforts.
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 will require additional capital to fund our operations and if we fail to obtain necessary capital, we will not be
able to complete the development and commercialization of apitegromab, SRK-181, SRK-439 and any future
product candidates.
Risks Related to Our Common Stock
●
The price of our stock is volatile, and you could lose all or part of your investment.
Risks Related to Product Development, Regulatory Approval and Commercialization
The regulatory approval process for our product candidates in the U.S., EU and other jurisdictions will be lengthy, time-
consuming and inherently unpredictable and we may fail to receive or be delayed in receiving regulatory approval of
apitegromab, SRK-181, SRK-439 and future product candidates.
The research, testing, manufacturing, labeling, approval, sale, import, export, marketing, promotion and distribution of
drug products, including biologics, are subject to extensive regulation by the FDA in the U.S. and other regulatory
authorities outside the U.S. We are not permitted to market any biological product in the U.S. until we receive a biologics
license from the FDA. Prior to filing the Biologics License Application (“BLA”) to the U.S. FDA for apitegromab as a
treatment for patients with SMA in January 2025, we have not submitted a BLA to the FDA or similar marketing
application to comparable foreign authorities. A BLA must include extensive preclinical and clinical data and supporting
information to establish that the product candidate is safe, pure and potent for each desired indication. FDA approval of a
new biologic or drug generally requires dispositive data from two (and in some cases, one) adequate and well-controlled
pivotal Phase 3 clinical trials of the biologic or drug in the relevant patient population. The FDA, EMA or comparable
foreign regulatory authorities may disagree with the design or implementation of our clinical trials or our analysis or
interpretation of data from preclinical studies or clinical trials, the results of our clinical trials may not meet the level of
statistical significance or amount of data required for approval, regulatory authorities may not agree with the statistical
methods we used to evaluate our clinical data, or we may be unable to demonstrate that our product candidates’ clinical
and other benefits outweigh their safety risks. A BLA must also include significant information regarding the chemistry,
manufacturing, and controls for the product, and the manufacturing facilities must complete a successful pre-license
inspection as well as certain key clinical sites conducting our clinical trials. The FDA, EMA or comparable foreign
regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which
we contract for clinical and commercial supplies.
The FDA may seek independent advice from a panel of experts, referred to as an Advisory Committee, on complex or
novel issues that may be presented in an application, including issues related to 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 receive approval of any product candidates that we develop based on the completed clinical trials.
Further, a clinical trial may be suspended or terminated by us, the IRBs for the institutions at which such trials are being
conducted, or the FDA, the competent authorities and/or ethics committees of the EU Member States or other regulatory
authorities, or recommended for suspension or termination by the DSMB for such trial, 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, EMA, competent authorities of the EU Member States or
other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects,
failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative
actions or lack of adequate funding to continue the clinical trial. If we experience termination of, or delays in the
completion of, any clinical trial of our product candidates, the prospects for regulatory approval and commercial prospects
for our product candidates will be harmed, and our ability to generate product revenue will be delayed. In addition, any
delays in completing any clinical trials will increase our costs, slow down our product development and approval process
and jeopardize our ability to commence product sales and generate revenue.
We have never commercialized a product and are in the process of building and scaling our business for potential
commercialization of apitegromab in the United States and Europe, including building our compliance, medical affairs
and commercial organizations, which, if we are not able to do so successfully could negatively impact our business,
including the potential for a successful commercialization of apitegromab.
Although we are preparing our commercialization capabilities in anticipation of a potential approval and commercial
launch of apitegromab, we have no prior sales or distribution experience and limited capabilities for marketing and market
access. We expect to invest significant financial and management resources over time to establish compliance, medical
affairs and commercial organizations for the marketing, sales and distribution of apitegromab in the United States as well
as Europe, if approved in each jurisdiction, and other capabilities and infrastructure to support commercial operations. If
we are unable to establish these commercial capabilities and infrastructure in a timely manner or to enter into agreements
with third parties to market, sell, and/or distribute apitegromab if approved, we may be unable to
59
complete a successful commercial launch. To the extent we enter into agreements with third parties, the revenue we receive
may depend upon the efforts of such third parties, over which we may have limited or no control, and our revenue from
product sales may be lower than if we had commercialized the products ourselves. We also face competition in our search
for third parties to assist us with the distribution, sales and marketing of our products.
Furthermore, we intend to commercialize apitegromab globally, if approved. In order to do so, we must build, on a
territory-by-territory basis, marketing, sales, distribution, managerial and other capabilities or make arrangements with
third parties to perform these services, and we may not be successful in doing so.
Changes or disruptions at the FDA and other government agencies caused by funding cuts, government shutdowns,
personnel reductions, substantial changes in leadership and policy, or other changes or disruptions to these agencies’
operations could prevent these agencies from performing functions on which the operation of our business relies,
including the timely review and potential approval of our BLA application, and any such disruptions and changes could
negatively impact our business.
The ability of the FDA and foreign regulatory authorities to review and or approve new products can be affected by a
variety of factors, including government budget and funding levels, staffing levels, and statutory, regulatory, and policy
changes, the FDA’s and foreign regulatory authorities' ability to hire and retain key personnel and accept the payment of
user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times
at the FDA and foreign regulatory authorities have fluctuated in recent years as a result. Disruptions at the FDA and other
agencies, including substantial leadership, personnel, and policy changes, may also slow the time necessary for new drugs
to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For
example, over the last few months, the U.S. government has issued executive orders that could adversely impact FDA
staffing and resources. Such changes could significantly impact the ability of the FDA to timely review and take action on
our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a
public company, future government shutdowns or substantial leadership, personnel, and policy changes could impact our
ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
In addition, changes in the requirements and policies of the FDA and other regulatory agencies with jurisdiction over our
products, including pricing and reimbursement framework under federal healthcare programs could affect the commercial
viability of our products, create revenue uncertainty, and impact our ability to achieve profitability. Additionally, regulatory
changes may introduce new challenges in obtaining FDA approval or navigating commercialization, and any delay in
securing applicable regulatory approvals would adversely affect our business and prospects. These uncertainties could also
present new challenges and/or opportunities as we navigate the submission of our BLA to the FDA and make other
preparations for potential commercialization. Any delay in obtaining, or our inability to obtain, applicable regulatory
approvals would delay or prevent commercialization of apitegromab and could materially adversely impact our business
and prospects.
We are seeking priority review for apitegromab for the treatment of SMA, which we requested at the time of submission
of our marketing application to the FDA, and may seek accelerated assessments for apitegromab at the time of
submitting a marketing application to the EMA. Even if received, priority review designation may not result in a shorter
timeline to approval, and such designation may be rescinded if a product no longer meets the qualifying criteria. An
application for accelerated assessment may not be accepted by the EMA and, even if it is, there is no guarantee that a
product will be granted a marketing authorization.
As appropriate, we may seek priority review at the time of submitting a marketing application for certain of our product
candidates. For apitegromab for the treatment SMA, we have requested Priority Review which, if granted, would shorten
the FDA’s review time to six months from the date of filing acceptance. The FDA may designate a product for priority
review if it is a product that treats a serious condition and, if approved, would provide a significant improvement in safety
or effectiveness when compared with other available therapies. Significant improvement may be illustrated by evidence of
increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting adverse
reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, or evidence
of safety and effectiveness in a new subpopulation. A priority review designation is intended to direct overall attention and
resources to the evaluation of such applications, and to shorten the FDA’s Prescription Drug
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61
User Fee Act (“PDUFA”) goal date for taking action on a marketing application from ten months to six months from FDA’s
acceptance of the application for review. However, priority review does not guarantee a faster review or approval process or
assure ultimate approval by the FDA. In addition, priority review designation may be rescinded if the FDA determines that a
product no longer meets the qualifying criteria.
In addition, as appropriate, we may seek accelerated assessment of a marketing authorization application by the EMA for
certain of our product candidates. The EMA may accept an application for accelerated assessment if the applicant can show
that its product is of major interest for public health, particularly from the perspective of therapeutic innovation. Accelerated
assessment reduces the timeframe for the EMA to review a marketing authorization application under the centralized
procedure from 210 days (excluding “clock stops”, when applicants are required to provide additional information in
response to questions from the EMA) to 150 days (excluding clock stops). There is no single definition of what constitutes
major public health interest and the EMA may not accept an application for accelerated assessment. Even if an application
for accelerated assessment is accepted, the evaluation of the marketing authorization application is subject to the same
evidence requirements as evaluation under a standard timetable and there is no guarantee that a product will be granted a
marketing authorization.
Product 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
apitegromab, SRK-181, SRK-439, or any future product candidates. Many of the factors that cause, or lead to, a delay in
the initiation or completion of clinical trials may also ultimately lead to the denial of regulatory approval or limit market
acceptance of our product candidates.
Before obtaining regulatory approvals for the commercial sale of any product candidates, we must demonstrate through
extensive preclinical studies and clinical trials that our product candidates are safe and effective in humans. Clinical
development is expensive and can take many years to complete, and its outcome is inherently uncertain, a clinical trial can
fail at any stage of development. We may experience delays in initiating, progressing or completing our clinical trials. We
may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful.
Clinical trials may fail to meet their primary or secondary endpoints, raise safety concerns or generate mixed 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. Clinical data may not be sufficient to apply for and obtain regulatory
approval on the timelines we expect or at all. Other decisions or actions of regulatory agencies may affect our plans, progress
or results.
We also may experience numerous unforeseen events during, or as a result of, any clinical trials in process or any future
clinical trials that we conduct that could delay or prevent our ability to receive marketing approval or commercialize
apitegromab, SRK-181, SRK-439, or any future product candidates, including:
●
delay or inability to reach agreement with the FDA or comparable foreign regulatory authorities on acceptable
clinical trial design, conduct or statistical analysis plan;
●
regulators, Institutional Review Boards (“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 CROs, the terms of which can be subject to extensive negotiation and may vary significantly
among different CROs and trial sites;
●
failure by our collaborators to provide us with an adequate and timely supply of product that complies with the
applicable quality and regulatory requirements for a combination trial;
●
collaborators may provide insufficient funding for a clinical trial program, delay or stop a clinical trial, abandon a
product candidate or clinical trial program, repeat or conduct new clinical trials or require a new formulation of a
drug candidate for clinical testing;
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●
clinical trials of any product candidates may fail to show safety and effectiveness, or produce negative or
inconclusive results and we may decide, or regulators may require us, to conduct additional preclinical studies or
clinical trials or we may decide to abandon product development programs;
●
the number of subjects required for clinical trials of any product candidates may be larger than we anticipate,
enrollment in these clinical trials may be slower or more challenging than we anticipate or subjects may drop out
of these clinical trials or fail to return for post treatment follow-up at a higher rate than we anticipate;
●
challenges in identifying or recruiting sufficient study sites or investigators for clinical trials;
●
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;
●
clinical study sites or clinical investigators may deviate from the clinical trial protocol or drop out of the trial,
which may require that we add new clinical trial sites or investigators;
●
we may elect to, or regulators, IRBs or ethics committees may require that we or our investigators, suspend or
terminate clinical research or trials for various reasons, including noncompliance with regulatory requirements or
a finding that the participants are being exposed to unacceptable health risks;
●
limitations on our or our CROs’ ability to access and verify clinical trial data captured at clinical study sites
through monitoring and source document verification;
●
the cost of clinical trials of a product candidate may be greater than we anticipate;
●
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our
product candidates may be insufficient or inadequate to initiate or complete a given clinical trial;
●
our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our
investigators, regulators, IRBs or ethics committees to suspend or terminate the trials, or reports from clinical
testing of other therapies may raise safety or efficacy concerns about our product candidates;
●
our product candidates may have undesirable side effects or other unexpected characteristics when used in a new
disease indication or with products in a different class which may raise safety, efficacy or other concerns about
our product candidate as a potential therapy in that new disease indication or other indications or its use with
products in a different class;
●
our failure to establish an appropriate safety profile for a product candidate based on clinical or preclinical data
for such product candidate and/or data emerging from other molecules in the same class as our product candidate;
●
the FDA, EMA or other regulatory authorities may require us to submit additional data, such as long-term
toxicology studies, or change or impose other requirements before permitting us to initiate a clinical trial;
●
evolution in the standard of care or changes in applicable governmental regulations or policies during the
development of a product candidate that require amendments to ongoing clinical trials and/or the conduct of
additional preclinical studies or clinical trials; and
●
lack of adequate funding to complete a clinical trial.
Many of the factors that cause, or lead to, a delay in the initiation or completion of clinical trials may also ultimately lead
to the denial of regulatory approval or limit market acceptance of our product candidates. For example, we anticipate some
of our future trials to, in part, utilize an open-label trial design, and our ongoing Phase 1 DRAGON clinical trial for SRK-
181 in cancer immunotherapy and our ongoing ONYX long-term extension study for apitegromab in patients from both the
TOPAZ and SAPPHIRE trials, utilize an open-label trial design. An open-label trial is one where both the patient and
investigator know whether the patient is receiving the test article or either an existing approved drug or placebo. Open-
label trials are subject to various limitations that may exaggerate any therapeutic effect as patients in
open-label studies are aware that they are receiving treatment. Open-label trials may be subject to a patient bias, for example,
if patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment.
Open-label trials also 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. The potential sources of bias in clinical trials as a result of open-label design may not be
adequately mitigated and may cause any of our trials that utilize such design to fail and additional trials may be necessary to
support future marketing applications. In addition, other types of trials (including randomized, double-blind, parallel arm
studies), particularly if smaller in size or if limited to one study, are also subject to potential sources of bias and limitations that
may exaggerate any therapeutic effect or falsely identify a positive efficacy signal, or conversely, fail to detect an efficacy
signal when in fact there may actually be a positive therapeutic effect. Furthermore, we are conducting clinical trials with
apitegromab in SMA, but by using apitegromab in a Phase 2 obesity clinical trial, we may become aware of safety information
associated with apitegromab that we did not observe when we used apitegromab in our clinical trials in SMA. We, the FDA,
the competent authorities and/or ethics committees of the EU Member States or other applicable regulatory authorities for their
jurisdictions, or an IRB for their site(s) may suspend clinical trials of a product candidate at any time for various reasons,
including a belief that subjects or patients in such trials are being exposed to unacceptable health risks or adverse side effects.
Our product development costs will increase if we experience delays in clinical testing or marketing approvals. We do not
know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or
at all. Significant clinical trial delays could also 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 clinical development programs may harm our business, financial condition and results of operations
significantly.
Our clinical development strategy depends on the continued use and availability of certain third-party approved drug
therapies.
Apitegromab and SRK-181 are our two clinical-stage product candidates. Patients in ONYX, our long-term extension study
for patients from both the TOPAZ and SAPPHIRE studies, are receiving apitegromab in conjunction with an approved SMN
therapy. These patients are reliant on the continued use and availability of such therapies. If access to an approved SMN
therapy such as nusinersen or risdiplam becomes limited or is unavailable, we may be forced to pause or stop our ONYX long-
term extension trials, or the medical condition of patients may be affected which could negatively affect the efficacy and safety
results for apitegromab in the trials or reduce the amount of data or confound the data from this trial. In May 2024, we initiated
the Phase 2 EMBRAZE proof-of-concept trial of apitegromab in combination with approved GLP-1 RAs in obesity. This
study relies upon the continued availability of such GLP-1 RA. Access to approved GLP-1 RAs are limited for use in clinical
trials and may continue to be limited for such use. If GLP-1 RAs become more limited or unavailable, we may be unable to
enroll, or may be delayed in enrolling patients, or may be forced to stop our Phase 2 study. While we have obtained substantial
supply of an approved GLP-1 RA for use in this Phase 2 study, we cannot assure you that we will be able to obtain adequate
supply for future studies of our product candidate in obesity. Patients in Part B of our ongoing Phase 1 DRAGON clinical trial
of SRK-181 in patients with locally advanced or metastatic solid tumors that exhibit resistance to anti-PD-(L)1 antibody
therapies are receiving SRK-181 in conjunction with an approved anti-PD-(L)1 therapy such as pembrolizumab. If access to
the approved anti-PD-(L)1 therapy becomes limited or is unavailable, we may be forced to pause or stop our Phase 1
DRAGON clinical trial, or the medical condition of patients may be affected which could negatively affect the efficacy and
safety results for SRK-181 in the trial. Any delay or suspension of our clinical trials would significantly and delay our clinical
development programs and harm our business, financial condition and results of operations.
The results or success of preclinical studies and early-stage clinical trials of our product candidates may not be predictive
of future results or replicated in later preclinical studies or clinical trials of our product candidates in the same indications
or other indications.
The results or success of preclinical studies and early-stage clinical trials of our product candidates may not be predictive of
future results or replicated in later preclinical studies or later-stage clinical trials. Preclinical studies and early-stage clinical
trials are primarily designed to study PK and PD, understand the side effects of product candidates, and evaluate
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various doses and dosing schedules. Our current or future product candidates may demonstrate different chemical,
biological and pharmacological properties in patients than they do in laboratory studies or may interact with human
biological systems in unforeseen or harmful ways. Product candidates in later-stages of clinical trials may fail to show
desired pharmacological properties or produce positive safety and efficacy results despite having progressed through
preclinical studies and early-stage clinical trials. We completed a Phase 1 clinical trial for apitegromab in healthy adult
volunteers and our Phase 2 TOPAZ clinical trial for the treatment of patients with Type 2 and Type 3 SMA. In 2024, we
announced data from the Phase 2 TOPAZ trial extension period which showed patient outcomes at 48 months of treatment
with apitegromab. These data show that continued treatment with apitegromab over the extended period was associated
with sustained clinical benefit, a continued favorable safety profile with no new safety findings, and a retention rate of over
90% in patients with nonambulatory Types 2 and 3 SMA receiving SMN therapy. In January 2022, we initiated our Phase
3 SAPPHIRE clinical trial of apitegromab for the treatment of patients with Type 2 and Type 3 SMA and in October 2024,
we announced positive top-line data from our Phase 3 SAPPHIRE clinical trial evaluating the efficacy and safety of
apitegromab. We also announced in October 2023 our plans to expand into cardiometabolic disorders based on preclinical
data with SRK-439, and we initiated the Phase 2 EMBRAZE proof-of-concept trial of apitegromab in combination with a
GLP-1 RA in obesity in May 2024 with top-line results expected in the second quarter of 2025. We cannot assure you that
any future clinical trials of apitegromab, such as our Phase 2 clinical trial in obesity, or of SRK-439 will show positive
results. Additionally, product candidates evaluated in one disease indication may interact in unforeseen or harmful ways in
a patient population with a different disease indication than was previously studied. For example, we have initiated a Phase
2 clinical trial of apitegromab in obesity. Apitegromab may interact in unforeseen or different ways in the obesity
population than in the SMA patient population. There can be no assurance that any of our current or planned clinical trials
will ultimately be successful or support further clinical development of any of our product candidates. There can also be no
assurance that any of our future clinical trials will show similar results to our earlier clinical trials or support further
development or registration of any of our product candidates.
Interim, initial, or preliminary results from our clinical trials that we announce or publish from time to time may
change (e.g., from positive safety or efficacy results to poor or negative safety or efficacy results) as more patient data
become available and are subject to additional audit, validation and verification procedures that could result in material
changes in the final data.
From time to time, we may publish interim, initial, or preliminary data, including interim top-line results or initial or
preliminary results from our clinical trials. Any interim, initial or preliminary data and other results from our clinical trials
may materially change as more patient data become available. Preliminary, initial, interim or top-line results also remain
subject to audit, validation and verification procedures that may result in the final data being materially different from the
interim, initial or preliminary data we previously published. As a result, interim, initial or preliminary data may not be
predictive of final results and should be viewed with caution until the final data are available. We may also arrive at
different conclusions, or considerations may qualify such results, once we have received and fully evaluated additional
data. For example, clinical data from our Phase 1 DRAGON trial in cancer immunotherapy, including preliminary safety,
efficacy and biomarker data were presented in June 2024 at the ASCO 2024 annual meeting and in November 2024 at the
SITC 39th Annual Meeting, and we will continue to present data from our Phase 1 DRAGON trial while the trial is
ongoing. Tumor response data is based on assessments by site investigators. Central reads for the tumor responses are also
being conducted, with a comprehensive review of the central reads to be performed once completed within and/or across
the cohorts. Differences between preliminary, initial or interim data and final data could adversely affect our business.
There is a high failure rate for drugs and biologics proceeding through clinical trials. A number of companies in the
pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical development even
after achieving promising results in earlier studies, and we cannot be certain that we will not face similar setbacks. Many
drugs have failed to replicate efficacy and safety results in larger or more complex later stage trials. Moreover, preclinical
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 regulatory
approval. If we fail to produce positive results in our ongoing and planned preclinical studies and clinical trials in
apitegromab, SRK-181, SRK-439 or if a regulatory authority interprets and analyzes the results as not positive, the
development timeline and regulatory approval and commercialization prospects for our product candidates, and,
correspondingly, our business and financial prospects, may be materially adversely affected.
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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 trial until its conclusion. The enrollment of patients depends on many factors, including:
●
the patient eligibility and exclusion criteria defined in the protocol;
●
the size of the patient population required for analysis of the trial’s primary endpoints;
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the willingness or availability of patients to participate in our trials;
●
the number and location of participating trial sites;
●
the proximity of patients to trial sites and any limitations on travel or access to trial sites;
●
the design of the trial;
●
our ability to recruit clinical trial investigators with the appropriate competencies and experience;
●
clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being
studied in relation to other therapies;
●
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 of their involvement in
the study.
For example, we are initially developing apitegromab for the treatment of SMA, a rare disease, affecting an estimated
20,000 patients in the U.S. and Europe. As a result, we may encounter difficulties enrolling patients in our clinical trials for
apitegromab due, in part, to the small size of this patient population. In addition, our clinical trials will compete with other
clinical trials for 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. 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 site.
Additionally, patients may opt out of participation in clinical trials in favor of treatment with FDA-approved therapies, or
therapies approved in the EU or other foreign jurisdictions.
Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our future clinical trials,
which could prevent completion of these trials and adversely affect our ability to advance the development of our product
candidates.
We rely on third parties to conduct our clinical trials and certain aspects of our preclinical studies. If these third parties
do not successfully carry out their contractual duties or meet expected deadlines or comply with legal and regulatory
requirements, we may be delayed or unable to receive regulatory approval of or commercialize apitegromab, SRK-181,
SRK-439, or any future product candidates, and our business could be materially harmed.
We depend upon third parties to conduct certain aspects of our preclinical studies and to conduct our clinical trials, under
agreements with universities, medical institutions, CROs, strategic partners and others. We often have to negotiate budgets
and contracts with such third parties, and if we are unsuccessful or if the negotiations take longer than anticipated, this
could result in delays to our development timelines and increased costs.
We rely especially heavily on third parties over the course of our clinical trials, and, as a result, have limited control over
the clinical investigators and limited visibility into their day-to-day activities, including with respect to their individual
employment policies or 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 Good Clinical Practice (“GCP”) requirements, which are regulations and guidelines enforced by the FDA and
comparable foreign regulatory authorities for conducting, recording and reporting the results of clinical trials to assure that data
and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.
Regulatory authorities enforce these 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 preclinical 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. We also are required to register certain ongoing clinical trials and post the results of completed clinical trials
on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in civil monetary
penalties, adverse publicity and civil and criminal sanctions. The FDA and National Institutes of Health have signaled the
government’s willingness to begin enforcing these registration and reporting requirements against non-compliant clinical trial
sponsors.
Our failure or any failure by these third parties to comply with these regulations would delay the regulatory approval process.
Moreover, our business may be implicated if any of these third parties violate federal or state fraud and abuse or false claims laws
and regulations or healthcare privacy and security laws.
Any third parties conducting aspects of our preclinical studies or clinical trials 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 they devote sufficient time
and resources to our preclinical studies and clinical trials. The third party CROs and clinical trial sites that conduct our clinical
trials have experienced staffing shortages and the inability of a CRO or clinical trial site to maintain appropriate levels of
competent staffing to support the demands of our clinical trials could negatively impact the execution of our clinical trials. 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 preclinical or clinical data they obtain is compromised due to the failure to adhere to
our protocols or regulatory requirements or for other reasons, our development timelines, including clinical development
timelines, may be extended, delayed or terminated and we may not be able to complete development of, receive 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 to do so on commercially reasonable terms. Switching or adding additional 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 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 these delays or challenges will not have a material adverse impact on our
business, financial condition and prospects.
We have received Orphan Drug designation from the FDA for apitegromab for the treatment of SMA and the EC granted
Orphan Medicinal Product designation to apitegromab for the treatment of SMA. We may seek Orphan Drug designation
from regulatory authorities in other jurisdictions for apitegromab and Orphan Drug designation from the FDA, EC or
regulatory authorities in other jurisdictions for our other product candidates. In any of these instances, we may not receive the
requested designation or we may be unable to realize the benefits associated with Orphan Drug designation, including the
potential for market exclusivity.
We have received Orphan Drug designation from the FDA for apitegromab for the treatment of SMA, and following the EMA’s
Committee for Orphan Medicinal Products’ positive opinion, the EC designated apitegromab as an orphan medicinal product for
the treatment of SMA. Even if we receive orphan drug exclusivity, the benefit of that exclusivity
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may be limited if we seek approval for an indication broader than the orphan-designated indication or could be revoked under
certain circumstances, for example if the FDA later determines that the request for designation was materially defective or that
we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.
Further, even if we receive orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from
competition during the exclusivity period because different drugs with different active moieties can be approved for the same
condition, and the same product can be approved for different uses. Also, in the U.S., even after an orphan drug is approved
and receives orphan drug exclusivity, the FDA may subsequently approve another drug for the same condition if the FDA
concludes that the latter drug is not the same drug, including because it has been shown to be clinically superior to the drug
with exclusivity because it is safer, more effective or makes a major contribution to patient care. In the EU, a marketing
authorization may be granted to a similar medicinal product to an authorized orphan product for the same orphan indication if:
●
the second applicant can establish in its application that its medicinal product, although similar to the orphan
medicinal product already authorized, is safer, more effective or otherwise clinically superior; or
●
the holder of the marketing authorization for the orphan medicinal product consents to a second medicinal
product application; or
●
the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient
quantities of orphan medicinal product.
●
See the sections of this Annual Report entitled, “Business — Government Regulation — US Biological Product
Development — Orphan Drug Designation” and “Business – Government Regulation – European Union Drug
Development — European Union Orphan Designation and Exclusivity.”
The FDA may 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.
We have received Rare Pediatric Disease designation for apitegromab for the treatment of SMA. However, a marketing
application for apitegromab, if approved, may not meet the eligibility criteria for a rare pediatric disease priority review
voucher.
We have received Rare Pediatric Disease designation for apitegromab for the treatment of SMA. Designation of a biologic
as a product for a rare pediatric disease does not guarantee that a BLA for such biologic will meet the eligibility criteria for
a rare pediatric disease priority review voucher at the time the application is approved. Under the Federal Food, Drug, and
Cosmetic Act, we will need to request a rare pediatric disease priority review voucher in our original BLA for apitegromab.
The FDA may determine that a BLA for apitegromab, if approved, does not meet the eligibility criteria for a rare pediatric
disease priority review voucher, including for the following reasons:
●
SMA no longer meets the definition of a rare pediatric disease;
●
apitegromab contains an active ingredient (including any ester or salt of the active ingredient) that has been
previously approved in an application;
●
the BLA is not deemed eligible for priority review;
●
the BLA does not rely on clinical data derived from studies examining a pediatric population and dosages of the
drug intended for that population; or
●
the BLA seeks approval for a different adult indication than the rare pediatric disease for which apitegromab is
designated.
The FDA’s authority to grant rare pediatric disease designations expired on December 20, 2024. Under the amended statutory
sunset provisions, the FDA may award a priority review voucher for an approved rare pediatric disease product application only
if the sponsor has rare pediatric disease designation for the drug and if that designation was granted by December 20, 2024.
After September 30, 2026, the FDA may not award any rare pediatric disease priority review vouchers. If the BLA for
apitegromab is not approved on or prior to September 30, 2026 for any reason, it will not be eligible for a priority review
voucher. However, it is possible the authority for the FDA to award rare pediatric disease priority review vouchers will be
further extended by Congress.
We have received Fast Track designation from the FDA and PRIME designation from the EMA for apitegromab for the
treatment of SMA. We may seek Fast Track designation or Breakthrough Therapy designation from the FDA or PRIME
designation from the EMA for certain of our current and future product candidates, and we may not be successful in
receiving such designations, or if received, such designation may not actually lead to a faster development or regulatory
review or approval process.
We may seek Fast Track designation, Breakthrough Therapy designation or PRIME designation for certain of our product
candidates.
In May 2021, the FDA granted Fast Track designation for apitegromab for the treatment of SMA. 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 that the FDA would decide to grant it. Although the FDA has granted Fast Track designation for
apitegromab in SMA, 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.
Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product
candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to
make such designation. In any event, the receipt of a Breakthrough Therapy designation for a product candidate may not result
in a faster development process, review or approval compared to products 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 the products no longer meet the conditions for qualification and
rescind the breakthrough designation. See the sections of this Annual Report entitled,
“Business — Government Regulation — US Biological Product Development — Expedited Development and Review
Programs.”
In March 2021, the EMA granted PRIME designation to apitegromab for the treatment of SMA. PRIME is a scheme provided
by the EMA to enhance support for the development of medicines that target an unmet medical need. The receipt of PRIME
designation for apitegromab for the treatment of SMA may not result in a faster development process, review or approval
compared to products considered for approval under conventional regulatory agency procedures and does not assure ultimate
approval by the EMA.
See the section of this Annual Report entitled, “Business – Government Regulation – European Union Drug Development—
European Union Expedited Review and Development.”
Receiving and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be
successful in receiving or maintaining regulatory approval of our product candidates in other jurisdictions.
Receiving and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be
able to receive or maintain regulatory approval in any other jurisdiction, but a failure or delay in receiving regulatory approval
in one jurisdiction may have a negative effect on the regulatory approval process in other jurisdictions. Even if the FDA grants
marketing approval of a product candidate, the EC, the competent authorities of EU Member States or comparable regulatory
authorities in foreign jurisdictions may not approve the manufacturing, marketing and promotion of the product candidate in
other countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods
different from, and greater than, those in the U.S., including additional preclinical studies or clinical trials, as clinical trials
conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside
the U.S., a product candidate must be approved
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for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for
our products is also subject to approval.
We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the U.S. have
requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions.
Receiving 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, our target market will
be reduced and our ability to realize the full market potential of our product candidates will be harmed.
Even if we receive regulatory approval of any product candidates, 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, including requirements
related to manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, import, export,
conduct of post-marketing studies and submission of safety, efficacy and other post-marketing information. The safety and
efficacy profile of any product will continue to be closely monitored by the FDA and comparable foreign regulatory authorities.
In addition, we will be subject to continued compliance with current Good Manufacturing Practice (“cGMP”) and GCP
requirements for any clinical trials that we conduct post-approval.
Manufacturers and manufacturers’ facilities are required to comply with extensive FDA, EU and comparable foreign regulatory
authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. As
such, we and our contract manufacturers will be subject to periodic review and inspections to assess compliance with cGMP
and adherence to commitments made in any BLA or 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 uses for
which the product may be marketed or contain requirements for potentially costly post-market testing, including Phase 4
clinical trials and surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a 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.
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, untitled letters or holds on clinical trials;
●
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
●
permanent injunctions and consent decrees, including the imposition of civil or criminal penalties.
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The FDA strictly regulates marketing, labeling, advertising, and promotion of products that are placed on the market. Products
may be promoted only for their approved indications and in a manner consistent with their FDA-approved labeling. The FDA
and other agencies actively enforce the laws and regulations prohibiting the promotion of unapproved uses and a company that
is found to have improperly promoted unapproved uses may be subject to significant liability.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or
administrative action, either in the U.S. or abroad. In addition, the U.S. Supreme Court’s July 2024 decision to overturn
established case law giving deference to regulatory agencies’ interpretations of ambiguous statutory language has introduced
uncertainty regarding the extent to which the FDA’s regulations, policies and decisions may become subject to increasing legal
challenges, delays, and/or changes. 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 face enforcement action and our
business may be harmed.
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 apitegromab, SRK-181, SRK-439 or any future product candidate we develop receives marketing approval, whether as a
single agent or in conjunction with other therapies, it may nonetheless fail to gain sufficient market acceptance by physicians,
patients, third-party payors, and others in the medical community. There may be delays in getting our product candidates, if
approved, on hospital or insurance formularies or limitations on coverage that may be available in the early stages of
commercialization for newly approved drugs. If any of our product candidates are approved but fail to achieve market
acceptance among hospitals, physicians, patients or health care payors, we will not be able to generate significant revenues,
which would have a material adverse effect on our business, prospects, financial condition and results of operations. For
example, doctors may deem it sufficient to treat patients with SMA with an SMN therapy such as nusinersen or risdiplam, and
therefore will not be willing to utilize apitegromab in conjunction with such SMN therapy. 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:
●
the efficacy and safety of such product candidate as demonstrated in clinical trials;
●
the indications for which the product candidate is approved;
●
efficacy and potential advantages compared to alternative treatments;
●
the ability to obtain sufficient third-party coverage and adequate reimbursement;
●
the amount, scope and nature of the clinical data (and other forms of data) available;
●
the ability to offer our products, if approved, for sale at competitive prices;
●
the timing of market introduction of our products as well as competitive products;
●
convenience and ease of administration compared to alternative treatments;
●
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
●
the strength of marketing and distribution support; and
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the prevalence and severity of any side effects.
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If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and
market apitegromab, we may not be successful in commercializing apitegromab if and when it is approved.
We have recently begun to build our sales or marketing infrastructure and have limited experience in the sale, marketing or
distribution of pharmaceutical products. To achieve commercial success for any approved product for which we retain sales and
marketing responsibilities, we must continue to develop a sales and marketing organization and/or outsource certain functions to
third parties.
There are risks involved both with establishing our own sales and marketing capabilities and with entering into arrangements with
third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and
could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish
marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these
commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and
marketing personnel.
Factors that may inhibit our efforts to commercialize our product candidates on our own include:
●
our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
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the inability of sales personnel to obtain access to physicians or educate adequate numbers of physicians on the
benefits of prescribing any future products; and
●
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
If we enter into arrangements with third parties to perform sales, marketing, third-party logistics providers, specialty
distributors, specialty pharmacies, patient service providers and distribution services, our product revenue or the
profitability of these product revenue to us may be lower than if we were to market and sell any products that we develop
ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our
product candidates or may be unable to do so on terms that are favorable to us. We may have little control over such third
parties, and any of them may fail to devote the necessary resources and attention to sell and market our products
effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with
third parties, we will not be successful in commercializing our product candidates.
Competing therapies may exist or could emerge that adversely affect the amount of revenue we are able to generate
from the sale of apitegromab, if approved, or any of our future product candidates, if successfully developed and
approved.
The biopharmaceutical industry is highly competitive. There are many public and private companies, universities,
governmental agencies and other research organizations actively engaged in the research and development of products that
may be similar to our product candidates or address similar markets. If we are successful in developing apitegromab, it is
probable that the number of companies seeking to develop products and therapies similar to our products candidates or
targeting similar indications will increase. Many of our potential competitors, alone or with their strategic partners, have
substantially greater financial, technical and human resources than we do, and significantly greater experience in the
discovery and development of product candidates, obtaining FDA and other regulatory approvals of treatments and the
commercialization of those treatments. Mergers and acquisitions in the biotechnology and pharmaceutical industries may
result in even more resources being concentrated among a smaller number of our competitors. We expect competition in
the indications we are pursuing will focus on efficacy, safety, convenience, availability, and price. The commercial
opportunity for apitegromab, if approved, could be reduced or eliminated if our competitors develop and commercialize
products that are perceived to be safer, more effective, have fewer or less severe side effects, are more convenient or are
less expensive than apitegromab. Our competitors also may obtain FDA or other regulatory approval
for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a
strong market position before we are able to enter the market.
Preclinical development is uncertain. Our preclinical programs, such as SRK-439, may experience delays or may never
advance to clinical trials, which would adversely affect our ability to develop our product pipeline and receive
regulatory approvals or commercialize these programs on a timely basis or at all, which would have an adverse effect on
our business.
Before we can commence clinical trials for any product candidate, we must complete extensive preclinical studies that
support our planned INDs in the U.S., or similar applications in other jurisdictions. We cannot be certain of the timely
completion or outcome of our preclinical studies or of the timing of any planned IND submission to the FDA or similar
applications in other jurisdictions, and cannot predict if the FDA, EMA or other regulatory authorities will accept our
proposed clinical programs or if the outcome of our preclinical 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 for the clinical
development of our preclinical programs, such as our potential IND for SRK-439, 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, the competent authorities and/or
ethics committees in the EU Member States or other regulatory authorities allowing clinical trials to begin.
Conducting preclinical testing can be a lengthy, time-consuming and expensive process. The time required for such testing
may vary substantially according to the type, complexity and novelty of the program, and can be several years or more per
program. Delays associated with programs for which we are conducting preclinical testing and studies may cause us to
incur additional operating expenses. We also may be affected by delays associated with the preclinical testing and studies
of certain programs that are the responsibility of our collaborators or our potential future collaborators over which we have
limited or no control. The commencement and rate of completion of preclinical studies for a product candidate may be
delayed by many factors, including, for example, challenges in reaching consensus with regulatory agencies regarding the
scope of the necessary preclinical study program and/or appropriate preclinical study designs.
Risks Related to Our Business and Operations
Because we rely on a limited number of third-party manufacturing and supply partners, our supply of research and
development, preclinical and clinical development materials, and, if approved, commercial materials, may become
limited or interrupted or may not be of satisfactory quantity or quality.
We have no experience manufacturing our product candidates on a commercial scale. We rely on a limited number of third-
party contract manufacturers to manufacture all of our clinical trial product supplies and, if approved, all of our
commercial product supplies, including all of our drug substance, drug product, labeling, and packaging. We do not own
our own manufacturing facilities for producing any clinical trial or commercial product supplies. There can be no
assurance that our preclinical, clinical development, and, if approved, commercial product supplies will not be limited or
interrupted due to impacts to our third-party contract manufacturers. For example, we rely on a single source supplier for
the manufacture of apitegromab and SRK-181. Any replacement of our current drug substance contract manufacturer or
drug product contract manufacturer would require significant resources, lead time and expertise because there may be a
limited number of qualified replacements. In addition, our ability to procure sufficient supplies for the development of
apitegromab, SRK-181, SRK-439 or future product candidates could be impacted by factors outside of our control such as
current macroeconomic and geopolitical events and the changing rates of inflation and interest rates. We have no direct
control over our contract manufacturers’ ability to maintain adequate quality control, quality assurance and qualified
personnel. Furthermore, all of our third-party contract manufacturers supply and/or manufacture materials or products for
other companies, which exposes our third-party contract manufacturers to regulatory risks for the production of such
materials and products. As a result, failure to satisfy the regulatory requirements for the production of those materials and
products may affect the regulatory clearance of our contract manufacturers’ facilities generally.
The manufacturing process for a product candidate is subject to FDA and foreign regulatory authority review. Suppliers
and manufacturers must meet applicable manufacturing requirements and undergo rigorous facility and process validation
tests required by regulatory authorities in order to comply with regulatory standards, such as cGMP. In the event that any of
our manufacturers fails to comply with such requirements or to perform its obligations to us in relation to quality, timing or
otherwise, or if our supply of components or other materials becomes limited or interrupted for
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other reasons, we may be forced to manufacture the materials ourselves, for which we currently do not have the capabilities or
resources, or enter into an agreement with another third-party, which we may not be able to do on reasonable terms, if at all. In
some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the
original manufacturer and we may have difficulty transferring such skills or technology to another third-party and a feasible
alternative may not exist. These factors would increase our reliance on the original manufacturer or require us to obtain a license
from such manufacturer in order to have another third-party manufacture our product candidates. If we must change manufacturers
for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with
quality standards and with all applicable regulations and guidelines. 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
manufacturer could negatively affect our ability to develop and commercialize product candidates in a timely manner or within
budget.
We expect to continue to rely on third-party manufacturers for commercial supplies of drug substance, drug product, and packaged
and labeled product for apitegromab, if we receive regulatory approval. We will also rely on our contract manufacturers to
manufacture sufficient quantities of apitegromab to produce validation batches. We do not have long-term supply agreements in
place with many of our contract manufacturers, and each batch of our drug product for our product candidates is individually
contracted through a purchase order governed by master service and quality agreements. If our existing drug product contract
manufacturers for our product candidates are not willing to enter into long-term supply agreements, or are not willing or are unable
to supply product candidate supplies to us, we could be required to engage new contract manufacturers who would need to scale
up the manufacturing process before we would be able to use the product candidate supplies they manufacture, which could result
in delays to our clinical trials or future commercialization plans, if we are successful and gain approval.
To the extent that we have existing, or in the future enter into, manufacturing arrangements with third parties, we will depend on
these third parties to perform their obligations in a timely manner consistent with contractual and regulatory requirements,
including those related to quality control and assurance. If we are unable to obtain or maintain third-party manufacturing for
product candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our product
candidates successfully. Our or a third-party’s failure to execute on our manufacturing requirements and comply with cGMP could
adversely affect our business in a number of ways, including:
●
an inability to initiate or continue clinical trials for apitegromab, SRK-181, SRK-439 or of future product
candidates under development;
●
delay in submitting regulatory applications, or receiving regulatory approvals, for apitegromab, SRK-181, SRK-
439 or future product candidates;
●
loss of the cooperation of an existing or future collaborator;
●
subjecting third-party manufacturing facilities or our manufacturing facilities to additional inspections by
regulatory authorities;
●
requirements to cease distribution or to recall batches of apitegromab, SRK-181, SRK-439 or future product
candidates; and
●
in the event of approval to market and commercialize apitegromab, SRK-181, SRK-439 or a future product
candidate, an inability to meet commercial demands for our products.
In addition, we contract with fill and finishing providers which we believe have the appropriate expertise, facilities and
scale to meet our needs. Failure to maintain compliance with cGMP can result in a contractor receiving FDA sanctions,
which can impact our ability to operate or lead to delays in any clinical development programs or commercial supply. We
believe that our current fill and finish contractors are operating in accordance with cGMP, but we can give no assurance
that the FDA, EMA, competent authorities of the EU Member States or other regulatory agencies will not conclude that a
lack of compliance exists. In addition, any delay in contracting for fill and finish services, or failure of
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the contract manufacturer to perform the services as needed, may delay any clinical trials, registration and commercial launches,
which could negatively affect our business.
Our reliance on third parties, such as manufacturers, third-party logistics providers, specialty distributors, specialty
pharmacies, and patient service providers, may subject us to risks relating to manufacturing scale-up and may cause us to
undertake substantial obligations, including financial obligations.
In order to conduct later-stage clinical trials, or, if approved, produce commercial product, we will need to manufacture such
product candidate in large quantities. In particular, we expect to rely on our contract manufacturers to scale our manufacturing
processes for future clinical trials of apitegromab, and if our development efforts are successful and if apitegromab is approved,
for commercial supply of apitegromab. We, or any manufacturing partners, may be unable to successfully increase the
manufacturing capacity for apitegromab in a timely or cost-effective manner to meet our supply requirements. If we successfully
commercialize any of our product candidates, we may be required to establish large-scale commercial manufacturing capabilities.
As our drug development pipeline increases and matures, we will have a greater need for clinical study and commercial
manufacturing capacity. In addition, quality-control issues may arise during scale-up activities. If we, or any manufacturing
partners, are unable to successfully scale-up the manufacture of our product candidates in sufficient quality and quantity, the
development, testing, clinical trials, and if approved, commercial supply, of that product candidate may be delayed or infeasible,
and regulatory approval, commercial launch or commercial supply of any resulting product may be delayed or not received,
which could significantly harm our business.
Our reliance on third-party logistics providers, specialty distributors, specialty pharmacies, and patient services providers may
subject us to risks that could impact the commercialization and patient access to apitegromab. If apitegromab is approved, we
expect to use limited distribution agreements, which could concentrate supply with a small number of specialty pharmacies,
increasing the risk of distribution disruptions, capacity constraints, and gaps in patient access if these partners fail to perform.
Additionally, third parties manage high-touch patient support, reimbursement processing, and copay assistance, and any failures
in these areas could lead to delays in initiation of treatment, coverage denials, and financial barriers for patients. Additionally,
challenges such as disruptions in logistics, quality-control issues, non-compliance with regulatory requirements, or delays in
onboarding key distribution partners may arise. If we or our third-party distribution service providers fail to scale and manage
commercial distribution operations efficiently, the launch, commercialization, or continued supply of apitegromab may be
delayed or compromised, which could significantly harm our business, reputation, and financial results.
We will need to continue to grow our organization in certain areas, including our personnel, systems and relationships with
third parties, in order to develop and potentially commercialize our product candidates, and we may experience difficulties in
managing this growth.
As our clinical development plans and commercialization strategies continue to develop and expand, we expect we will need to
hire additional managerial, clinical development, scientific, regulatory, commercial, and administrative personnel. Our ability to
compete in the highly competitive biotechnology industry depends upon our ability to attract and retain highly qualified
specialized personnel. As apitegromab approaches commercialization, we will also need to hire sales, marketing and other
commercial personnel. Future growth would impose significant added responsibilities on members of management, including:
●
identifying, recruiting, integrating, maintaining and motivating additional employees;
●
managing our development efforts effectively, including the clinical and regulatory review process for
apitegromab, SRK-181, SRK-439, and any future product candidates, while complying with our contractual
obligations to contractors and other third parties; and
●
improving our operational, financial and management controls, reporting systems and procedures.
Our future financial performance and our ability to commercialize apitegromab, SRK-181, SRK-439 and future product
candidates, if approved, 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 third parties, advisors and
consultants to provide certain services, including CROs, contract manufacturers and companies focused on antibody
development and discovery activities. There can be no assurance that the services of third parties, 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, accuracy or quantity of the services provided is
compromised for any reason, our preclinical studies and clinical trials may be extended, delayed or terminated, and we may not
be able to receive, or may be substantially delayed in receiving, regulatory approval of apitegromab, SRK-181, SRK-439 or
future 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.
We may not be able to attract or retain qualified management and scientific personnel in the future due to the intense
competition for a limited number of qualified personnel in the biopharmaceutical space, especially those engaged in oncology
and immuno-oncology and cardiometabolic fields. In this highly competitive market, there may be increased costs to attract and
retain qualified personnel. Many of the other pharmaceutical companies that we compete against for qualified personnel have
greater financial resources, different risk profiles and a longer history in the industry than we do. They also may provide more
diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high
quality candidates than what we have to offer. If we are not able to offer competitive compensation or appealing opportunities
for high quality candidates, we may not be able to attract or retain qualified candidates and personnel. 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 apitegromab, SRK-181,
SRK-439 or any future product candidates and, accordingly, may not achieve our research, development and commercialization
goals.
Our executives and highly skilled technical and managerial personnel are critical to our business. If we have transition in
management, lose key personnel, or if we fail to recruit additional highly skilled personnel, our ability to further develop and
potentially commercialize apitegromab, SRK-181 and SRK-439 and identify and develop new or next generation product
candidates may be impaired.
Our performance substantially depends on the performance of our management team. Any transition or loss of the services of
any of our executives or highly skilled technical and managerial personnel could have a disruptive impact on our ability to
implement our strategy and impede the achievement of our research, development and commercialization objectives. In
addition, these transitions or departures could, cause us to incur increased operating expenses, divert senior management
resources in searching for replacements, or otherwise have a material adverse effect on our business, internal controls, financial
condition and results of operations. Management transition inherently causes some loss of institutional knowledge, which can
negatively affect strategy and operational execution during this phase. If we have additional changes to our executives or highly
skilled technical and managerial personnel, we may be unable to successfully manage and grow our business, and our results of
operations, execution of corporate goals, internal controls and financial condition could suffer as a result. The unplanned loss of
the services of our executives or other personnel also could harm our reputation.
Our internal computer systems, or those used by our contract research organizations, or other contractors or consultants,
may fail or suffer security breaches, incidents or compromises.
We have outsourced significant parts of our IT and business infrastructure to third-party providers, and we currently use these
providers to perform business critical IT and business services for us. Despite the implementation of security measures, our
computer systems, whether they are managed by us directly or by the third parties with whom we contract, and those of our
existing and future CROs, and other contractors and consultants are vulnerable to damage from computer viruses and
unauthorized access. While we have not experienced any such material system failure or security breach to date, if such an event
were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and
our business operations. Our increased reliance on personnel working from home may increase our cyber security risk, create
data accessibility concerns, and make us more susceptible to workforce and communication disruptions, any of which could
adversely impact our business operations or delay necessary interactions with local and federal regulators, ethics committees,
manufacturing sites, research or clinical trial sites and other agencies and contractors. For example, the loss of preclinical or
clinical data could result in delays in our
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regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third
parties for the manufacture of apitegromab, SRK-181 and SRK-439 and to conduct preclinical studies and 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 apitegromab, SRK-181, SRK-439 and future product candidates could be delayed.
As a company that uses IT systems, our systems may be subject to cyber-attacks, incidents or compromises. Due to the
nature of some of these attacks, there is a risk that they may remain undetected for a period of time. While we have
invested in the protection of data and information technology, our efforts may not prevent service interruptions or security
breaches (e.g., ransomware attacks). We maintain cyber liability insurance; however, this insurance may not be sufficient to
cover the financial, legal, business, or reputational losses, including regulatory fines, that may result from an interruption or
breach of our systems.
Our employees, independent contractors, consultants, commercial partners, vendors and distributors 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 that fails to comply with the laws and regulations of the FDA, EU Member States, EMA and other
similar foreign regulatory bodies; provide true, complete and accurate information to the FDA, EMA and other similar
foreign regulatory bodies; comply with manufacturing standards we have established; comply with healthcare fraud and
abuse laws in the U.S. and similar foreign fraudulent misconduct laws; or report financial information or data accurately or
to disclose unauthorized activities to us. If we receive FDA approval or EMA approval or approval from other foreign
regulatory bodies of apitegromab, SRK-181, SRK-439 or any future product candidates and begin commercializing those
products in the U.S. or in such other jurisdictions, our potential exposure under such laws 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. We have adopted a code of business conduct and ethics, but it is not always possible to
identify and deter misconduct by our employees, independent contractors, consultants, commercial partners and vendors,
and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged
risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to
comply with these laws or regulations. If any actions are instituted against us and we are not successful in defending
ourselves or asserting our rights, those actions could result in the imposition of civil, criminal and administrative penalties,
damages, monetary fines, individual imprisonment, disgorgement, possible exclusion from participation in government
healthcare programs, 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, contractual damages, reputational harm,
diminished profits and future earnings and the curtailment of our operations, any of which could adversely affect our ability
to operate our business, financial condition and results of operations.
Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business and
results of operations.
Changes in statutes, regulations or the interpretation of existing statutes or 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; (iv) additional record-keeping requirements; or (v) changes to
our pricing arrangements, or coverage of or reimbursement for our products. If any such changes were to be imposed, they
could adversely affect the profitability and operation of our business. See the sections of this Annual Report entitled,
“Business — Government Regulation — Current and Future Healthcare Reform Legislation” and “Business – Government
Regulation – Coverage and Reimbursement.”
It is possible that the ACA, as currently enacted or as it may be amended or otherwise modified in the future, as well as
other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare or
other healthcare funding, more rigorous coverage criteria, or new payment methodologies or otherwise affect the prices we
may obtain for any of our product candidates for which we may receive regulatory approval. Any reduction in
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reimbursement from Medicare or other government programs may result in a similar reduction in payments from
commercial payors. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that
have been adopted will be modified or invalidated. The continuing health care reform initiatives efforts of the government,
insurance companies, managed care organizations and other payers of health care services to contain or reduce costs of
health care may adversely affect the demand for any product candidates for which we may obtain regulatory approval, our
ability to set a price that we believe is fair for our products, our ability to obtain coverage and reimbursement approval for
a product, our ability to generate revenues and achieve or maintain profitability; and the level of taxes that we are required
to pay.
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 U.S. 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 research of our product candidates, as well as 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(s), certain customer incentive programs and other business arrangements generally. Activities subject to these
laws also involve the improper use of information received in the course of patient recruitment for clinical trials. See the
section in this Annual Report entitled “Business – Government Regulation – Other Healthcare Laws.”
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 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, fines, disgorgement, individual imprisonment, possible exclusion from participation in
federal and state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as
well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other
agreement to resolve allegations of non-compliance with these laws. Any action for violation of these laws, even if
successfully defended, could cause a pharmaceutical manufacturer to incur significant legal expenses and divert
management’s attention from the operation of the business. Prohibitions or restrictions on sales or withdrawal of future
marketed products could materially affect business in an adverse way.
Failure to comply with health care privacy and data protection laws and regulations could lead to government
enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and
could negatively affect our operating results and business.
We, our CROs, and any potential collaborators may be subject to strict and changing federal, state, and foreign data
protection laws and regulations (i.e., laws and regulations that address privacy and data security) and policies and
contractual obligations related to data privacy and security. In the U.S., numerous federal and state laws and regulations,
including federal health information privacy laws, state data breach notification laws, state health information privacy laws,
and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the
collection, use, disclosure and protection of health-related and other personal information could apply to our operations or
the operations of our CROs and collaborators. In addition, we may obtain health information from third parties (including
research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under
the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information
Technology for Economic and Clinical Health Act of 2009. Depending on the facts and circumstances, we could be subject
to civil, criminal, and administrative penalties if we knowingly obtain, use, or disclose individually identifiable health
information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
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Compliance with U.S. and international data protection laws and regulations could require us to take on more onerous
obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to
operate in certain jurisdictions. Failure to comply with these laws and regulations could result in government enforcement
actions (which could include civil, criminal and administrative penalties), private litigation, and/or adverse publicity and
could negatively affect our operating results and business. Moreover, clinical trial subjects, employees and other
individuals about whom we or our potential collaborators obtain personal information, as well as the providers who share
this information with us, may limit our ability to collect, use and disclose the information. Claims that we have violated
individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we
are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could
harm our business.
We have conducted our Phase 2 TOPAZ clinical trial and Phase 3 SAPPHIRE clinical trial of apitegromab in the European
Economic Area (“EEA”), and are currently conducting ONYX, our long-term extension clinical trial of apitegromab, in the
EEA and the UK, and may conduct future clinical trials in the EEA or the UK and therefore may be subject to additional
privacy laws. The EU General Data Protection Regulation (the “EU GDPR”) imposes a broad range of strict requirements
on companies subject to the EU GDPR, including requirements relating to having legal bases and conditions for processing
personal information relating to personal data and transferring such personal data outside the EEA or the UK, including to
the U.S., providing details to those individuals regarding the processing of their personal information, keeping personal
information secure, having data processing agreements with third parties who process personal information, responding to
individuals’ requests to exercise their rights in respect of their personal information, where required reporting security
breaches involving personal data to the competent national data protection authority and affected individuals, where
required, appointing data protection officers, where required conducting data protection impact assessments for high risk
processing, and record-keeping. The EU GDPR imposes penalties in the event of non-compliance, including fines of up to
10,000,000 Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to
20,000,000 Euros or up to 4% of our total worldwide annual turnover for more serious offenses. The EU 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 EU GDPR.
The EU GDPR ceased to apply in the UK after the UK’s exit from the EU on January 31, 2020, but the UK incorporated
the EU GDPR (as it existed on December 31, 2020 but subject to certain UK specific amendments) into UK law (“ 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 currently still aligned to the EU’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. Although the UK is
regarded as a third country under the EU’s GDPR, the UK is recognized as providing adequate protection under the EU
GDPR (“UK Adequacy Decision”) and, therefore, transfers of personal data originating in the EU to the UK remain
unrestricted. Likewise, personal data transfers from the UK to the EEA remain free flowing. The UK Government
introduced a Data Protection and Digital Information Bill which failed in the UK legislative process. A new Data (Use and
Access) Bill (“UK Bill”) has been introduced into parliament. If passed, the final version of the UK Bill may have the
effect of further altering the similarities between the UK and EEA data protection regime and threaten the UK Adequacy
Decision from the European Commission, or EC. Further, this may lead to additional compliance costs and could increase
our overall risk. The respective provisions and enforcement of the EU GDPR and UK GDPR may further diverge in the
future and create additional regulatory challenges and uncertainties.
Adequate safeguards must be implemented to enable the transfer of personal data outside of the EEA or the UK in
compliance with European and UK data protection laws. The EC has issued forms of standard contractual clauses
(“SCCs”) for data transfers from controllers or processors in the EEA (or otherwise subject to the EU GDPR) to controllers
or processors established outside the EEA (and not subject to the EU GDPR). The UK is not subject to the EC’s SCCs but
has published its own standard clauses, the International Data Transfer Agreement, which enables transfers from the UK.
We will be required to implement these new safeguards when conducting restricted data transfers under the EU GDPR and
UK GDPR and doing so will require significant effort and cost. Where relying on the SCCs or UK IDTA for data transfers,
we may also be required to carry out transfer impact assessments to assess whether the recipient is subject to local laws
which allow public authority access to personal data.
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In July 2023, the EC adopted its adequacy decision for the EU-U.S. Data Privacy Framework (“Framework”). On the basis
of the new adequacy decision, personal data can flow safely from the EU to U.S. companies participating in the
Framework, without having to put in place additional data protection safeguards. There has been an extension to the
Framework to cover UK transfers to the United States. The long-term validity of the Framework remains uncertain as the
Framework could be challenged like its predecessor frameworks. This complexity and the additional contractual burden
increases our overall risk exposure. There may be further divergence in the future, including with regard to administrative
burdens.
The EU GDPR and UK GDPR may increase our responsibility and liability in relation to personal data that we process
where such processing is subject to the EU GDPR and UK GDPR, and we may be required to put in place additional
mechanisms to ensure compliance with the EU GDPR and UK GDPR, including as implemented by individual countries.
Given the new law, we face uncertainty as to the exact interpretation of the new requirements and we may be unsuccessful
in implementing all measures required by data protection authorities or courts in interpretation of the law. Compliance with
the EU GDPR and UK GDPR will be a rigorous and time-intensive process that may increase our cost of doing business or
require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and
penalties, litigation, and reputational harm in connection with our European activities.
EU Member States have adopted implementing national laws to implement the EU GDPR which may partially deviate
from the EU GDPR and the competent authorities in the EU Member States may interpret EU GDPR obligations slightly
differently from country to country, so that we do not expect to operate in a uniform legal landscape in the EU. Also, as it
relates to processing and transfer of genetic data, the EU GDPR specifically allows national laws to impose additional and
more specific requirements or restrictions, and European laws have historically differed quite substantially in this field,
leading to additional uncertainty.
In addition, in the United States, many states in which we operate have laws that protect the privacy and security of
sensitive and personal information. Certain state laws may be more stringent or broader in scope, or offer greater individual
rights, with respect to sensitive and personal information than federal, international or other state laws, and such laws may
differ from each other, which may complicate compliance efforts. Where state laws are more protective than HIPAA, we
must comply with the state laws we are subject to, in addition to HIPAA. In certain cases, it may be necessary to modify
our planned operations and procedures to comply with these more stringent state laws. Further, in some cases where we
process sensitive and personal information of individuals from numerous states, we may find it necessary to comply with
the most stringent state laws applicable to any of the information. For example, California’s California Consumer Privacy
Act (“CCPA”), creates comprehensive individual privacy rights for California consumers (as defined in the law) and places
increased privacy and security obligations on entities handling personal data of consumers or households. While there are
currently exceptions for protected health information that is subject to HIPAA and clinical trial regulations, as currently
written, the CCPA, as amended by the California Privacy Rights Act, and other enacted or proposed comprehensive state
consumer privacy legislation may impact our business activities. We continue to monitor the impact that the state consumer
privacy and protection laws, like the CCPA, may have on our business activities. See the section in this Annual Report
entitled “Business – Government Regulation – European General Data Protection Regulation and “Business – Government
Regulation – Other Healthcare and Privacy Laws.”
Artificial intelligence presents risks and challenges that can impact our business including by posing security risks to
our confidential information, proprietary information, and personal data.
The potential use of new and evolving technologies, such as artificial intelligence, in our offerings to employees may result
in additional spending and present risks and challenges that can impact our business including by posing security and other
risks to our confidential information, proprietary information and personal information, and as a result we may be exposed
to reputational harm, legal liability, and regulatory investigations and fines.
We may build and integrate artificial intelligence into our offerings, and this innovation may present risks and challenges
that could affect its adoption, and therefore our business. If we enable or offer solutions that draw controversy due to
perceived or actual negative societal impact, we may experience brand or reputational harm, competitive harm or legal
liability. The use of certain artificial intelligence technology can give rise to intellectual property risks, including
compromises to proprietary intellectual property and intellectual property infringement, for example where third-party
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data sources are used to train artificial intelligence models, or the output of artificial intelligence systems reproduce or
incorporate third party intellectual property rights, in each case without the right to do so.
Additionally, we expect to see increasing government and supranational regulation related to artificial intelligence use
and ethics, which may also significantly increase the burden and cost of research, development and compliance in this
area. For example, the EU’s Artificial Intelligence Act (“AI Act”), the world’s first comprehensive AI law, entered into
force on August 1, 2024 and most provisions of which will become effective on August 2, 2026. This legislation imposes
tiered obligations on providers and deployers of artificial intelligence systems which are put onto the EU market, or
where the output is intended for use in the EU market, depending on the risk classification of the AI system, and
encourages providers and deployers of artificial intelligence systems to account for EU fundamental rights in their
development and use of these systems. If we develop or use AI systems that are governed by the AI Act, it may
necessitate ensuring higher standards of data quality, transparency, and human oversight, and if the AI systems are
considered high risk, we would be required to implement substantive risk and quality management systems and post-
market monitoring systems and adhere to specific and burdensome and costly ethical, accountability, and administrative
requirements. Other jurisdictions, including the United States and UK, are also taking steps to regulate AI systems. The
rapid evolution of artificial intelligence will require the application of significant resources to design, develop, test and
maintain our service offerings to help ensure that artificial intelligence is implemented in accordance with applicable law
and regulation and in a socially responsible, safe and ethical manner and to minimize any real or perceived unintended
harmful impacts.
Our vendors may in turn incorporate artificial intelligence tools into their own offerings, and the providers of these
artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards, including with
respect to privacy and data security. Further, bad actors around the world use increasingly sophisticated methods,
including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal
information, confidential information and intellectual property. Any of these effects could damage our reputation, result
in the loss of valuable property and information, cause us to breach applicable laws and regulations, and adversely impact
our business. A risk of our proprietary intellectual property rights being compromised through the use of artificial
intelligence could arise through third party vendors using our data to train their models and/or to generate output for other
users of their systems. There is also a risk (as with any hosted service) of security incidents occurring that could lead to
unauthorized access to our data. In the event that personal data (including special category data relating to patients) were
to be compromised, we may also face action from regulators and affected data subjects, and damage to our reputation.
Additional laws and regulations governing international operations, including certain U.S. and foreign anti-
corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, could negatively
impact or restrict our operations.
If we further expand our operations outside of the U.S., 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 (“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 U.S. 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 U.S., or the sharing
with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and
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technical data relating to those products. If we expand our presence outside of the U.S., 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 U.S., 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.
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 commercialization efforts,
research and development efforts and business operations, 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 utilized by our third-party manufacturers 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 or eliminate the risk of accidental contamination or injury from these materials.
In such an event, 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, environmental laws and regulations are complex, change frequently and have tended to become more
stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. 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, and as a result, may be subject to lengthy and expensive litigation
and excessive damages and we may not have, or be able to obtain, sufficient capital to pay such amounts. We do not
carry specific biological waste or hazardous waste insurance coverage, workers compensation or property and casualty
and general liability insurance policies that include coverage for damages and fines arising from biological or hazardous
waste exposure or contamination.
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 apitegromab, SRK-181, SRK-439 and any of our future
product candidates in clinical trials and will face an even greater risk if we commercialize any products, if approved. 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;
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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;
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initiation of investigations by regulators;
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costs to defend the related litigation;
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diversion of management’s time and our resources;
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substantial monetary awards to trial participants;
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product recalls, withdrawals or labeling, marketing or promotional restrictions;
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loss of revenue;
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exhaustion of any available insurance and our capital resources;
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the inability to commercialize any product candidate, if approved; and
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decline 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. We may
be unable to obtain, or may obtain on unfavorable terms, additional clinical trial insurance in amounts adequate to cover
any liabilities from any of our clinical trials. 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.
Inadequate funding for the FDA, the SEC and other government agencies, including from government shut downs, or
other disruptions to these agencies’ operations, including policy, leadership and personnel changes, could 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 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 other 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.
A prolonged government shutdown or other disruption including significant leadership and personnel changes, 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. Future shutdowns or other disruptions could also affect other government agencies
such as the SEC, which may also impact our business by delaying review of our public filings, to the extent such review is
necessary, and our ability to access the public markets.
Our current laboratory operations are concentrated in one location, and we or the third parties upon whom we depend,
including our clinical trial sites and the manufacturing facilities of our third-party contract manufacturers, may
experience business interruptions and our business continuity and disaster recovery plans may not adequately protect us
from a serious disaster, including earthquakes, outbreak of disease or other natural disasters.
Our office and laboratory facilities are located in Cambridge, Massachusetts. Any unplanned event, such as flood, fire,
explosion, earthquake, extreme weather condition, medical epidemics, power shortage, telecommunication failure or other
natural or manmade accidents or incidents that result in us being unable to fully utilize our facilities, the facilities at any
clinical trial site, or the manufacturing facilities of our third-party contract manufacturers, may have a material and adverse
effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on
our financial and operating conditions. Loss of access to these facilities may result in increased costs, delays in the
development of apitegromab, SRK-181, SRK-439 and future product candidates or interruption of our business operations.
If a natural disaster, outbreak of disease, power outage or other event occurred that prevented us from using all or a
significant portion of our headquarters, that damaged critical infrastructure, such as our research facilities, our clinical trial
sites or the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may
be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.
Global events, including global health concerns could also result in social, economic, and labor instability in the countries
in which we operate or where the third parties with whom we engage, including our clinical trial sites and manufacturing
facilities of our third-party contract manufacturers, operate. Unforeseen global events, such as increasing rates of inflation
and interest, could adversely impact our business. For example, we are conducting ONYX, our long-term extension clinical
trial of apitegromab in the EU could adversely affect the conduct of our clinical trials. Such conflicts could lead to
sanctions, embargoes, supply shortages, regional instability, geopolitical shifts, cyberattacks, other retaliatory actions, and
adverse effects on macroeconomic conditions, currency exchange rates, and financial markets, which could adversely
impact our operations and financial results, as well as those of third parties with whom we conduct business.
The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious
disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and
business continuity plans, which could have a material adverse effect on our business. As part of our risk management
policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of
an accident or incident at our facilities, we cannot assure you that the amounts of insurance will be sufficient to satisfy any
damages and losses. If our facilities, the manufacturing facilities of our third-party contract manufacturers, or the sites
where we conduct clinical trials or preclinical studies, are unable to operate because of an accident or incident or for any
other reason, even for a short period of time, our research and development programs may be harmed. Any business
interruption may have a material and adverse effect on our business, financial condition, results of operations and
prospects.
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 profitably.
The success of our product candidates, apitegromab and SRK-181, and future product candidates such as SRK-439, if
approved, depends on the availability of coverage and adequate reimbursement from third-party payors. We cannot be sure
that coverage and reimbursement will be available for, or accurately estimate the potential revenue from, apitegromab,
SRK-181, SRK-439 or future product candidates or assure that coverage and reimbursement will be available for any
product that we may develop. See the sections in this Annual Report entitled “Business– Government Regulation –
Coverage and Reimbursement” and “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. Coverage and adequate reimbursement from governmental healthcare
programs, such as Medicare and Medicaid or national payor bodies (such as in European countries), and commercial
payors is critical to new product acceptance.
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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:
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a covered benefit under its health plan;
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safe, effective and medically necessary;
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appropriate for the specific patient;
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cost-effective; and
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neither experimental nor investigational.
In the U.S., no uniform policy of coverage and reimbursement for products exists among third party payors, Coverage and
reimbursement for products can differ significantly from payor to payor. One payor’s decision to cover a particular medical
product or service does not ensure that other payors will also provide coverage for the medical product or service, or will
provide coverage at an adequate reimbursement rate. Coverage and reimbursement for products may vary widely from
payor to payor, state-to-state (for example, state Medicaid coverage and reimbursement for products may be subject to
varying degrees of coverage restrictions or delays) or across national payors from country to country.
Payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical
products and services, in addition to their safety and efficacy. In order to obtain and maintain coverage and reimbursement
for any product, we may need to conduct expensive evidence generation studies in order to demonstrate the medical
necessity and cost-effectiveness of such a product, in addition to the costs required to obtain regulatory approvals. If payors
do not consider a product to be cost-effective compared to current standards of care, they may not cover the product as a
benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to cover its costs or
make a profit. 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.
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. There is
significant uncertainty related to insurance coverage and reimbursement of newly approved products. 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. 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 third-party payors in the U.S. 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 U.S. with respect to specialty drug pricing practices. Specifically, there have
been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among
other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the
relationship between pricing and manufacturer patient programs, and reform government program reimbursement
methodologies for drugs. We expect to experience pricing pressures in connection with the sale of any of our product
candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, cost
containment initiatives and additional legislative changes.
EU 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 U.S. and in selected foreign jurisdictions. If we
receive approval in one or more foreign jurisdictions for apitegromab, SRK-181, SRK-439 or future product candidates, we
will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in the EU, the
pricing of medicinal products is subject to governmental control and other market regulations which 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 receiving 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 health care reform measures.
Much like the federal Anti-Kickback Statute prohibition in the U.S., 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 EU. The provision of benefits or advantages to physicians is governed by the national
anti-inducement, advertising and anti-bribery laws of EU Member States. Infringement of these laws could result in
substantial fines and imprisonment.
Payments made to physicians in certain EU Member States must be disclosed publicly. 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 EU Member States. These requirements are
provided in the national laws, industry codes or professional codes of conduct, applicable in the EU Member States. EU
Directive 2001/83/EC, which is the EU 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. Failure to comply with these requirements could result in reputational risk, public
reprimands, administrative penalties, fines or imprisonment.
In addition, in most foreign countries, including several EU Member States, 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 EU 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 EU Member States and parallel distribution, or arbitrage
between low-priced and high-priced Member States, can further reduce prices. A Member State may approve a specific
price for the medicinal product or it 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 study 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 EU do not follow price structures of the U.S. 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.
We may seek to enter into collaborations in the future with third parties, including for apitegromab, SRK-181, SRK-439
or potential product candidates. If we are unable to enter into such collaborations, or if these collaborations are not
successful, our business could be adversely affected.
A part of our strategy is to evaluate and, as deemed appropriate, enter into additional collaborations or partnerships in the
future when strategically attractive, including potentially with biotechnology or pharmaceutical companies. We have
limited capabilities for product development and only recently have begun to build our capabilities to prepare for
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potential commercialization. Accordingly, we may enter into collaborations with other companies to provide us with
important technologies, capabilities and funding for our programs and underlying technology.
Any future collaboration we enter into may pose a number of risks, including the following:
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collaborators may have significant discretion or decision-making authority in determining the efforts and
resources that they will apply to the collaboration or that we are required to apply to the collaboration;
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collaborators may not perform their obligations as expected or in a manner satisfactory to us;
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we may commit to certain preclinical or clinical development or commercialization efforts as part of the
collaboration that we are unable to meet or our collaborators may not be satisfied with our preclinical or clinical
development or commercialization efforts;
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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;
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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;
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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;
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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;
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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;
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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;
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collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary
information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or
proprietary information or expose us to potential litigation;
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collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and
potential liability;
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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;
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collaborations may be terminated by the collaborator, and, if terminated, we may be blocked to advance the
program due to collaborator patents that are not licensed to us; and
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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 future collaborations do not result in the successful discovery, development and commercialization of product
candidates or if one of our collaborators terminates its agreement with us, we may not receive any future research funding
or milestone or royalty payments under such collaboration. 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 potential
therapeutic collaborators.
Additionally, if one of our collaborators terminates its agreement with us, we may find it more difficult to attract new
collaborators and our perception in the biotechnology or pharmaceutical industry, including within the business and
financial communities, could be adversely affected.
We face significant competition in seeking appropriate partners for our product candidates, and the negotiation process is
time-consuming and complex. In order for us to successfully partner our product candidates, potential partners must view
these product candidates as economically valuable in markets they determine to be attractive in light of the terms that we
are seeking and other available products for licensing by other companies. 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. 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. Even if we are successful in our efforts to establish new strategic collaborations, the terms that we agree
upon may not be favorable to us, and we may not be able to maintain such strategic collaborations if, for example,
development or approval of a product candidate is delayed or sales of an approved product are disappointing. Any delay in
entering into new strategic collaboration agreements related to our product candidates could delay the development and
commercialization of our product candidates and reduce their competitiveness even if they reach the market.
Risks Related to Our Intellectual Property
Our success depends in part on our ability to protect our intellectual property. It is difficult and costly to protect our
proprietary rights and technology, and we may not be able to ensure their protection.
Our commercial success will depend in large part on obtaining and maintaining patent, trademark and trade secret
protection of our proprietary technologies and our product candidates, their respective components, formulations,
combination therapies, methods used to manufacture them and methods of treatment, as well as successfully defending
these patents against third-party challenges. Our ability to stop unauthorized third parties from making, using, selling,
offering to sell or importing our product candidates is dependent upon the extent to which we have rights under valid and
enforceable patents that cover these activities. If we are unable to secure and maintain patent protection for any product or
technology we develop, or if the scope of the patent protection secured is not sufficiently broad, our competitors could
develop and commercialize products and technology similar or identical to ours, and our ability to commercialize any
product candidates we may develop may be adversely affected.
The patenting process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or
desirable patent applications at a reasonable cost or in a timely manner. In addition, we may not pursue or obtain patent
protection in all relevant markets. Unforeseen global events, and sanctions or actions relating to such events, could affect
our ability to file, prosecute, maintain, and/or defend patents and applications in those markets. It is also possible that we
will fail to identify patentable aspects of our research and development output before it is too late to obtain patent
protection. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution
of patent applications, or to maintain the patents, covering technology that we license from or license to third parties and
are reliant on our licensors or licensees.
The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and
can be uncertain. The patent applications that we own or in-license may fail to result in issued patents with claims that
cover our product candidates or uses thereof in the U.S. and/or in other foreign countries. Even if the patents do
successfully issue, third parties may challenge the validity, enforceability or scope thereof, which may result in such
patents being narrowed, invalidated or held unenforceable. For example, Russia issued a decree in March of 2022, stating
that patent owners who reside in a country “unfriendly” to Russia are not entitled to compensation in the event of patent
infringement. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect
our intellectual property and/or prevent others from designing around our claims. If the breadth or strength of protection
provided by the patent applications we hold with respect to our product candidates is threatened, it could dissuade
companies from collaborating with us to develop, and threaten our ability to commercialize, our product candidates.
Further, if we encounter delays in our clinical trials, the period of time during which we could market our product
candidates under patent protection would be reduced.
We cannot be certain that we are the first to invent the inventions covered by pending patent applications and, if we are not,
we may be subject to priority disputes. We may be required to disclaim part or all of the term of certain patents or all of the
term of certain patent applications. There may be prior art of which we are not aware that may affect the validity or
enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the
validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of
a claim. No assurance can be given that if challenged, our patents would be declared by a court to be valid or enforceable
or that even if found valid and enforceable, a competitor’s technology or product would be found by a court to infringe our
patents. We may analyze patents or patent applications of our competitors that we believe are relevant to our activities, and
consider that we are free to operate in relation to our product candidates, but our competitors may achieve issued claims,
including in patents we consider to be unrelated, which block our efforts or may potentially result in our product candidates
or our activities infringing such claims. The possibility exists that others will develop products which have the same effect
as our products on an independent basis which do not infringe our patents or other intellectual property rights, or will
design around the claims of patents that we have had issued that cover our products.
In addition, periodic maintenance fees on any issued patent are due to be paid to the U.S. Patent Office (“USPTO”) and
foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental
patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during
the patent application process and following the issuance of a patent. While an inadvertent lapse can, in many cases, be
cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which
noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss
of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or
patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-
payment of fees and failure to properly legalize and submit formal documents. Moreover, complications due to global
pandemics may result in inadvertent lapse due to, for example, unexpected closures of the USPTO or foreign patent offices,
delays in delivery of notifications relating to deadlines, or failure to timely and/or properly obtain signatures on necessary
documents. Additionally, due to the ongoing conflict in Ukraine, there remain uncertainties as to any potential impact on
patent protection and/or enforcement in the region, including, for example, payments to the Russian Patent Office and other
entities. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on
our business.
The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection
and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
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it is possible that our pending patent applications will not result in issued patents;
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we or our licensors, as the case may be, might not have been the first to file patent applications for these
inventions;
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the claims of our owned or in-licensed issued patents or patent applications, if and when issued, may not cover
our product candidates;
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it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents, as the case
may be, or parts of our or their patents;
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our owned or in-licensed issued patents may not provide us with any competitive advantages, may be narrowed in
scope, or be held invalid or unenforceable as a result of legal challenges by third parties;
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we or our licensors, as the case may be, may fail to meet our obligations to the U.S. government in regards to any
in-licensed patents and patent applications funded by U.S. government grants, leading to the loss of patent rights;
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the laws of foreign countries may not protect our or our licensors’, as the case may be, proprietary rights to the
same extent as the laws of the U.S.;
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the inventors of our owned or in-licensed patents or patent applications may become involved with competitors,
develop products or processes which design around our patents, or become hostile to us or the patents or patent
applications on which they are named as inventors;
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it is possible that our owned or in-licensed patents or patent applications omit individual(s) that should be listed
as inventor(s) or include individual(s) that should not be listed as inventor(s), which may cause these patents or
patents issuing from these patent applications to be held invalid or unenforceable;
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others may be able to make or use compounds or cells that are similar to the biological compositions of our
product candidates but that are not covered by the claims of our patents;
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others may independently develop similar or alternative technologies or duplicate any of our technologies;
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it is possible that others may circumvent our owned or in-licensed patents;
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the active biological ingredients in our current product candidates will eventually become commercially available
in biosimilar drug products, and no patent protection may be available with regard to formulation or method of
use;
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we have engaged in scientific collaborations in the past, and will continue to do so in the future. Such
collaborators may develop adjacent or competing products to ours that are outside the scope of our patents;
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we may not develop additional proprietary technologies for which we can obtain patent protection;
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it is possible that product candidates or diagnostic tests we develop may be covered by third parties’ patents or
other exclusive rights;
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it is possible that there are unpublished applications or patent applications maintained in secrecy that may later
issue with claims covering our products or technology similar to ours; and/or
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the patents of others may have an adverse effect on our business.
Our current patents covering our proprietary technologies and our product candidates are expected to expire beginning in
2034, without taking into account any possible patent term adjustments or extensions. Our earliest patents may expire
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before, or soon after, our first product achieves marketing approval in the U.S. or foreign jurisdictions. Upon the expiration
of our current patents, we may lose the right to exclude others from practicing these inventions. The expiration of these
patents could also have a material adverse effect on our business, results of operations, financial condition and prospects.
We own pending patent applications covering our proprietary technologies or our product candidates that if issued as
patents are expected to expire from 2034 through 2046, without taking into account any possible patent term adjustments
or extensions. However, we cannot be assured that the USPTO or relevant foreign patent offices will grant any of these
patent applications.
We depend on intellectual property licensed from third parties. Failure to comply with our obligations under any of
these licenses or termination of any of these licenses could result in the loss of significant rights, which would harm our
business.
We are dependent on patents, know-how and proprietary technology, including intellectual property rights licensed from
others. We may be a party to license agreements pursuant to which we in-license key patents and patent applications for our
product candidates. These licenses impose various diligence, milestone payment, royalty, insurance and other obligations
on us. If we fail to comply with these obligations, our licensors may have the right to terminate the license. Any
termination of licenses by third parties could result in our loss of significant intellectual property rights and could harm our
ability to commercialize our product candidates.
We may have limited control over the maintenance and prosecution of these in-licensed patents and patent applications,
activities or any other intellectual property that may be related to our in-licensed intellectual property. For example, we
cannot be certain that such activities by these licensors have been or will be conducted in compliance with applicable laws
and regulations or will result in valid and enforceable patents and other intellectual property rights. We may have limited
control over the manner in which our licensors initiate an infringement proceeding against a third-party infringer of the
intellectual property rights, or defend certain of the intellectual property that is licensed to us. It is possible that the
licensors’ infringement proceeding or defense activities may be less vigorous than had we conducted them ourselves.
Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement,
including:
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the scope of rights granted under the license agreement and other interpretation related issues;
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whether and the extent to which our technology and processes infringe on intellectual property of the licensor that
is not subject to the licensing agreement;
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our right to sublicense patent and other rights to third parties under collaborative development relationships; and
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the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our
licensors and us and our partners.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing
arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product
candidates.
We may not be successful in obtaining or maintaining necessary rights to develop any future product candidates on
acceptable terms.
Because our programs may involve additional product candidates that may require the use of additional proprietary rights
held by third parties, the growth of our business may depend in part on our ability to acquire, in-license or use these
proprietary rights.
Our product candidates may also require specific formulations to work effectively and efficiently, and these rights may be
held by others. We may develop products containing our compounds and pre-existing pharmaceutical compounds. We may
be required by the FDA or comparable foreign regulatory authorities to provide a companion diagnostic test or tests with
our product candidates. These diagnostic test or tests may be covered by intellectual property rights held by
others. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party
intellectual property rights from third parties that we identify as necessary or important to our business operations. We may
fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all, which would harm our business. We
may need to cease use of the compositions or methods covered by such third-party intellectual property rights, and may
need to seek to develop alternative approaches that do not infringe on such intellectual property rights which may entail
additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible.
Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same
technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or
license replacement technology.
Additionally, we sometimes collaborate with academic institutions to accelerate our preclinical research or development
under written agreements with these institutions. In certain cases, these institutions provide us with an option to negotiate a
license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such option, we may
be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to
do so, the institution may offer the intellectual property rights to others, potentially blocking our ability to pursue our
program. If we are unable to successfully obtain rights to required third-party intellectual property or to maintain the
existing intellectual property rights we have, we may have to abandon development of such program and our business and
financial condition could suffer.
The licensing or acquisition of third-party intellectual property rights is a competitive area, and companies, which may be
more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party
intellectual property rights that we may consider necessary or attractive in order to commercialize our product candidates.
More established companies may have a competitive advantage over us due to their size, cash resources and greater clinical
development and commercialization capabilities. There can be no assurance that we will be able to successfully complete
such negotiations and ultimately acquire the rights to the intellectual property surrounding the additional product
candidates that we may seek to acquire.
Changes in patent law in the U.S. and in ex-U.S. jurisdictions could diminish the value of patents in general, thereby
impairing our ability to protect our products.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property,
particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and
legal complexity, and is therefore costly, time-consuming and inherently uncertain.
In addition, recent or future patent reform legislation could increase the uncertainties and costs surrounding the prosecution
of our patent applications and the enforcement or defense of our issued patents. Under the enacted Leahy-Smith America
Invents Act (the “America Invents Act”), enacted in 2013, the U.S. moved from a “first to invent” to a “first to file”
system. Under a “first to file” system, assuming the other requirements for patentability are met, the first inventor to file a
patent application generally will be entitled to a patent on the invention regardless of whether another inventor had made
the invention earlier. The America Invents Act includes a number of other significant changes to U.S. patent law, including
provisions that affect the way patent applications are prosecuted, redefine prior art and establish a new post-grant review
system. The effects of these changes are currently unclear as the USPTO only recently developed new regulations and
procedures in connection with the America Invents Act, and many of the substantive changes to patent law, including the
“first to file” provisions, only became effective in March 2013. In addition, the courts have yet to address many of these
provisions and the applicability of the act and new regulations on specific patents discussed herein have not been
determined and would need to be reviewed. However, the America Invents Act and its implementation could increase the
uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued
patents, all of which could have a material adverse effect on our business and financial condition.
Recent U.S. Supreme Court rulings have also narrowed the scope of patent protection available in certain circumstances
and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our
ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of
patents, once obtained. As a consequence, issued patents may be found to contain invalid claims according to the newly
revised eligibility and validity standards. Additionally, some of our owned or in-licensed patents may be subject to
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challenge and subsequent invalidation or significant narrowing of claim scope in proceedings before the USPTO, or
during litigation, under the revised criteria which could also make it more difficult to obtain patents.
Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing
patents, or interpretation thereof, could change in unpredictable ways that would weaken our ability to obtain new
patents, to maintain, or to enforce our existing patents and patents that we might obtain in the future. For example, in the
case Amgen Inc. v. Sanofi, the Federal Circuit held that a well characterized antigen is insufficient to satisfy the written
description requirement of certain claims directed to a genus of antibodies that are solely defined by function. While the
validity of a subset of patents at issue was subsequently upheld by a district court jury, uncertainty remains as to the legal
question pertaining to the written description requirement under 35 USC §112 as it relates to functional antibodies. In the
case of Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to DNA
molecules are not patentable. We cannot predict how these decisions or any future decisions by the courts, the U.S.
Congress or the USPTO may impact the value of our patents. Similarly, any adverse changes in the patent laws of other
jurisdictions could have a material adverse effect on our business and financial condition. For example, Russia issued a
decree in March of 2022, stating that patent owners who reside in a country “unfriendly” to Russia are not entitled to
compensation in the event of patent infringement.
Third-party claims of intellectual property infringement may prevent or delay our product discovery and development
efforts.
Our commercial success depends in part on our ability to develop, manufacture, market and sell our product candidates
and use our proprietary technologies without infringing the proprietary rights of third parties. There is a substantial
amount of 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, inter partes
review, post-grant review, and reexamination proceedings before the USPTO or oppositions and other comparable
proceedings in foreign jurisdictions. We may be exposed to, or threatened with, future litigation by third parties having
patent or other intellectual property rights alleging that our product candidates and/or proprietary technologies infringe
their intellectual property rights. Numerous U.S. and foreign issued patents and pending patent applications, which are
owned by third parties, exist 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 may give rise
to claims of infringement of the patent rights of others. Moreover, it is not always clear to industry participants, including
us, which patents cover various types of drugs, products or their methods of use or manufacture. Thus, because of the
large number of patents issued and patent applications filed in our fields, there may be a risk that third parties may allege
they have patent rights encompassing our product candidates, technologies or methods.
If a third-party claims that we infringe its intellectual property rights, we may face a number of issues, including, but not
limited to:
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infringement and other intellectual property claims which, regardless of merit, may be expensive and time-
consuming to litigate and may divert our management’s attention from our core business;
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substantial damages for infringement, which we may have to pay if a court decides that the product candidate or
technology at issue infringes on or violates the third-party’s rights, and, if the court finds that the infringement
was willful, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees;
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a court prohibiting us from developing, manufacturing, marketing or selling our product candidates, or from using
our proprietary technologies, unless the third-party licenses its product rights to us, which it is not required to do;
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if a license is available from a third-party, we may have to pay substantial royalties, upfront fees and other
amounts, and/or grant cross-licenses to intellectual property rights for our products; and
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redesigning our product candidates or processes so they do not infringe, which may not be possible or may
require substantial monetary expenditures and time.
Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because
they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any
litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations or could
otherwise have a material adverse effect on our business, results of operations, financial condition and prospects.
Third parties may assert that we are employing their proprietary technology without authorization. Generally, conducting
clinical trials and other development activities in the U.S. is protected under the Safe Harbor exemption as set forth in 35
U.S.C. § 271. If and when apitegromab, SRK-181, or another one of our product candidates is approved by the FDA, that
certain third-party may then seek to enforce its patent by filing a patent infringement lawsuit against us. While we are not
aware of any claims of such a patent that could otherwise materially adversely affect commercialization of our product
candidates, we may be incorrect in this belief, or we may not be able to prove it in a litigation. In this regard, patents issued
in the U.S. by law enjoy a presumption of validity that can be rebutted only with evidence that is “clear and convincing,” a
heightened standard of proof. There may be third-party patents of which we are currently unaware with claims to materials,
formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product
candidates. Because patent applications can take many years to issue, there may be currently pending patent applications
which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain
patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were
held by a court of competent jurisdiction to cover the manufacturing process of our product candidates, constructs or
molecules used in or formed during the manufacturing process, or any final product itself, the holders of any such patents
may be able to block our ability to commercialize the product candidate unless we obtained a license under the applicable
patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any
third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for
manufacture or methods of use, the holders of any such patent may be able to block our ability to develop and
commercialize the product candidate unless we obtained a license or until such patent expires or is finally determined to be
held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms, or at
all. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our
ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our
business. Even if we obtain a license, it may be non-exclusive, thereby giving our competitors access to the same
technologies licensed to us. In addition, if the breadth or strength of protection provided by our patents and patent
applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize
current or future product candidates.
Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our
ability to further develop and commercialize our product candidates. Defense of these claims, regardless of their merit,
would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble
damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, and/or pay royalties or
redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. We
cannot predict whether any such license would be available at all or whether it would be available on commercially
reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to
advance our research or allow commercialization of our product candidates. We may fail to obtain any of these licenses at a
reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize
our product candidates, which could harm our business significantly.
We may also choose to challenge the patentability of claims in a third-party’s U.S. patent by requesting that the USPTO
review the patent claims in an ex-parte re-exam, inter partes review or post-grant review proceedings. These proceedings
are expensive and may consume our time or other resources. We may choose to challenge the grant of a third-party’s patent
in opposition proceedings in the European Patent Office (“EPO”) or other foreign patent office. The costs of these
opposition proceedings could be substantial, and may consume our time or other resources. If we fail to obtain a favorable
result at the USPTO, EPO or other patent office, then we may be exposed to litigation by a third-party alleging that the
patent may be infringed by our product candidates or proprietary technologies.
Additionally, the Unitary Patent/Unified Patent Court system in Europe became fully operational in June 2023.
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The new court may be associated with greater degrees of uncertainty in litigation, with respect to both planning
and outcome.
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The opt-out selection afforded during the transition may have a direct impact on future litigation and may result in
loss of certain flexibility with regard to choice of forum and other litigation strategy considerations.
We may incur substantial costs as a result of litigation or other proceedings relating to our patents or the patents of our
licensors, and we may be unable to protect our rights to our products and technology.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may
be required to file infringement claims against a third party(ies), which can be expensive and time-consuming. In addition,
in an infringement proceeding, a court may decide that one or more of our patents is not valid or is unenforceable, or may
refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology
in question. There is also the risk that, even if the validity of our patents or the patents of our licensors is upheld, the court
will refuse to stop the third-party on the ground that such third-party’s activities do not infringe our owned or in-licensed
patents. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being
invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not issuing.
Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial
diversion of employee resources from our business.
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.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or
developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse
effect on the price of our common stock.
In some situations, we or our licensor, may not be able to detect infringement against our owned or in-licensed patents, as
the case may be, which may be especially difficult for manufacturing processes or formulation patents. Even if we or our
licensors detect infringement by a third-party of our owned or in-licensed patents, we or our licensors, as the case may be,
may choose not to pursue litigation against or settlement with the third-party. If we, or our licensors, later sue such third-
party for patent infringement, the third-party may have certain legal defenses available to it, which otherwise would not be
available except for the delay between when the infringement was first detected and when the suit was brought. Such legal
defenses may make it impossible for us or our licensors to enforce our owned or in-licensed patents, as the case may be,
against such third-party.
Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court or the
USPTO.
If we or one of our licensing partners initiate legal proceedings against a third-party to enforce a patent covering one of our
product candidates, the defendant could counterclaim that the patent covering our product candidate, as applicable, is
invalid and/or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity and/or
unenforceability are commonplace, and there are numerous grounds upon which a third-party can assert invalidity or
unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the U.S. or abroad,
even outside the context of litigation. Such mechanisms include inter parties review, ex parte re-examination, post-grant
review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). For example, EP3368069,
EP2981822 and EP3365368 are currently subject to opposition proceedings. Such proceedings are expensive and could
result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. The
outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question,
for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and the patent
examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or
unenforceability, or if we are otherwise unable to adequately protect our rights, we would lose at least part, and perhaps all,
of the patent protection on our product candidates. Such a loss of patent protection could have a material adverse impact on
our business and our ability to commercialize or license our technology and product candidates.
In addition, because some patent applications in the U.S. may be maintained in secrecy until the patents are issued, because
patent applications in PCT member jurisdictions are typically not published until 18 months after the earliest filing, and
because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have
not filed patent applications for technology covered by our owned and in-licensed issued patents or our pending
applications, or that we or, if applicable, a licensor were the first to invent the technology. Our competitors may have filed,
and may in the future file, patent applications covering our products, compositions, methods of use, or technology similar
to ours. Any such patent application may have priority over our owned and in-licensed patent applications or patents,
which could require us to obtain rights to issued patents covering such technologies. If another party has filed a U.S. patent
application on inventions similar to those owned by or in-licensed to us, we or, in the case of in-licensed technology, the
licensor may have to participate in an interference proceeding declared by the USPTO to determine priority of invention in
the U.S. If we or one of our licensors is a party to an interference proceeding involving a U.S. patent application on
inventions owned by or in-licensed to us, we may incur substantial costs, divert management’s time and expend other
resources, even if we are successful.
For applications filed under pre-AIA, interference proceedings declared by the USPTO may be necessary to determine the
priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome
could result in a loss of our current patent rights and could require us to cease using the related technology or to attempt to
license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a
license on commercially reasonable terms. Litigation or interference proceedings may result in a decision adverse to our
interests and, even if we are successful, may result in substantial costs and distract our management and other employees.
We may not be able to prevent, alone or with our licensors, misappropriation of our trade secrets or confidential
information, particularly in countries where the laws may not protect those rights as fully as in the U.S.
We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights
throughout the world.
We have limited intellectual property rights outside the U.S. Filing, prosecuting and defending patents on product
candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in
some countries outside the U.S. can be less extensive than those in the U.S. In addition, the laws of some foreign countries
do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Consequently, we may not
be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing
products made using our inventions in and into the U.S. or other jurisdictions. Indeed, Russia issued a decree in March of
2022, stating that patent owners who reside in a country “unfriendly” to Russia are not entitled to compensation in the
event of patent infringement. Competitors may use our technologies in jurisdictions where we have not obtained patent
protection to develop their own products and, further, may export otherwise infringing products to territories where we
have patent protection but where enforcement is not as strong as that in the U.S. These products may compete with our
products in jurisdictions where we do not have any issued patents and our patent claims 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 biopharmaceutical products
and/or methods of medical treatment, which could make it difficult for us to stop the infringement of our patents or
marketing of competing products against third parties in violation of our proprietary rights generally. The initiation of
proceedings by third parties to challenge the scope or validity of our patent rights in foreign jurisdictions could result in
substantial cost and divert our efforts and attention from other aspects of our business. Proceedings to enforce our patent
rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our
business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not
issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and
the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce
our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the
intellectual property that we develop or license.
As another example, in Europe, a new unitary patent system became effective in June 2023, which may significantly
impact European patents, including those granted before the introduction of such a system. Under the unitary patent
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system, European applications have the option, upon grant of a patent, of becoming a Unitary Patent which will be subject
to the jurisdiction of the Unified Patent Court (“UPC”). As the UPC is a new court system, there is little precedent for the
court, increasing the uncertainty of any litigation. Subject to current transitional provisions, European patents have the
option of opting out of the jurisdiction of the UPC and remaining as national patents in the UPC countries. Patents that
remain under the jurisdiction of the UPC are potentially vulnerable to a single UPC-based revocation challenge that, if
successful, could invalidate the patent in all countries who are signatories to the UPC. We cannot predict with certainty the
long-term effects of any potential changes.
Patent terms may result in inadequate protection for our product candidates, and we may be unable to obtain patent
term extensions and data exclusivity for our product candidates, resulting in material harm to our business.
Patents have a limited lifespan. In the U.S., if all maintenance fees are timely paid, the natural expiration of a patent is
generally 20 years from its earliest U.S. non-provisional filing date. Various extensions such as patent term adjustments
and/or extensions, may be available, but the life of a patent, and the protection it affords, is limited.
Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we may
develop, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price
Competition and Patent Term Restoration Action of 1984, also known as the Hatch Waxman Amendments. The Hatch
Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the
FDA regulatory review process. The patent term restoration period is generally one-half of the time between the effective
date of the IND or the date of patent grant (whichever is later) and the date of submission of the BLA, plus the time
between the date of submission of the BLA and the date of FDA approval of the product. The patent holder must apply for
restoration within 60 days of approval. 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. We may not be granted an
extension 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.
Given the amount of time required for the development, testing and regulatory review of new product candidates, the
patents protecting our product candidates might expire before or shortly after such candidates are commercialized. If we
are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors may
obtain approval of competing products following our patent expiration. As a result, our owned and licensed patent portfolio
may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours,
which could materially harm 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 patent protection, we rely heavily upon know-how and trade secret protection, as well as non-disclosure
agreements and invention assignment agreements with our employees, consultants and third parties, to protect our
confidential and proprietary information, especially where we do not believe patent protection is appropriate or obtainable.
In addition to contractual measures, we try to protect the confidential nature of our proprietary information using physical
and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret
by an employee or third-party with authorized access, provide adequate protection for our proprietary information. Our
security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them
to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests
fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and
time-consuming, and the outcome is unpredictable. In addition, trade secrets may be independently developed by others in
a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade
secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor,
our competitive position could be harmed.
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In addition, courts outside the U.S. are sometimes less willing to protect trade secrets. If we choose to go to court to stop a
third-party from using any of our trade secrets, we may incur substantial costs. These lawsuits may consume our time and
other resources even if we are successful. Although we take steps to protect our proprietary information and trade secrets,
including through contractual means with our employees and consultants, third parties may independently develop
substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our
technology.
Thus, we may not be able to meaningfully protect our trade secrets. It is our policy to require our employees, consultants,
outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the
commencement of employment or consulting relationships with us. These agreements provide that all confidential
information concerning our business or financial affairs developed or made known to the individual or entity during the
course of the party’s relationship with us is to be kept confidential and not disclosed to third parties except in specific
circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and which
are related to our current or planned business or research and development or made during normal working hours, on our
premises or using our equipment or proprietary information, are our exclusive property. In addition, we take other
appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our
proprietary technology by third parties. We have also adopted policies and conduct training that provides guidance on our
expectations, and our advice for best practices, in protecting our trade secrets.
Third parties may assert that our employees or consultants have wrongfully used, disclosed, or misappropriated their
confidential information or trade secrets.
As is common in the biotechnology and pharmaceutical industries, we employ individuals who were previously employed
at universities or other biopharmaceutical or pharmaceutical companies, including our competitors or potential competitors.
Although no claims against us are currently pending, and although we try to ensure that our employees and consultants do
not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our
employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property,
including trade secrets or other proprietary information, of a former employer or other third parties. 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 or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and
could distract our technical and management personnel from their normal responsibilities. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments, and, if securities analysts
or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common
stock. This type of litigation or proceeding could substantially increase our operating losses and reduce our resources
available for development activities. We may not have sufficient financial or other resources to adequately conduct such
litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more
effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation
and continuation of patent litigation or other intellectual property related proceedings could adversely affect our ability to
compete in the marketplace.
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 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 or may be forced
to stop using these names, which we need for name recognition by potential partners or customers in our markets of
interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to
compete effectively and our business may be adversely affected.
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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 biopharmaceutical company formed in 2012 and our operations to date have been focused on research and
development of monoclonal antibodies that selectively inhibit activation of growth factors for therapeutic effect. We have
not yet demonstrated the ability to progress any of our product candidates through clinical trials, we have no products
approved for commercial sale and we have not generated any revenue from product sales to date. 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. For the fiscal year ended December 31, 2024 and
2023, we reported a net loss of $246.3 million and $165.8 million, respectively. We have incurred losses since our
inception, and as of December 31, 2024, we had an accumulated deficit of $922.7 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, apitegromab, SRK-181, SRK-439, and any
future product candidates and prepare for the commercialization of apitegromab, if approved.
To become and remain profitable, we or any current or potential future collaborators must develop and eventually
commercialize products with significant market potential and favorable pricing. This will require us to be successful in a
range of challenging activities, including completing preclinical studies and clinical trials, receiving marketing approval for
product candidates, manufacturing, marketing and selling products for which we may receive 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 could 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.
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 capital, we will not be able to
complete the development and commercialization of apitegromab, SRK-181, SRK-439 and any future product
candidates.
Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial
amounts of cash to conduct further research and development, including clinical trials for apitegromab and SRK-181 and
preclinical studies and clinical trials for SRK-439 and any future product candidates, to seek regulatory approvals for our
product candidates and to launch and commercialize any products for which we receive regulatory approval. As of
December 31, 2024, we had approximately $437.3 million in cash, cash equivalents and marketable securities. Based on
our current operating plan, we believe that our existing cash, cash equivalents, marketable securities and cash available to
us as of December 31, 2024, will be sufficient to fund our operating expenses and capital expenditure requirements into the
fourth quarter of 2026. 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. Additionally, any program setbacks or delays
due to changes in federal or state laws or clinical site or clinical vendor policies as a result of the impacts of current
macroeconomic and geopolitical events, increasing rates of inflation and rising interest rates could impact our programs
and increase our expenditures. Our future funding requirements, both near and long-term, will depend on many factors,
including, but not limited to:
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the initiation, progress, timing, completion, costs and results of clinical trials for apitegromab and SRK-181 and
preclinical studies and clinical trials for SRK-439 and any future product candidates;
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the clinical development plans we establish for our product candidates;
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the number and characteristics of product candidates that we identify and develop;
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the terms of any collaboration, strategic alliance, or licensing agreements we are currently party to or may choose
to enter into in the future;
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the outcome, timing and cost of meeting regulatory requirements established by the FDA, the 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;
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the cost of defending intellectual property disputes, including patent infringement actions brought by third parties
against us or our product candidates;
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the effect of competing technological and market developments;
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the cost and timing of developing research cell lines and development and completion of commercial scale
outsourced manufacturing activities;
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the impact of any business interruptions to our operations, including the timing and enrollment of patients in our
planned clinical trials, or to those of our manufacturers, suppliers, or other vendors resulting from pandemics or
similar public health crisis or macroeconomic conditions; and
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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.
We do not have any committed external source of funds or other support for our development efforts. Until we can generate
sufficient product or royalty revenue to finance our cash requirements, which we may never do, we expect to finance our
future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic
alliances, licensing arrangements and other marketing or distribution arrangements. If we raise additional funds through
public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely
affect our stockholders’ rights. Further, to the extent that we raise additional capital through the sale of common stock or
securities convertible or exchangeable into common stock, your ownership interest will be diluted. In addition, any debt
financing may subject us to fixed payment obligations and covenants limiting or restricting our ability to take specific
actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional capital
through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with
third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue
streams or research programs or grant licenses on terms that may not be favorable to us. We also could be required to seek
collaborators for apitegromab, SRK-181, SRK-439 or any future product candidate at an earlier stage than otherwise would
be desirable or relinquish our rights to product candidates or technologies that we otherwise would seek to develop or
commercialize ourselves. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we
may have to significantly delay, scale back or discontinue the development or commercialization of apitegromab, SRK-
181, SRK-439 or one or more of our future product candidates or other research and development initiatives. Any of the
above events could significantly harm our business, prospects, financial condition and results of operations and cause the
price of our common stock to decline.
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 us or holders of our common stock. For example, under
Section 174 of the Code, in taxable years beginning after December 31, 2021, expenses that are incurred for research and
development in the U.S. will be capitalized and amortized, which may have an adverse effect on our cash flow. 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. It cannot be predicted whether, when, in what form or with what effective dates tax laws, regulations and
rulings may be enacted, promulgated or issued, which could result in an increase in our or our shareholders’ tax liability or
require changes in the manner in which we operate in order to minimize or mitigate any adverse effects of changes in tax
law. 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.
Our ability to use our net operating loss carryforwards and certain tax credit carryforwards may be subject to limitation.
As of December 31, 2024, we had net operating loss carryforwards for federal and state income tax purposes of $512.6
million and $498.8 million, respectively, which begin to expire in 2032, except for our post 2017 federal net operating loss
carryforwards of $462.1 million, and $0.2 million of state net operating losses which do not expire. As of December 31,
2024, we also had available tax credit carryforwards for federal and state income tax purposes of $54.9 million and $7.7
million, respectively, which begin to expire in 2034 and 2025, respectively. Additionally, for taxable years beginning after
December 31, 2017 the deductibility of the indefinite lived federal and state net operating losses is limited to 80% of our
taxable income in any future taxable year. Under Section 382 of the Internal Revenue Code of 1986, as amended (the
“Code”), changes in our ownership may limit the amount of our net operating loss carryforwards and tax credit
carryforwards that could be utilized annually to offset our future taxable income, if any. This limitation would generally
apply in the event of a cumulative change in ownership of our company of more than 50% within a three-year period. Any
such limitation may significantly reduce our ability to utilize our net operating loss carryforwards and tax credit
carryforwards before they expire. Private placements and other transactions that have occurred since our inception, as well
as our IPO, may trigger such an ownership change pursuant to Section 382 of the Code. Any such limitation, whether as
the result of our IPO, prior private placements, sales of our common stock by our existing stockholders or additional sales
of our common stock by us, could have a material adverse effect on our results of operations in future years.
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity,
defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our
current and projected business operations and our financial condition and results of operations.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial
institutions, transactional counterparties or other companies in the financial services industry or the financial services
industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in
the future lead to market-wide liquidity problems. For example, on March 10, 2023, SVB was closed by the California
Department of Financial Protection and Innovation, which appointed the FDIC as receiver. Similarly, on March 12, 2023,
Signature Bank and Silvergate Capital Corp. were each swept into receivership. Since then, additional financial institutions
have experienced similar failures and have been placed into receivership.
Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government
securities with interest rates below current market interest rates. Although the U.S. Department of Treasury, FDIC and
Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by
certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of
such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for
immediate liquidity may exceed the capacity of such program. Additionally, there is no guarantee that the U.S. Department
of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the
closure of other banks or financial institutions, or that they would do so in a timely fashion.
Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and
other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations
could be significantly impaired by factors that affect the Company, the financial institutions with which the Company has
credit agreements or arrangements directly, or the financial services industry or economy in general. These factors could
include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types
of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or
financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry.
These factors could involve financial institutions or financial services industry companies
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delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets;
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delayed or lost access to, or reductions in borrowings available under our existing debt facility; or
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potential or actual breach of contractual obligations that require the Company to maintain certain financial
accounts at specific financial institutions.
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable
commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or
systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing
on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among
other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other
obligations, result in breaches of our financial and/or contractual obligations or result in violations of federal or state wage
and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or
similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected
business operations and financial condition and results of operations.
In addition, any further deterioration in the macroeconomic economy or financial services industry could lead to losses or
defaults by our suppliers, which in turn, could have a material adverse effect on our current and/or projected business
operations and results of operations and financial condition. For example, a supplier could be adversely affected by any of
the liquidity or other risks that are described above as factors that could result in material adverse impacts on us, including
but not limited to delayed access or loss of access to uninsured deposits or loss of the ability to draw on existing credit
facilities involving a troubled or failed financial institution. Any supplier bankruptcy or insolvency, or any breach or
default by a supplier, or the loss of any significant supplier relationships, could result in material losses to us and may have
a material adverse impact on our business.
Our current investment policy focuses on preservation of capital. However, we could recognize losses on securities held
in our investment portfolio, particularly if interest rates increase or economic and market conditions deteriorate.
As of December 31, 2024, the fair value of our cash, cash equivalents and investments in our marketable debt securities
portfolio was approximately $437.3 million and consisted primarily of investments in money market funds and U.S.
treasury obligations and government agency securities. Factors beyond our control can significantly influence the fair value
of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. For example,
fixed-rate securities acquired by us are generally subject to decreases in market value when interest rates rise. Additional
factors include, but are not limited to, rating agency downgrades of the securities or our own analysis of the value of the
security, defaults by the issuer with respect to the underlying securities, and continued instability in the credit markets. Any
of the foregoing factors could cause other-than-temporary impairment in future periods and result in realized losses. The
process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about
the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of
receiving all contractual principal and interest payments on the security.
At December 31, 2024, we had $20,000 in net unrealized losses in our marketable securities available-for-sale portfolio,
and unrealized losses in our securities portfolio may increase in the future due to the aforementioned economic factors.
While our goal is to hold each security until maturity, that may not be possible in light of our policy to preserve capital and
liquidity and because investment in securities with unrealized losses has a diminished utility as a source of liquidity prior to
maturity. Selling securities with an unrealized loss would result in the realization of such losses, which could have an
adverse effect on our financial condition and results of operations.
with which the Company has financial or business relationships, but could also include factors involving financial markets
or the financial services industry generally.
The results of events or concerns that involve one or more of these factors could include a variety of material and adverse
impacts on our current and projected business operations and our financial condition and results of operations. These could
include, but may not be limited to, the following:
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announcements of significant acquisitions, strategic collaborations or partnerships, joint ventures or capital
commitments by us, our collaborators or our competitors;
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actual or anticipated variations in quarterly operating results or our cash position;
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our failure to meet the estimates and projections of the investment community or that we may otherwise provide
to the public;
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changes in accounting practices; and
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significant lawsuits, including patent or stockholder litigation.
In addition, 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. 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.
The terms of our loan and security agreement place restrictions on our operating and financial flexibility. If we raise
additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our
business.
On February 10, 2025, we entered into an Amended and Restated Loan and Security Agreement (the “Amended and
Restated Loan and Security Agreement”) with Oxford Finance LLC (“Oxford”). The Amended and Restated Loan and
Security Agreement amends and restates in its entirety that certain Loan and Security Agreement dated as of October 16,
2020, as amended.
The Amended and Restated Loan and Security Agreement provides us with up to $200.0 million of borrowing capacity.
Our overall leverage and certain obligations and affirmative and negative covenants contained in the related documentation
could adversely affect our financial health and business and future operations by limiting our ability to, among other things,
satisfy our obligations under the Amended and Restated Loan and Security Agreement, refinance our debt on terms
acceptable to us or at all, plan for and adjust to changing business, industry and market conditions, use our available cash
flow to fund future acquisitions and make dividend payments, and obtain additional financing for working capital, to fund
growth or for general corporate purposes, even when necessary to maintain adequate liquidity.
If we default under the Amended and Restated Loan and Security Agreement, Oxford may accelerate all of our repayment
obligations and exercise all of their rights and remedies under the Amended and Restated Loan and Security Agreement
and applicable law, potentially requiring us to renegotiate our agreement on terms less favorable to us. Further, if we are
liquidated, the lenders’ right to repayment would be senior to the rights of the holders of our common stock to receive any
proceeds from the liquidation. Oxford could declare a default upon the occurrence of customary events of default,
including events that they interpret as a material adverse change as delineated in the Amended and Restated Loan and
Security Agreement, payment defaults or breaches of certain affirmative or negative covenants, thereby requiring us to
repay the loan immediately. Any declaration by the lender of an event of default could significantly harm our business and
prospects and could cause the price of our common stock to decline. Additionally, if we raise any additional debt financing,
the terms of such additional debt could further restrict our operating and financial flexibility.
Risks Related to Our Common Stock
The price of our stock is volatile, and you could lose all or part of your investment.
Similar to the trading prices of the common stock of other biopharmaceutical companies, the trading price of our common
stock is subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited
trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report on
Form 10-K, these factors include:
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. Furthermore, our ability to pay cash
dividends is currently restricted by the terms of our debt facility with Oxford, and future debt or other financing
arrangements may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our
common stock. Any return to stockholders will therefore be limited to the appreciation of their stock.
Our Board members, management, and their affiliates, own a significant percentage of our stock and will be able to
exert significant control over matters subject to stockholder approval.
As of December 31, 2024, our executive officers, directors and their affiliates beneficially hold, in the aggregate,
approximately 9% of our outstanding voting stock. These stockholders, acting together, are able to significantly influence
all matters requiring stockholder approval. For example, these stockholders are able to significantly influence elections of
directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate
transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may
feel are in your best interest as one of our stockholders.
We are a “smaller reporting company” as defined in the Exchange Act, and have elected to take advantage of certain of
the scaled disclosures available to smaller reporting companies, including reduced disclosure obligations regarding
executive compensation.
While we are no longer an “emerging growth company”, we are a “smaller reporting company” as defined in the Exchange
Act, and have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies,
including reduced disclosure obligations regarding executive compensation if we are eligible to do so. These exemptions
and reduced disclosures in our SEC filings due to our status as a smaller reporting company also mean our auditors are not
required to audit our internal control over financial reporting for so long as we report less than $100 million in annual
revenues for the most recent fiscal year and may make it harder for investors to analyze our results of operations and
financial prospects. We cannot predict if investors will find our common stock less attractive because we may rely on these
exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market
for our common stock and our common stock price may be more volatile. We will remain a smaller reporting company
until our public float exceeds $250 million or our annual revenues exceed $100 million with a public float greater than
$700 million as of the prior June 30 in any given year.
We expect to continue to incur 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.
In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and Nasdaq have imposed various
requirements on public companies, including establishment and maintenance of effective disclosure and financial controls
and corporate governance practices. Our management and other personnel devote a substantial amount of time to these
compliance initiatives. These rules and regulations have significantly increased our legal and financial compliance costs
and we anticipate that these activities will become more time-consuming and costly over time now that we no longer
qualify as an emerging growth company.
Pursuant to Section 404 of the Sarbanes-Oxley Act, we will be required to furnish a report by our management on our
internal control over financial reporting. Our independent registered public accounting firm will not be required to formally
attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act
until the date we report at least $100 million in annual revenues and have a public float of at least $75 million for the most
recent fiscal year or have a public float of at least $700 million for the most recent fiscal year. To achieve compliance with
Section 404 within the prescribed period, we are engaged in a process to document and evaluate our internal control over
financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal
resources, engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal
control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that
controls are functioning as documented and implement a continuous reporting
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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;
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a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken
at a meeting of our stockholders;
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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;
and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor
our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our
internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction to
the trading price of our common stock in the financial markets due to a loss of confidence in the reliability of our financial
statements.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately
report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other
public reporting, which would harm our business and the trading price of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together
with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or
improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting
obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our
independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that
are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or
identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose
confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management
will be required to assess the effectiveness of these controls annually. However, for as long as we are a “smaller reporting
company”, our independent registered public accounting firm will not be required to attest to the effectiveness of our
internal controls over financial reporting pursuant to Section 404. We will qualify as a “smaller reporting company” if the
market value of our common stock held by non-affiliates is below $250 million (or $700 million if our annual revenue is
less than $100 million) as of June 30 in any given year. An independent assessment of the effectiveness of our internal
controls over financial reporting could detect problems that our management’s assessment might not. Undetected material
weaknesses in our internal controls over financial reporting could lead to financial statement restatements and require us to
incur the expense of remediation.
We have broad discretion in the use of our existing cash, cash equivalents and marketable securities and may not use
them effectively.
Our management has broad discretion in the application of our existing cash, cash equivalents and marketable securities.
Because of the number and variability of factors that will determine our use of our existing cash and cash equivalents, their
ultimate use may vary substantially from their currently intended use. Our management might not apply our existing cash
and cash equivalents in ways that ultimately increase the value of your investment. The failure by our management to apply
these funds effectively could harm our business.
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:
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●
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 amended and restated certificate of
incorporation; and
●
the authority of the board of directors to issue convertible preferred stock on terms determined by the board of
directors without stockholder approval and which convertible 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 Corporation 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 you and other stockholders to elect directors of your choosing or
cause us to take other corporate actions you 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.
If securities or industry analysts publish inaccurate or unfavorable research about our business, our stock price and
trading volume could decline.
The trading market for our common stock depends in part on the 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 may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our common stock may be volatile. The stock market in general, and Nasdaq and 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. In the past, companies that have experienced volatility
in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of
litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s
attention from other business concerns, which could seriously harm our business.
Our amended and restated bylaws contain certain exclusive forum provisions requiring that substantially all disputes
between us and our stockholders be resolved in certain judicial forums, which could limit our stockholders’ ability to
obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum
for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action
asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated
certificate of incorporation or our bylaws, any action to interpret, apply, enforce, or determine the validity of our amended
and restated certificate of incorporation or bylaws, or any action asserting a claim against us that is governed by the
internal affairs doctrine. In addition, our amended and restated bylaws contain a provision by virtue of which, unless we
consent in writing to the selection of an alternative forum, the U.S. District Court for the District of Massachusetts will be
the exclusive forum for any complaint asserting a cause of action arising under the Securities Act. 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 provisions, however, stockholders cannot and
will not be deemed to have waived compliance with federal securities laws and the rules and
regulations thereunder. We have chosen the U.S. District Court for the District of Massachusetts as the exclusive forum for
such causes of action because our principal executive offices are located in Cambridge, Massachusetts. Some companies
that have adopted similar federal district court forum selection provisions have had such provisions challenged in legal
proceedings by stockholders. While the Delaware Supreme Court ruled in March 2020 in Salzburg et al. v. Sciabacucchi
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 selection
provision, and we may incur additional costs of litigation should such enforceability be challenged. If the federal forum
selection provision is otherwise found inapplicable to, or unenforceable in respect of, one or more of the specified actions
or proceedings, we may incur additional costs, which could have an adverse effect on our business, financial condition or
results of operations. We recognize that the federal district court forum selection clause may impose additional litigation
costs on stockholders who assert the provision is not enforceable and may impose more general additional litigation costs
in pursuing any such claims, particularly if the stockholders do not reside in or near the Commonwealth of Massachusetts.
Additionally, the choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it
finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits
against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum
provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur
additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and
financial condition.
We have issued a substantial number of warrants and equity awards from our equity plans which are exercisable into
shares of our common stock which could result in substantial dilution to the ownership interests of our existing
stockholders.
As of December 31, 2024, approximately 8,678,664 shares of our common stock were reserved for issuance upon exercise
of outstanding common stock purchase warrants. As of December 31, 2024, we also have 17,362,147 shares of our
common stock reserved for issuance upon exercise of pre-funded warrants, which are already included in our calculation of
our weighted average common shares outstanding. Additionally, 11,956,594 shares of our common stock were reserved for
issuance upon exercise of outstanding stock options and vested restricted stock units. The exercise of these securities will
result in a significant increase in the number of outstanding shares and substantially dilute the ownership interests of our
existing stockholders. The shares underlying the equity awards from our equity plans are registered on a Form S-8
registration statement. As a result, upon vesting these shares can be freely exercised and sold in the public market upon
issuance, subject to volume limitations applicable to affiliates. The exercise of options and the subsequent sale of the
underlying common stock could cause a decline in our stock price.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.
The sales of a substantial number of the shares and/or the exercise and sale of a substantial number of the pre-funded
warrants and common stock purchase warrants in the public market or the perception that these sales might occur could
depress the market price of our common stock and could impair our ability to raise capital through the sale of additional
equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common
stock. In addition, the sale of substantial amounts of our common stock could adversely impact the price of our common
stock. The sale, or the availability for sale, of a large number of shares of our common stock in the public market could
cause the price of our common stock to decline.
The sale or issuance of our common stock to, or through, Jefferies may cause significant dilution and the sale of the
shares of common stock acquired by Jefferies, or the perception that such sales may occur, could cause the price of our
common stock to fall.
On November 14, 2022, we entered into a sales agreement with Jefferies LLC (“Jefferies”), pursuant to which we may
offer and sell our common stock, subject to certain limitations in the sales agreement and compliance with applicable law,
at any time throughout the term of the sales agreement. The number of shares that are sold by Jefferies after delivering a
placement notice will fluctuate based on the market price of the common stock during the sales period and limits we set
with Jefferies. Because the price per share of each share sold will fluctuate based on the market price of our common stock
during the sales period, it is not possible at this stage to predict the number of shares that will be ultimately issued. Sales to,
or through, Jefferies by us could result in substantial dilution to the interests of other holders
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of our common stock. Additionally, the sale of a substantial number of shares of our common stock, or the anticipation of
such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price
that we might otherwise wish to effect sales.
From January 1, 2024 through December 31, 2024, we did not sell any shares of common stock through the Jefferies sales
agreement.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cyber Risk Management and Strategy
We have processes for assessing, identifying and managing cybersecurity risks, which are informed by industry standards
and built into our overall enterprise risk management function and are designed to help protect our information assets and
operations from internal and external cyber threats, and to protect employee, collaborator and patient information from
unauthorized access or attack.
We maintain a team of internal and external information technology specialists who are responsible for the design,
implementation, and operation of our information technology ecosystem and cybersecurity governance processes. We
engage with certain external parties, including consultants, computer security firms and risk management advisors, peer
companies, and industry groups in an effort to enhance our cybersecurity oversight and risk management strategy. We also
use security technologies, including third-party solutions and monitoring tools that are designed to identify and mitigate
cybersecurity risks. Further, we regularly engage third parties to conduct penetration testing, security assessments and
tabletop exercises. We also engage a virtual chief information security officer (“vCISO”) to support and advise on our
cybersecurity program. We have a process to consider the internal risk oversight programs of critical third-party service
providers, including through security questionnaires and contractual requirements, as appropriate. In addition, in an effort
to deter and detect cyber threats, we have implemented an annual training program to provide employees with data
protection, cybersecurity and incident response and prevention training.
We have not identified any cybersecurity incidents or threats that have materially affected us or are reasonably likely to
materially affect us, including our business strategy, results of operations, or financial condition. However, like other
companies in our industry, we and our third-party vendors have from time to time experienced threats and security
incidents. For more information, please see the section entitled “Risk Factors.”
Governance Related to Cybersecurity Risks
The Audit Committee of our Board of Directors provides direct oversight over cybersecurity risk and provides updates to
the Board of Directors regarding such oversight. The Audit Committee receives periodic updates from management,
including from our Vice President, Information Technology (the “VP of IT”), regarding cybersecurity matters, such as
relevant cybersecurity risk assessments, as applicable. We have established a process for the Audit Committee to be
notified in the event of significant cybersecurity threats or incidents.
The VP of IT leads the operational oversight of company-wide cybersecurity strategy, policies, processes, and support
staff. Additionally, the VP of IT works across all relevant departments to assess and help prepare us and our employees to
address cybersecurity risks. The VP of IT reports and provides regular updates to the Chief Operations Officer and Chief
Financial Officer on the cybersecurity program as well as periodic updates to executive management, as needed. Our VP of
IT has worked in the information technology field for over 20 years at biotechnology companies including publicly-traded
organizations.
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Item 2. Properties
Our corporate headquarters and operations are located in Cambridge, Massachusetts.
In November 2019, we entered into a lease of laboratory and office space at 301 Binney Street in Cambridge,
Massachusetts to be used as our new corporate headquarters. The expiration date was originally in August 2025 and
included an option to extend the term by two years. In May 2024, we entered into the First Amendment to the Lease to
extend the term for approximately two years, commencing on August 19, 2025 with an option to extend the term by five
years.
We believe that our existing facility is adequate to meet our current needs, and that suitable additional space will be
available as and when needed.
Item 3. Legal Proceedings
From time to time, we are subject to various legal proceedings and claims that arise in the ordinary course of our business
activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of this Annual
Report, we do not believe we are party to any claim or litigation the outcome of which, if determined adversely to us, would
individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the
outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management
resources and other factors.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock is traded on the Nasdaq Global Select Market under the symbol “SRRK”. Trading of our common stock
commenced on May 24, 2018, following the completion of our IPO. Prior to that time, there was no established public
trading market for our common stock.
Stockholders
As of February 24, 2025, there were approximately four stockholders of record of our common stock. This number does
not include beneficial owners whose shares are held in street name.
Dividends
We have never declared or paid any dividends to our stockholders since our inception and we do not plan to declare or pay
cash dividends in the foreseeable future. We currently anticipate that we will retain all available funds and any future
earnings for the operation and expansion of our business. Furthermore, our ability to pay cash dividends is currently
restricted by the terms of our debt facility with Oxford. Any future determination related to dividend policy will be made at
the discretion of our board of directors and will depend on, among other factors, our results of operations, financial
condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may
deem relevant. Investors should not purchase our common stock with the expectation of receiving cash dividends.
Equity Compensation Plans
The information required under this item is incorporated herein by reference to Item 12 of Part III of this Annual Report,
such information to be provided in the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy
statement will be filed with the SEC not later than 120 days after the close of the Company’s fiscal year ended December
31, 2024.
Unregistered Sales of Securities
Not applicable.
Issuer Purchases of Equity Securities
None.
Item 6. Reserved
Not applicable.
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Apitegromab, an investigational, fully human monoclonal antibody that inhibits myostatin activation by
selectively binding the pro- and latent forms of myostatin in skeletal muscle and is being developed for the
treatment of SMA. We also believe apitegromab could have potential in the treatment of other neuromuscular
disorders where the inhibition of myostatin may be beneficial.
●
SRK-439, a novel, preclinical, investigational myostatin inhibitor that has high in vitro affinity for pro- and latent
myostatin and maintains myostatin specificity and is being developed for the treatment of cardiometabolic
disorders.
●
SRK-181, an investigational inhibitor of the activation of latent TGFβ1, that is being developed for the treatment
of cancers that are resistant to anti-PD-(L)1 antibody therapies.
●
SRK-373, a novel, preclinical, investigational TGFβ inhibitor that selectively inhibits the activation of latent
TGFβ1 isoform in the context of fibrotic extracellular matrix and that avoids perturbing TGFβ1 presented by cells
of the immune system and is being developed for the treatment of fibrotic diseases.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information contained in this section has been derived from our consolidated financial statements and should be read
together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form
10-K. This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, the
“Exchange Act” and are subject to the “safe harbor” created by those sections. In particular, statements contained in this
Annual Report on Form 10-K that are not historical facts, including, but not limited to statements regarding our future
expectations, plans and prospects, including without limitation, our expectations regarding the potential of the TGFβ
program, the potential of apitegromab as a therapy in SMA and the timeline for and progress in developing apitegromab,
the potential of SRK-181 as a cancer immunotherapy and the timeline for and progress in developing SRK-181, the
potential for our anti-myostatin program as a therapy in cardiometabolic disorders, and liquidity, constitute forward-
looking statements and are made under these safe harbor provisions. Some of the forward-looking statements can be
identified by the use of forward-looking terms such as "believes," "expects," "may," "will," "should," "could," "seek,"
"intends," "plans," "estimates," "anticipates," or other comparable terms. Forward-looking statements involve inherent
risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements.
We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date
made. We urge you to consider the risks and uncertainties discussed in greater detail under the heading "Risk Factors"
elsewhere in this Annual Report on Form 10-K in evaluating our forward-looking statements. We have no plans to update
our forward-looking statements to reflect events or circumstances after the date of this report. As a result of many factors,
including those factors set forth under the heading "Risk Factors" elsewhere in 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 late-stage biopharmaceutical company focused on the discovery, development and delivery of innovative
medicines for the treatment of serious diseases in which signaling by protein growth factors plays a fundamental role. As a
global leader in transforming growth factor beta (“TGFβ”) superfamily biology, our novel understanding of the molecular
mechanisms of growth factor activation enabled us to develop a proprietary platform for the discovery and development of
monoclonal antibodies that locally and selectively target the precursor, or latent, forms of growth factors. By targeting the
signaling proteins at the cellular level and acting in the disease microenvironment, we believe we may avoid the historical
dose-limiting safety challenges associated with inhibiting growth factors for therapeutic effect. We believe our focus on
biologically validated growth factors may facilitate a more efficient development path.
Based on this proprietary and scalable technology platform, we are building a growing portfolio of novel product
candidates with the aim of transforming the lives of patients suffering from a wide range of serious diseases, including
neuromuscular disorders, cardiometabolic disorders, cancer, fibrosis and iron-restricted anemia. We have discovered and
progressed the development of:
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●
SRK-256, a novel, preclinical, investigational inhibitor that selectively inhibits RGMc or hemojuvelin, the co-
receptor of bone morphogenic protein 6 (“BMP6”) and hence inhibits BMP6 signaling. BMP6 signaling is critical
for iron homeostasis and SRK-256 has wide potential applicability in states of iron-restricted anemias.
●
Additional discovery and early preclinical programs related to the selective modulation of growth factor
signaling.
Our first product candidate, apitegromab, is a highly selective, fully human, monoclonal antibody, with a unique
mechanism of action that results in inhibition of the activation of the growth factor, myostatin, in skeletal muscle.
Apitegromab is being developed as a potential first muscle-targeted therapy for the treatment of SMA. We completed
SAPPHIRE, a pivotal Phase 3 clinical trial to evaluate the efficacy and safety of apitegromab in patients with
nonambulatory Type 2 and Type 3 SMA (which is estimated to represent the majority of the current prevalent SMA patient
population in the U.S. and Europe) and announced positive top-line results in October 2024. The study achieved its
primary endpoint. We submitted a U.S. Biologics License Application to the FDA in January 2025 and are planning to
submit a European Union marketing authorization application to the European Medicines Agency (“EMA”) in the first
quarter of 2025. If apitegromab is approved, we expect to initiate a commercial product launch in the fourth quarter of
2025 in the United States, with a commercial launch of apitegromab in Europe to follow.
Apitegromab was evaluated in our Phase 2 TOPAZ proof-of-concept clinical trial for the treatment of patients with Type 2
and Type 3 SMA. Positive 12-month top-line results were initially announced in April 2021. We have subsequently
presented data from the TOPAZ trial over 24-months (2022), 36-months (2023) and 48-months (2024). At 48-months over
90% of TOPAZ patients with nonambulatory Type 2 and 3 SMA receiving a survival motor neuron (“SMN”) therapy
remained on apitegromab treatment and showed sustained clinical benefit, a continued favorable safety profile with no new
safety findings. Additionally, we are conducting a long-term extension study, ONYX, for patients from both the TOPAZ
and SAPPHIRE studies, who were receiving apitegromab in conjunction with an approved SMN therapy. The FDA granted
Fast Track designation, Rare Pediatric Disease designation and Orphan Drug designation to apitegromab for the treatment
of SMA in May 2021, August 2020 and March 2018, respectively. The EMA granted Priority Medicines (“PRIME”)
designation in March 2021 and the EC granted orphan medicinal product designation in December 2018 to apitegromab for
the treatment of SMA.
In October 2023, we announced an expansion of our therapeutic focus into cardiometabolic disorders by advancing our
anti-myostatin program with SRK-439, a novel, fully human anti-myostatin monoclonal antibody, for evaluation in
cardiometabolic disorders, including obesity. We are developing SRK-439 towards a potential IND submission in the third
quarter of 2025. In 2024, we presented preclinical data at scientific conferences which support the potential of SRK-439 to
increase lean mass and contribute to a favorable body composition in conjunction with a GLP-1 receptor agonist (“GLP-1
RA”) treatment. To inform the development of SRK-439, in May 2024 we initiated the Phase 2 EMBRAZE proof-of-
concept trial, designed to assess the safety and efficacy of apitegromab to preserve muscle mass in individuals living with
obesity and on background therapy of a GLP-1 RA. In September 2024, we announced that we completed enrollment in the
Phase 2 EMRAZE proof-of-concept trial. Top-line results from this trial are expected in the second quarter of 2025.
We believe that apitegromab has the potential to be the first muscle-targeted therapy that is aimed at improving motor
function in patients with SMA who are receiving an SMN therapy. We also have identified multiple other diseases for
which the selective inhibition of the activation of myostatin may offer therapeutic benefit, including additional patient
populations in SMA (such as patients with SMA under 2 years of age) and indications for other neuromuscular disorders
beyond SMA.
Our second product candidate, SRK-181, a highly selective inhibitor of the activation of latent TGFβ, is being developed
for the treatment of cancers that are resistant to CPI therapies, such as anti-PD-1 or anti-PD-L1 antibody therapies (referred
to together as anti-PD-(L)1 antibody therapies). SRK-181 is being evaluated in our Phase 1 DRAGON proof-of-concept
clinical trial in patients with locally advanced or metastatic solid tumors that exhibit resistance to anti-PD-(L)1 antibody
therapies. We completed enrollment of the DRAGON trial in December 2023 and continue to treat patients who remain on
study. This two-part clinical trial consists of a dose escalation portion (Part A) and a dose expansion portion evaluating
SRK-181 in combination with an approved anti-PD-(L)1 antibody therapy (Part B). Part B
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disease microenvironment, or tissue where it is localized. Our structural insights and unique antibody discovery capabilities
can also be applied to other protein classes beyond growth factors, with an aim of generating differentiated candidates
targeting cell surface receptors such as immune cell receptors or G-protein coupled receptors, where selectivity remains
challenging.
We have incurred significant operating losses since inception. Our net losses were $246.3 million for the year ended
December 31, 2024. As of December 31, 2024, we had an accumulated deficit of $922.7 million. We expect to continue to
incur significant expenses and operating losses for the foreseeable future in performing our ongoing activities, as we:
●
develop our commercialization capabilities to support product sales, marketing and distribution activities;
●
continue development activities for apitegromab, including the completion of our Phase 3 SAPPHIRE pivotal
clinical trial in SMA, the conduct of ONYX, our long-term extension study for patients from both the TOPAZ and
SAPPHIRE studies and the associated drug supply;
●
continue research and development activities for SRK-181, including the conduct of our Phase 1 DRAGON
proof-of-concept clinical trial;
●
continue research and development activities for our cardiometabolic program, including our Phase 2 EMBRAZE
proof-of-concept trial with apitegromab and advancing SRK-439 towards a potential IND submission in the third
quarter of 2025;
●
continue to discover, validate and develop additional product candidates through the use of our proprietary
platform;
●
maintain, expand and protect our intellectual property portfolio;
●
hire additional research, development, commercial and other business personnel; and
●
continue to build the infrastructure to support our operations as a public company.
To date, we have not generated any revenue from product sales. If we successfully complete clinical development and
obtain regulatory approval for apitegromab, SRK-181, SRK-439 or any of our future product candidates, we may generate
revenue in the future from product sales. In addition, if we obtain regulatory approval for apitegromab, SRK-181, SRK-439
or any of our future product candidates, we expect to incur significant expenses related to developing our
commercialization capabilities to support product sales, marketing and distribution activities.
commenced in 2021 and includes the following active cohorts: urothelial carcinoma, cutaneous melanoma, non-small cell
lung cancer, ccRCC, and HNSCC. Safety, efficacy and biomarker data were presented in June 2024 at the ASCO annual
meeting and in November 2024 at the SITC 39th Annual Meeting. The data showed encouraging responses in heavily
pretreated and anti-PD-(L)1 resistant patients across multiple tumor types. We believe that the DRAGON trial achieved its
study objectives by showing objective, durable clinical responses in patients with ccRCC resistant to PD-1 therapy above
what is expected from continuing PD-1 alone. We anticipate that emerging data from the DRAGON trial will be presented
at medical meetings in the future.
Using our innovative approach and proprietary platform, we are creating a pipeline of novel product candidates that
selectively modulate the activation of growth factors implicated in a variety of serious diseases, including neuromuscular
disorders, cardiometabolic disorders, cancer, fibrosis, and iron-restricted anemia. Our proprietary platform is designed to
generate highly selective antibodies that target the growth factor’s latent precursor form prior to its activation within the
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Financial Operations Overview
Operating Expenses
Research and Development
Research and development expenses consist primarily of costs incurred for our research and development activities,
including our product candidate discovery efforts, preclinical studies, manufacturing, and clinical trials under our research
programs, which include:
●
employee-related expenses, including salaries, benefits and equity-based compensation expense for our research
and development personnel;
●
expenses incurred under agreements with third parties that conduct research and development and preclinical
activities on our behalf;
●
expenses incurred under agreements related to our clinical trials, including the costs for investigative sites and
contract research organizations (“CROs”), that conduct our clinical trials;
●
manufacturing process-development, manufacturing of clinical supplies and technology-transfer expenses;
●
consulting and professional fees related to research and development activities;
●
costs of purchasing laboratory supplies and non-capital equipment used in our internal research and development
activities;
●
costs related to compliance with clinical regulatory requirements; and
●
facility costs and other allocated expenses, which include expenses for rent and maintenance of facilities,
insurance, depreciation and other supplies.
Research and development costs are expensed as incurred. Costs for certain activities are recognized based on an
evaluation of the progress to completion of specific tasks. Nonrefundable advance payments for research and development
goods and services to be received in the future from third parties are deferred and capitalized. The capitalized amounts are
expensed as the related services are performed.
A significant portion of our research and development costs have been external costs, which we track on a program-by-
program basis after a clinical product candidate has been identified. However, we do not allocate our internal research and
development expenses, consisting primarily of employee-related costs, depreciation and other indirect costs, on a program-
by-program basis as they are deployed across multiple projects.
Research and development activities are central to our business model. Product candidates in later stages of clinical
development generally have higher development costs than those in earlier stages of clinical development, primarily due to
the increased size and duration of later-stage clinical trials, as well as the associated clinical trial material requirements. We
expect research and development costs for our product candidates to continue to be substantial for the foreseeable future as
the development programs progress. However, we do not believe that it is possible at this time to accurately project total
program-specific expenses through commercialization. There are numerous factors associated with the successful
commercialization of any of our product candidates, including future trial design and various regulatory requirements,
many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future
commercial and regulatory factors beyond our control will impact our clinical development programs and plans.
The successful development of apitegromab, SRK-181, SRK-439, SRK-373, SRK-256 and any future product candidates is
uncertain. Accordingly, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the
efforts that will be necessary to complete the remainder of the development of apitegromab, SRK-181, SRK-439, SRK-
373, SRK-256 and any future product candidates. We are also unable to predict when, if ever,
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material net cash inflows will commence from the sale of our product candidates, if approved. This is due to the numerous
risks and uncertainties associated with developing product candidates, including the uncertainty of:
●
the scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research
and development activities;
●
establishing an appropriate safety profile;
●
successful enrollment in and completion of clinical trials;
●
whether our product candidates show safety and efficacy in our clinical trials;
●
receipt of marketing approvals from applicable regulatory authorities, if any;
●
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
●
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product
candidates;
●
significant and changing government regulation;
●
commercializing the product candidates, if and when approved, whether alone or in collaboration with others; and
●
continued acceptable safety profile of the products following any regulatory approval.
A change in the outcome of any of these variables with respect to the development of apitegromab, SRK-181, SRK-439,
SRK-373, SRK-256 or any of our future product candidates could significantly change the costs and timing associated with
the development of that product candidate.
General and Administrative
General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and
equity-based compensation expenses for personnel in executive, finance, business development, investor relations, legal,
information technology, human resources and commercial functions. Other significant general and administrative expenses
include facility costs not otherwise included in research and development expenses, legal fees relating to patent and
corporate matters and fees for accounting, consulting services, professional fees and corporate expenses. We expect general
and administrative expense to increase as we continue to invest in building the infrastructure to support the
commercialization of apitegromab.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest income earned on our cash, cash equivalents and marketable
securities, partially offset by interest expense incurred on our debt facility, including amortization of debt discount and debt
issuance costs.
115
and 2023 (in thousands,
Year Ended December 31,
Change
2024
2023
$
%
Operating expenses:
Research and development
$ 184,550
$ 121,900
$ 62,650
51.4 %
General and administrative
67,504
49,395
18,109
36.7 %
Total operating expenses
252,054
171,295
80,759
47.1 %
Loss from operations
(252,054)
(171,295)
(80,759)
47.1 %
Other income (expense), net
5,760
5,506
254
4.6 %
Net loss
$ (246,294)
$ (165,789)
$ (80,505)
48.6 %
Operating Expenses
Research and Development
Research and development expense was $184.6 million for the year ended December 31, 2024 compared to $121.9 million
for the year ended December 31, 2023, an increase of $62.7 million, or 51.4%. The following table summarizes our
research and development expense for the years ended December 31, 2024 and 2023 (in thousands, except percentages):
Year Ended December 31,
Change
2024
2023
$
%
External costs by program:
Apitegromab
$ 78,290
$ 40,701
$
37,589
92.4 %
SRK-181
9,957
14,200
(4,243)
(29.9)%
SRK-439
11,638
631
11,007
1,744.4 %
Other early programs and unallocated costs
3,047
5,187
(2,140)
(41.3)%
Total external costs
102,932
60,719
42,213
69.5 %
Internal costs:
Employee compensation and benefits
64,354
44,594
19,760
44.3 %
Facility and other
17,264
16,587
677
4.1 %
Total internal costs
81,618
61,181
20,437
33.4 %
Total research and development expense
$ 184,550
$ 121,900
$
62,650
51.4 %
The increase in research and development expense was primarily attributable to the following:
●
An increase in our external research and development costs of $42.2 million, which primarily consisted of:
o
$37.6 million increase in costs associated with apitegromab primarily due to clinical trial costs,
particularly the conduct of ONYX, our long-term extension study for patients from both the TOPAZ and
SAPPHIRE studies and our Phase 2 EMBRAZE proof-of-concept study (including purchases of
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
The following table summarizes our results of operations for the years ended December 31, 2024
except percentages):
116
GLP-1 RA drug), as well as an increase in drug supply manufacturing, including to support lifecycle
management initiatives;
o
$4.2 million decrease in costs associated with SRK-181 mostly due to purchases of pembrolizumab in
2023 which were used in the Phase 1 DRAGON clinical trial;
o
$11.0 million increase in preclinical costs and manufacturing development for SRK-439; and
o
$2.1 million decrease in costs in other early development candidates and unallocated costs;
●
$20.4 million increase in internal research and development costs, which was primarily driven by an increase in
employee related costs, including salaries, benefits and non-cash equity-based compensation expense related to
increased headcount, as well as an increase in temporary support expense.
Total research and development expenses are expected to continue to be substantial, driven by employee compensation
costs and development costs associated with our clinical stage programs as we continue development activities for
apitegromab in SMA, including the completion of our Phase 3 SAPPHIRE pivotal clinical trial in SMA, the conduct of
ONYX, our long-term extension study for patients from both the TOPAZ and SAPPHIRE studies and the associated drug
supply, as well as costs associated with supporting our cardiometabolic program, including our Phase 2 EMBRAZE proof-
of-concept trial of apitegromab and our preclinical program, SRK-439. Additionally, we will continue to invest in our
pipeline. We expect costs of our SRK-181 program to decrease, as we completed enrollment of the Phase 1 DRAGON
clinical trial in December 2023.
General and Administrative
General and administrative expense was $67.5 million for the year ended December 31, 2024 compared to $49.4 million
for the year ended December 31, 2023, an increase of $18.1 million or 36.7%. The increase was primarily associated with
employee-related costs including salaries, benefits and non-cash equity-based compensation expense related to increased
headcount, in addition to an increase in professional service fees. We expect general and administrative expense to increase
as we continue to invest in building the infrastructure to support the commercialization of apitegromab.
Other Income (Expense), Net
The change in other income (expense), net was primarily attributable to an increase in interest income earned due to higher
interest rates and higher average balances in our cash, cash equivalents and marketable securities, partially offset by an
increase in interest expense related to the Loan and Security Agreement, also due to higher interest rates.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any product revenue and have incurred significant operating losses and
negative cash flows from our operations. We have funded our operations to date primarily with proceeds from the sale of
our convertible preferred stock and units in private placements before our IPO, and issuance of our common stock through
our IPO in 2018, to Gilead in an exempt private placement, through multiple secondary public offerings, including our
recent follow-on offering in October 2024 (see Note 9) and through at-the-market (“ATM”) sales, as well as payments from
our research collaborations and the Loan and Security Agreement entered into in October 2020 and subsequently amended
(see Note 13).
117
The following table provides information regarding our total cash, cash equivalents and marketable securities at
December 31, 2024 and December 31, 2023 (in thousands):
December 31, December 31,
2024
2023
Cash and cash equivalents
$ 177,878
$ 101,855
Marketable securities
259,400
178,083
Total cash, cash equivalents and marketable securities
$ 437,278
$ 279,938
During the year ended December 31, 2024, our cash, cash equivalents and marketable securities balance increased by
$157.3 million. The change was primarily the result of proceeds from our equity offering completed in October 2024 and
exercises of stock options and warrants, partially offset by cash used to operate our business, including payments related to,
among other things, research and development and general and administrative expenses as we continued to invest in our
product candidates and supported our internal research and development efforts and made interest payments on our debt.
Our current ATM program, established in November 2022, allows for the sale of shares of our common stock having an
aggregate offering price of up to $100 million. As of December 31, 2024, we sold 619,290 shares of our common stock,
generating net proceeds of $5.2 million, under the ATM program. No sales were made under the ATM program during the
year ended December 31, 2024. In October 2021, we sold 500,000 shares of our common stock through a sale in our prior
ATM program (in place between March 2021 and June 2022) and received $13.1 million in net proceeds, after deducting
commissions and fees.
We have had multiple equity offerings during the period 2019-2024. The most recent few are listed below:
In October 2024, we entered into an underwriting agreement with J.P. Morgan Securities LLC, Jefferies LLC and Piper
Sandler & Co., as representatives of the several underwriters named therein, relating to the issuance and sale of an
aggregate of 11,858,408 shares of our common stock and pre-funded warrants to purchase 353,983 shares of our common
stock, which includes the exercise in full by the underwriters of their option to purchase an additional 1,592,920 shares.
The offering price per share was $28.25 and the offering price per pre-funded warrant was $28.2499, which equals the per
share public offering price for the common shares less the $0.0001 exercise price for each such pre-funded warrant. The
offering resulted in estimated proceeds of approximately $324.4 million, net of underwriting discounts and estimated
offering expenses (see Note 9).
In October 2023, we entered into an underwriting agreement with J.P. Morgan Securities LLC and Piper Sandler & Co., as
representatives of the several underwriters named therein, relating to the issuance and sale of an aggregate of 14,270,074
shares of our common stock, which includes the exercise in full by the underwriters of their options to purchase an
additional 1,861,314 shares. The offering price per share was $6.85. The offering resulted in proceeds of approximately
$92.4 million, net of underwriting discounts and offering expenses.
On February 10, 2025, we entered into the Amended and Restated Loan and Security Agreement with Oxford for up to
$200 million of which $25.0 million from Tranche 1 was received in October 2020 and $25.0 million from Tranche 2
was received in December 2021 (see Note 13). The Amended and Restated Loan and Security Agreement consolidates
the existing outstanding loan tranches solely with Oxford.
118
Year Ended December 31,
2024
2023
Net cash used in operating activities
$ (200,949)
$ (145,226)
Net cash (used in) provided by investing activities
(76,056)
41,141
Net cash provided by financing activities
353,028
102,574
Net increase (decrease) in cash, cash equivalents and restricted cash
$
76,023
$
(1,511)
Net Cash Used in Operating Activities
Net cash used in operating activities was $200.9 million for the year ended December 31, 2024, and consisted of our net
loss of $246.3 million, changes in our assets and liabilities of $6.6 million, partially offset by non-cash adjustments of
$38.8 million. The non-cash adjustments are primarily from equity-based compensation.
Net cash used in operating activities was $145.2 million for the year ended December 31, 2023, and consisted of our net
loss of $165.8 million, changes in our assets and liabilities of $10.6 million, partially offset by non-cash adjustments of
$31.2 million. The non-cash adjustments are primarily from equity-based compensation.
Net Cash (Used in) Provided by Investing Activities
Net cash used in investing activities was $76.1 million for the year ended December 31, 2024, compared to net cash
provided by investing activities of $41.1 million for the year ended December 31, 2023. Net cash used in and provided by
investing activities for both periods was primarily associated with transactions involved in the routine management of our
marketable securities.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $353.0 million for the year ended December 31, 2024, compared to $102.6
million for the year ended December 31, 2023. Net cash provided by financing activities for the year ended December 31,
2024 was primarily attributable to net proceeds from an equity offering completed in October 2024, in addition to stock
option and warrant exercises. Net cash provided by financing activities for the year ended December 31, 2023 was
primarily attributable to net proceeds from an equity offering completed in October 2023.
In December 2018, we entered into the Gilead Collaboration Agreement pursuant to which we conducted research and
preclinical development activities relating to the diagnosis, treatment, cure, mitigation or prevention of diseases, disorders
or conditions, other than in the field of oncology in accordance with a pre-determined research plan. Pursuant to the Gilead
Collaboration Agreement, Gilead made non-refundable payments of $80.0 million, including an upfront payment and an
equity investment. In December 2019, we achieved a $25.0 million preclinical milestone for the successful demonstration
of efficacy in preclinical in vivo proof-of-concept studies, and subsequently received the associated payment in January
2020. Revenue was recognized during the period January 2019 through December 2021, as research and development
services were provided. All revenue related to the Gilead Collaboration Agreement had been fully recognized by January
31, 2022, upon the termination of Gilead’s option exercise period.
During the year ended December 31, 2024, 2,526,833 of the Company’s pre-funded warrants were exercised. As of
December 31, 2024, the Company had 17,362,147 pre-funded warrants outstanding.
During the year ended December 31, 2024, 1,309,492 of the Company’s common warrants were exercised. As of
December 31, 2024, the Company had 8,678,664 common warrants outstanding.
Cash Flows
The following table provides information regarding our cash flows for the years ended December 31, 2024 and 2023 (in
thousands):
119
Funding Requirements
We expect our expenses to be substantial as we continue the research and development of apitegromab in SMA. In
addition, we will seek marketing approval for apitegromab, and if we seek marketing approval for any of our future
product candidates, we expect to incur significant commercialization expenses related to product sales, marketing,
manufacturing and distribution. We expect to continue to incur costs related to SRK-181 as we continue to treat patients
who remain on the Phase 1 DRAGON clinical trial. We expect to incur costs to support our cardiometabolic program,
including our Phase 2 EMBRAZE proof-of-concept trial of apitegromab and our preclinical program, SRK-439.
Additionally, we will support the development of our pipeline and any other preclinical programs. Furthermore, we expect
to continue to incur costs associated with operating as a public company.
We expect that our existing cash, cash equivalents, marketable securities and cash available to us will enable us to fund our
operating expenses and capital expenditure requirements into the fourth quarter of 2026. However, we will require
additional capital in order to complete clinical development and commercialization for each of our current programs. We
have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources
sooner than we currently expect. Our future capital requirements will depend on many factors, including:
●
the costs and timing of developing our product candidates and future product candidates, including costs
associated with apitegromab in our Phase 3 SAPPHIRE clinical trial in SMA and ONYX, our long-term
extension study in SMA for patients from both the TOPAZ and SAPPHIRE studies, our Phase 2 EMBRAZE
proof-of-concept trial for apitegromab in our cardiometabolic program, our Phase 1 DRAGON clinical trial for
SRK-181, and the costs and timing of conducting future preclinical studies and clinical trials for SRK-439 or any
other product candidates;
●
the costs of future manufacturing of apitegromab, SRK-181, SRK-439, SRK-373, SRK-256 and any other future
product candidates;
●
the scope, progress, results and costs of discovery, preclinical development, laboratory testing and clinical trials
for other potential product candidates we may develop, if any;
●
the costs of identifying and developing, or in-licensing or acquiring, additional product candidates and
technologies;
●
the costs, timing and outcome of regulatory review of our product candidates;
●
our ability to establish and maintain collaborations on favorable terms, if at all;
●
the achievement of milestones or occurrence of other developments that trigger payments under any collaboration
agreements, license agreements, or other agreements we might have at such time;
●
the costs of seeking marketing approvals for our product candidates that successfully complete clinical trials,
including apitegromab in SMA;
●
the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and
distribution, for any of our product candidates for which we receive marketing approval;
●
the amount of revenue, if any, received from commercial sales of our product candidates, should any of our
product candidates receive marketing approval;
●
the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our
intellectual property rights and defending intellectual property-related claims;
●
our headcount growth and associated costs as we expand our business operations and research and development
activities;
●
the costs of supporting our infrastructure and facilities, including equipment and physical infrastructure to support
our research and development;
●
the costs of operating as a public company; and
●
the impact of adverse global economic conditions on our business, which may exacerbate the magnitude of the
factors discussed above.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming,
expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results
required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not
achieve commercial success. Accordingly, we will need to continue to rely on additional financing to achieve our business
objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a
combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the
extent that we raise additional capital through the sale of equity or convertible debt securities, common stockholder
ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could
adversely affect the rights of a common stockholder. Additional debt financing, if available, may involve agreements that
include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends, that could adversely impact our ability to conduct our business.
If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to
relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant
licenses on terms that may not be favorable to us. Market volatility or other factors could also adversely impact our ability
to access capital as and when needed. If we are unable to raise additional funds through equity or debt financings when
needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization
efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market
ourselves.
Critical Accounting Estimates
This management’s discussion and analysis is based on our consolidated financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements
requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses
and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on
historical experience, known trends and events and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions
or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts
and experience. The effects of material revisions in estimates, if any, will be reflected in the consolidated financial
statements prospectively from the date of change in estimates. 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
appearing elsewhere in this report, we believe that the following accounting estimates are those most critical to the
judgments used in the preparation of our consolidated financial statements. They involve a significant level of estimation
uncertainty and have had or are reasonably likely to have a material impact on our finance condition or result of operations.
Research and Development Expenses and related Accruals/Prepaids
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses
as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with
our personnel and/or reviewing other third-party sources to identify the progress of services that has been performed on our
behalf, as well as invoices received and contracted costs. This contributes to 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 the actual cost.
The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones
are met. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known
to us at that time. We periodically confirm the accuracy of our estimates with the service providers
120
and make adjustments if necessary. The significant estimates in our accrued research and development expenses include the
costs incurred for services performed by our vendors in connection with research and development activities for which we
have not yet been invoiced. In certain instances, we prepay for services to be provided in the future. These amounts are
expensed as the services are performed.
We base our expenses related to research and development activities on our estimates of the services received and efforts
expended pursuant to quotes and contracts with vendors that conduct research and development on our behalf. The
financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven
payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided
and result in a prepayment of the research and development 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 our estimate, we adjust the accrual or prepaid balance
accordingly. Nonrefundable advance payments for goods and services that will be used in future research and development
activities are expensed when the activity has been performed or when the goods have been received rather than when the
payment is made.
Although we do not expect our estimates to be materially different from amounts incurred, if our estimates of the status and
timing of services performed differ from the actual status and timing of services performed, it could result in us reporting
amounts that are too high or too low in any particular period. To date, there have been no material differences between our
estimates of such expenses and the amounts incurred.
The accrued research and development expenses at the end of each year are generally paid during the following year and
therefore the same estimates and assumptions do not continue to exist each year, although, as described above, the method
and procedures to develop those estimates and assumptions are generally consistent.
Recent Accounting Pronouncements
We have reviewed all recently issued standards and have determined that, other than Recently Issued Accounting
Pronouncements as disclosed in Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual
Report on Form 10-K, such standards will not have a material impact on our financial statements or do not otherwise apply
to our operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the
information required under this item.
Item 8. Financial Statements and Supplementary Data
Our financial statements, together with the report of our independent registered public accounting firm, appear in this
Annual Report beginning on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures.
Management’s Evaluation of our Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act,
that are designed to ensure that information required to be disclosed in the reports that we file or submit under the
Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our
121
principal executive officer and principal financial and accounting officer, as appropriate to allow timely decisions regarding
required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its
judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and
procedures are designed to provide reasonable assurance of achieving their control objectives.
Our management, with the participation of our chief executive officer (principal executive officer) and chief financial
officer (principal financial and accounting officer), has evaluated the effectiveness of our disclosure controls and
procedures as of December 31, 2024, the end of the period covered by this Annual Report on Form 10-K. Based upon such
evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and
procedures were effective at the reasonable assurance level as of such date. We continue to review and document our
disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from
time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such
term is defined in Exchange Act Rule 13a–15(f) and 15d-15(d) under the Exchange Act. Our internal control system was
designed to provide reasonable assurance to our management and our Board regarding the preparation and fair presentation
of published financial statements. All internal control systems, no matter how well designed have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2024. In making this assessment, our management used the criteria set forth in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in
2013 (“COSO criteria”). Based on this assessment, management concluded that our internal control over financial
reporting was effective as of December 31, 2024. This Annual Report on Form 10-K does not include an attestation report
pursuant to the requirements of Section 404(b) of the Sarbanes-Oxley Act of as we qualify as a “smaller reporting
company” and as such, are exempt from such auditor attestation requirement.
Changes in Internal Controls Over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) occurred during the year ended December 31, 2024 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
122
123
Item 9B. Other Information.
Trading Plans
During the quarter ended December 31, 2024, certain of our directors and officers adopted contracts, instructions or written
plans for the purchase or sale of our securities as noted below:
Name and Title
Type of Trading
Arrangement
Action Taken
(Date of
Action)
Duration or End
Date
Aggregate
Number of
Securities to
be Sold
Description of Trading
Arrangement
Mo Qatanani, CSO
Trading plan
intended to satisfy
the affirmative
defense conditions
of Securities
Exchange Act
Rule 10b5-1(c)
Adoption
(October 17,
2024)
February 19, 2026
68,510
Exercises of vested stock
options and sales of shares of
the Company's common stock
pursuant to the terms of the
trading plan
Ted Myles, COO and CFO
Trading plan
intended to satisfy
the affirmative
defense conditions
of Securities
Exchange Act
Rule 10b5-1(c)
Adoption
(November
19, 2024)
March 10, 2026
232,939 (1)
Exercises of vested stock
options and sales of shares of
the Company's common stock
pursuant to the terms of the
trading plan
Katie Peng, Board Member
Trading plan
intended to satisfy
the affirmative
defense conditions
of Securities
Exchange Act
Rule 10b5-1(c)
Adoption
(November
20, 2024)
March 17, 2026
6,049
Sale of the Company's common
stock pursuant to the terms of
the plan
Tracey Sacco, CCO
Trading plan
intended to satisfy
the affirmative
defense conditions
of Securities
Exchange Act
Rule 10b5-1(c)
Adoption
(December
20, 2024)
March 25, 2026
43,000
Exercises of vested stock
options and sales of shares of
the Company's common stock
pursuant to the terms of the
trading plan
Other than as disclosed above, no other officer or director adopted, modified or terminated a Rule 10b5-1 trading
arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K) during the
quarter ended December 31, 2024.
(1) These shares reflect the aggregate maximum number of Restricted Stock Units (“RSU”) prior to any non-
discretionary sell-to-cover transactions in addition to other shares eligible to be sold pursuant to the plan. The
Company has a non-discretionary sell-to-cover requirement to satisfy tax withholding obligations associated with
RSU vesting for employees.
Item 9C. Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement
pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the close of the
Company’s fiscal year ended December 31, 2024.
Item 11. Executive Compensation
The information required under this item (excluding the information under the heading “Pay Versus Performance”) is
incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy
statement will be filed with the SEC not later than 120 days after the close of the Company’s fiscal year
ended December 31, 2024.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement
pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the close of the
Company’s fiscal year ended December 31, 2024.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement
pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the close of the
Company’s fiscal year ended December 31, 2024.
Item 14. Principal Accountant Fees and Services
The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement
pursuant to Regulation 14A, which proxy statement will be filed with the SEC not later than 120 days after the close of the
Company’s fiscal year ended December 31, 2024.
124
125
Number
Description
Form
File No.
Exhibit No.
Filing Date
3.1
Amended and Restated Certificate of
Incorporation of the Registrant
S-1/A
333-224493
3.2
May 8, 2018
3.2
Amendment to Amended and Restated
Certificate of Incorporation of the Registrant
S-1/A
333-224493
3.1.1
May 14, 2018
3.3
Certificate of Amendment to Amended and
Restated Certificate of Incorporation of the
Registrant
8-K
001-38501
3.1
June 28, 2024
3.4
Amended and Restated By-laws of the
Registrant
S-1/A
333-224493
3.4
May 8, 2018
4.1
Investors’ Rights Agreement among the
Registrant and certain of its stockholders,
dated December 22, 2017
S-1
333-224493
4.1
April 27, 2018
4.2
Specimen Stock Certificate evidencing shares
of common stock
S-1/A
333-224493
4.2
May 14, 2018
4.3
Amended and Restated Warrant to Purchase
Stock, by and between Silicon Valley Bank
and the Registrant, dated December 22, 2017
S-1
333-224493
4.3
April 27, 2018
4.4*
Description of Capital Stock
4.5
Form of Pre-Funded Warrant
8-K
001-38501
4.1
June 21, 2022
4.6
Form of Common Stock Warrant
8-K
001-38501
4.2
June 21, 2022
4.7
Form of Pre-Funded Warrant
8-K
001-38501
4.1
October 10, 2024
10.1+
2017 Stock Option and Incentive Plan and
forms of award agreements thereunder
S-1
333-224493
10.1
April 27, 2018
10.2+
2018 Stock Option and Incentive Plan and
forms of award agreements thereunder
S-1/A
333-224493
10.2
May 14, 2018
10.3+
Senior Executive Cash Incentive Bonus Plan
S-1/A
333-224493
10.3
May 8, 2018
10.4+
2018 Employee Stock Purchase Plan
S-1/A
333-224493
10.4
May 14, 2018
10.5+
Scholar Rock Holding Corporation 2022
Inducement Equity Plan
8.K
001-38501
10.2
June 21, 2022
10.6+
Amendment No. 1 to Scholar Rock Holding
Corporation 2022 Inducement Equity Plan,
dated September 4, 2022
S-8
333-268327
99.2
November 14, 2022
PART IV
Item 15. Exhibits, Financial Statements and Schedules
(a)(1) Financial Statements.
Our consolidated financial statements and notes thereto, together with the Reports of Independent Registered Public
Accounting Firm are included in Item 8 of this Annual Report on Form 10-K commencing on page F-1.
(a)(2) Financial Statement Schedules.
All financial schedules have been omitted because the required information is either presented in the consolidated financial
statements or the notes thereto or is not applicable or required.
(a)(3) Exhibits.
The following exhibits are included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (and
are numbered in accordance with Item 601 of Regulation S-K):
126
10.7+
Amendment No. 2 to Scholar Rock Holding
Corporation 2022 Inducement Equity Plan,
dated February 3, 2023
10-K
001-38501
10.7
March 7, 2023
10.8+
Amendment No. 3 to Scholar Rock Holding
Corporation 2022 Inducement Equity Plan,
dated January 25, 2024
10-K
001-38501
10.8
March 19, 2024
10.9+
Amendment No. 4 to Scholar Rock Holding
Corporation 2022 Inducement Equity Plan,
dated November 9, 2024
S-8
333-283120
99.7
November 12, 2024
10.10+
Form of Indemnification Agreement
S-1/A
333-224493
10.5
May 14, 2018
10.11†
Exclusive License Agreement by and
between the Registrant, and Children’s
Medical Center, dated as December 16, 2013
S-1
333-224493
10.6
April 27, 2018
10.12
Lease Agreement by and between BMR-
Rogers Street LLC and Scholar Rock, Inc.,
dated November 5, 2019.
Schedules have been omitted pursuant to Item
601(b)(2) of Regulation S-K. A copy of any
omitted schedules will be furnished
supplementally to the Securities and
Exchange Commission upon request.
10-Q
001-38501
10.2
November 12, 2019
10.13+
Employment Agreement, dated July 14, 2020,
by and between Scholar Rock, Inc. and
Edward H. Myles.
8-K
001-38501
10.2
July 16, 2020
10.14
Loan and Security Agreement, dated October
16, 2020, by and among the Registrant,
Scholar Rock, Inc., Oxford Finance LLC and
Silicon Valley Bank.
10-K
001-38501
10.26
March 9, 2021
10.15
First Amendment to Loan and Security
Agreement, dated November 16, 2021, by
and among the Registrant, Scholar Rock, Inc.,
Oxford Finance LLC and Silicon Valley
Bank.
10-K
001-38501
10.27
March 7, 2022
10.16
Second Amendment to Loan and Security
Agreement, dated November 10, 2022, by
and among the Registrant, Scholar Rock, Inc.,
Oxford Finance LLC and Silicon Valley
Bank.
10-K
001-38501
10.26
March 7, 2023
10.17
Third Amendment to Loan and Security
Agreement, dated April 18, 2023, by and
among the Registrant, Scholar Rock, Inc.,
Oxford Finance LLC and Silicon Valley
Bank.
10-Q
001-38501
10.1
August 9, 2023
10.18+
Employment Agreement, by and between
Scholar Rock, Inc. and Jay T. Backstrom,
dated September 19, 2022.
8-K
001-38501
10.1
September 20, 2022
10.19+
Employment Agreement, by and between
Scholar Rock, Inc. and Jing Marantz, dated
November 7, 2022.
8-K
001-38501
10.1
November 9, 2022
10.20
Form of Securities Purchase Agreement by
and among the Registrant and the purchasers
dated June 17, 2022.
8-K
001-38501
10.1
June 21, 2022
127
10.21+
Amended and Restated Employment
Agreement, by and between Scholar Rock,
Inc. and Junlin Ho dated March 1, 2023.
10-K
001-38501
10.31
March 7, 2023
10.22+
Employment Agreement, by and between
Scholar Rock, Inc. and Tracey Sacco, dated
February 1, 2023.
10-K
001-38501
10.32
March 19, 2024
10.23+*
Amended and Restated Employment
Agreement, by and between Scholar Rock,
Inc. and Edward H. Myles dated December 8,
2024.
10.24
Fourth Amendment to Loan and Security
Agreement, dated May 27, 2024, by and
among the Registrant, Scholar Rock, Inc.,
Oxford Finance LLC and Silicon Valley
Bank.
10-Q
001-38501
10.2
August 8, 2024
10.25††*
Amended and Restated Loan and Security
Agreement, dated February 10, 2025, by and
among the Registrant, Scholar Rock, Inc.,
Oxford Finance LLC.
10.26
Separation Agreement and Release by and
between Scholar Rock, Inc. and Edward H.
Myles, dated January 28, 2025.
8-K
001-38501
10.1
January 29, 2025
10.27*
Scholar Rock Holding Corporation Amended
and Restated Non-employee Director
Compensation Policy
19*
Scholar Rock Holding Corporation
Statement of Company Policy on Insider
Trading and Disclosure
21.1*
Subsidiaries of the Registrant
23.1*
Consent of Independent Registered Public
Accounting Firm.
24.1*
Power of Attorney (included on the signature
page to this report).
31.1*
Certification of Principal Executive Officer
Pursuant to Rules 13a-14(a) and 15d-14(a)
under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer
Pursuant to Rules 13a-14(a) and 15d-14(a)
under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1**
Certification of Principal Executive Officer
and Principal Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
97#
Compensation Recovery Policy
10-K
001-38501
97
March 19, 2024
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema
Document
101.CAL
Inline XBRL Taxonomy Extension
Calculation Linkbase Document
128
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.)
*
Filed herewith.
** Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-K),
irrespective of any general incorporation language contained in such filing.
+
Indicates a management contract or compensatory plan.
† Confidential treatment has been granted for certain portions of this exhibit. These portions have been omitted and filed
separately with the SEC.
†† Portions of this exhibit (indicated by asterisks) were omitted in accordance with the rules of the Securities and
Exchange Commission.
Item 16. Form 10-K Summary
Not applicable.
129
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.
SCHOLAR ROCK HOLDING CORPORATION
Date: February 27, 2025
By: /s/ Jay T. Backstrom
Jay T. Backstrom
President and Chief Executive Officer (Principal
Executive Officer)
Date: February 27, 2025
By: /s/ Edward H. Myles
Edward H. Myles
Chief Operating Officer & Chief Financial
Officer (Principal Financial and Accounting
Officer)
130
Signature
Title
Date
/s/ Jay T. Backstrom
President and Chief Executive Officer
February 27, 2025
Jay T. Backstrom
(Principal Executive Officer)
/s/ Edward H. Myles
Chief Operating Officer & Chief Financial Officer
February 27, 2025
Edward H. Myles
(Principal Financial and Accounting Officer)
/s/ David Hallal
Chairman of the Board of Directors
February 27, 2025
David Hallal
/s/ Srinivas Akkaraju
Director
February 27, 2025
Srinivas Akkaraju
/s/ Richard Brudnick
Director
February 27, 2025
Richard Brudnick
/s/ Kristina Burow
Director
February 27, 2025
Kristina Burow
/s/ Jeffrey S. Flier
Director
February 27, 2025
Jeffrey S. Flier
/s/ Michael Gilman
Director
February 27, 2025
Michael Gilman
/s/ Katie Peng
Director
February 27, 2025
Katie Peng
/s/ Joshua Reed
Director
February 27, 2025
Joshua Reed
/s/ Akshay Vaishnaw
Director
February 27, 2025
Akshay Vaishnaw
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and appoints Jay T. Backstrom and Edward H.
Myles, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his
true and lawful attorney-in-fact and agent to act in his 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 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 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.
F-1
SCHOLAR ROCK HOLDING CORPORATION
Index to Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
F-2
Consolidated Balance Sheets
F-4
Consolidated Statements of Operations and Comprehensive Loss
F-5
Consolidated Statements of Stockholders’ Equity
F-6
Consolidated Statements of Cash Flows
F-7
Notes to Consolidated Financial Statements
F-8
F-2
Description of the
Matter
As shown in Notes 5 and 7 to the financial statements, the Company’s external prepaid research
and development expenses and accrued research and development expenses totaled $7.7 million
and $12.1 million, respectively, at December 31, 2024. As discussed in Note 2 to the
consolidated financial statements, the Company’s accrued and prepaid external research and
development expenses are recognized based on various inputs, including an evaluation of the
progress achieved to complete specific tasks based on communication with internal and external
personnel, open contracts and purchase orders, invoices received, contracted costs, and other
information provided to the Company by its service providers based on their actual costs
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Scholar Rock Holding Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Scholar Rock Holding Corporation (the Company) as of
December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders’
equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its
operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S.
generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex
judgments. The communication of the critical audit matter 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.
External Prepaid and Accrued Research and Development Expenses
F-3
incurred. Payments for these activities are due based on the terms of individual arrangements,
which may differ from the pattern of costs incurred. Accrued expenses are reflected on the
consolidated balance sheet when costs incurred exceed payments made while prepaid expenses
are reflected on the consolidated balance sheet when payments made exceed the costs incurred.
Auditing the Company’s accrued and prepaid external research and development expenses is
especially challenging in the context of our audit due to the estimation uncertainty associated with
services provided but not yet invoiced. Specifically, the amount of research and development
expenses incurred is sensitive to estimates of the progress of the studies, clinical trials or other
activities and the associated cost of such services. Additionally, due to the duration of certain of
the Company’s ongoing research and development activities and the timing of invoicing received
from third parties, the actual amounts incurred may not be known at the time the financial
statements are issued, further adding to the estimation uncertainty.
How We Addressed the
Matter in Our Audit
To test accrued and prepaid external research and development expenses, our audit procedures
included, among others, testing the accuracy and completeness of the underlying data used to
calculate accrued and prepaid external research and development expenses, as well as evaluating
the assumptions and estimates used by management to measure progress of studies, clinical trials
or other activities. To assess the extent of services incurred, we assessed the progress of clinical
trials with the Company’s research and development personnel that oversee the clinical trials and
obtained information from service providers regarding costs incurred to date. We also tested
subsequent invoices received and inspected the Company’s contracts with service providers and
any pending change orders to assess the effect on the accrued or prepaid external research and
development expenses.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2015.
Boston, Massachusetts
February 27, 2025
F-4
SCHOLAR ROCK HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31,
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$
177,878
$
101,855
Marketable securities
259,400
178,083
Prepaid expenses and other current assets
13,887
8,256
Total current assets
451,165
288,194
Property and equipment, net
2,761
4,600
Operating lease right-of-use asset
15,644
11,417
Restricted cash
2,407
2,407
Other long-term assets
2,945
4,417
Total assets
$
474,922
$
311,035
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
10,095
$
3,465
Accrued expenses
31,067
20,449
Operating lease liability
5,774
7,408
Short-term debt
—
1,334
Other current liabilities
—
85
Total current liabilities
46,936
32,741
Long-term portion of operating lease liability
9,206
4,392
Long-term debt
50,146
48,684
Total liabilities
106,288
85,817
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and
outstanding at December 31, 2024 and December 31, 2023
—
—
Common stock, $0.001 par value; 300,000,000 shares authorized; 93,823,678 and
75,979,495 shares issued and outstanding as of December 31, 2024 and
December 31, 2023, respectively
94
76
Additional paid-in capital
1,291,095
901,471
Accumulated other comprehensive income
160
92
Accumulated deficit
(922,715)
(676,421)
Total stockholders’ equity
368,634
225,218
Total liabilities and stockholders’ equity
$
474,922
$
311,035
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SCHOLAR ROCK HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
Year Ended December 31,
2024
2023
Operating expenses:
Research and development
$
184,550
$
121,900
General and administrative
67,504
49,395
Total operating expenses
252,054
171,295
Loss from operations
(252,054)
(171,295)
Other income (expense), net
5,760
5,506
Net loss
$
(246,294)
$
(165,789)
Net loss per share, basic and diluted
$
(2.47)
$
(1.99)
Weighted average common shares outstanding, basic and diluted
99,838,102
83,347,086
Comprehensive loss:
Net loss
$
(246,294)
$
(165,789)
Other comprehensive income:
Unrealized gain on marketable securities
68
976
Total other comprehensive income
68
976
Comprehensive loss
$
(246,226)
$
(164,813)
The accompanying notes are an integral part of these consolidated financial statements.
F-6
SCHOLAR ROCK HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
Accumulated
Additional
Other
Total
Common Stock
Paid‑in
Comprehensive
Accumulated
Stockholders’
Shares
Amount
Capital
Income (Loss)
Deficit
Equity
Balance at December 31, 2022
51,672,579
$
52
$
771,699
$
(884) $
(510,632) $
260,235
Unrealized gain on marketable securities
—
—
—
976
—
976
Sale of common shares, net of issuance costs
14,889,364
15
97,638
—
—
97,653
Exercise of stock options
258,372
—
1,535
—
—
1,535
Issuance of common shares upon RSU vesting
533,460
—
—
—
—
—
Exercise of pre-funded and common warrants
8,625,720
9
3,454
—
—
3,463
Equity-based compensation expense
—
—
27,142
—
—
27,142
Other
—
—
3
—
—
3
Net loss
—
—
—
—
(165,789)
(165,789)
Balance at December 31, 2023
75,979,495
$
76
$
901,471
$
92
$
(676,421) $
225,218
Unrealized gain on marketable securities
—
—
—
68
—
68
Sale of common shares, net of issuance costs
11,858,408
12
324,402
—
—
324,414
Exercise of stock options
1,469,756
1
18,974
—
—
18,975
Issuance of common shares upon RSU vesting
679,694
1
(1)
—
—
—
Exercise of pre-funded and common warrants
3,836,325
4
9,621
—
—
9,625
Equity-based compensation expense
—
—
36,628
—
—
36,628
Net loss
—
—
—
—
(246,294)
(246,294)
Balance at December 31, 2024
93,823,678
$
94
$ 1,291,095
$
160
$
(922,715) $
368,634
The accompanying notes are an integral part of these consolidated financial statements.
F-7
SCHOLAR ROCK HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
December 31,
2024
2023
Cash flows from operating activities:
Net loss
$ (246,294)
$
(165,789)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
1,937
2,844
Amortization of debt discount and debt issuance costs
253
274
Loss on disposal of property and equipment
—
11
Equity-based compensation
36,628
27,142
Amortization/accretion of investment securities
(5,291)
(6,220)
Non-cash operating lease expense
5,224
7,126
Change in operating assets and liabilities:
Prepaid expenses and other current assets
(5,770)
4,530
Other assets
1,472
(2,698)
Accounts payable
6,630
(529)
Accrued expenses
10,647
(3,927)
Operating lease liabilities
(6,271)
(7,852)
Other liabilities
(114)
(138)
Net cash used in operating activities
(200,949)
(145,226)
Cash flows from investing activities:
Purchases of property and equipment
(98)
(71)
Proceeds from sale of property and equipment
—
13
Purchases of marketable securities
(293,158)
(290,801)
Maturities of marketable securities
217,200
332,000
Net cash (used in) provided by investing activities
(76,056)
41,141
Cash flows from financing activities:
Proceeds from sale of common shares and pre-funded warrants to purchase common
shares, net of issuance costs
324,414
97,709
Proceeds from pre-funded and common warrant exercises
9,625
3,463
Proceeds from stock option exercises
19,114
1,399
Debt modification payment
(125)
—
Other
—
3
Net cash provided by financing activities
353,028
102,574
Net increase (decrease) in cash, cash equivalents and restricted cash
76,023
(1,511)
Cash, cash equivalents and restricted cash, beginning of period
104,262
105,773
Cash, cash equivalents and restricted cash, end of period
$
180,285
$
104,262
Supplemental disclosure for non-cash items:
Offering costs in accrued expenses
$
314
$
—
Operating lease liability adjustment from rent modification
$
9,451
$
—
Supplemental cash flow information:
Cash paid for interest
$
6,617
$
6,399
The accompanying notes are an integral part of these consolidated financial statements.
F-8
SCHOLAR ROCK HOLDING CORPORATION
Notes to Consolidated Financial Statements
1. Nature of the Business and Basis of Presentation
Organization
Scholar Rock Holding Corporation (the “Company”) is a late-stage biopharmaceutical company focused on the discovery,
development, and delivery of innovative medicines for the treatment of serious diseases in which signaling by protein
growth factors plays a fundamental role. As a global leader in transforming growth factor beta (“TGFβ”) superfamily
biology, the Company’s novel understanding of the molecular mechanisms of growth factor activation enabled the
development of a proprietary platform for the discovery and development of monoclonal antibodies that locally and
selectively target the precursor, or latent, forms of growth factors. By targeting the signaling proteins at the cellular level
and acting in the disease microenvironment, the Company believes that it may avoid the historical dose-limiting safety
challenges associated with inhibiting growth factors for therapeutic effect.
The Company’s first product candidate, apitegromab, is a highly selective, fully human, monoclonal antibody, with a
unique mechanism of action that results in inhibition of the activation of the growth factor, myostatin, in skeletal muscle.
Apitegromab is being developed as a potential first muscle-targeted therapy for the treatment of spinal muscular atrophy
(“SMA”). The Company completed SAPPHIRE, a pivotal Phase 3 clinical trial to evaluate the efficacy and safety of
apitegromab in patients with nonambulatory Type 2 and Type 3 SMA and announced positive top-line results in October
2024. The study achieved its primary endpoint. The Company submitted a U.S. Biologics License Application to the FDA
in January 2025 and is planning to submit a European Union marketing authorization application to the European
Medicines Agency (“EMA”) in the first quarter of 2025. If apitegromab is approved, the Company expects to initiate a
commercial product launch in the fourth quarter of 2025 in the United States, with a commercial launch of apitegromab in
Europe to follow. Additionally, in 2024, the Company announced data from the Phase 2 TOPAZ trial extension period
which showed patient outcomes at 48 months of treatment with apitegromab. The FDA granted Fast Track designation,
Rare Pediatric Disease designation and Orphan Drug designation to apitegromab for the treatment of SMA in May 2021,
August 2020 and March 2018, respectively. The EMA granted Priority Medicines (“PRIME”) designation in March 2021
and the EC granted orphan medicinal product designation in December 2018 to apitegromab for the treatment of SMA.
In October 2023, the Company announced an expansion of its therapeutic focus into cardiometabolic disorders by
advancing its anti-myostatin program with SRK-439, a novel, fully human anti-myostatin monoclonal antibody, for
evaluation in cardiometabolic disorders, including obesity. The Company is developing SRK-439 towards a potential
investigational new drug application (“IND”) submission in the third quarter of 2025. To inform the development of SRK-
439, in May 2024 the Company initiated the Phase 2 EMBRAZE proof-of-concept trial, designed to assess the safety and
efficacy of apitegromab to preserve muscle mass in individuals living with obesity and on background therapy of a GLP-1
receptor agonist (“GLP-1 RA”). In September 2024, the Company announced that it had completed enrollment in the Phase
2 EMRAZE proof-of-concept trial. Top-line results from this trial are expected in the second quarter of 2025.
The Company’s second product candidate, SRK-181, a highly selective inhibitor of the activation of latent TGFβ, is being
developed for the treatment of cancers that are resistant to checkpoint inhibitor therapies, such as anti-PD-1 or anti-PD-L1
antibody therapies (referred to together as anti-PD-(L)1 antibody therapies). SRK-181 is being evaluated in the Company’s
Phase 1 DRAGON proof-of-concept clinical trial in patients with locally advanced or metastatic solid tumors that exhibit
resistance to anti-PD-(L)1 antibody therapies. The Company completed enrollment of the Phase 1 DRAGON trial in
December 2023 and continues to treat patients who remain on study. This two-part clinical trial consists of a dose
escalation portion (Part A) and a dose expansion portion evaluating SRK-181 in combination with an approved anti-PD-
(L)1 antibody therapy (Part B). Part B commenced in 2021 and includes the following active cohorts: urothelial carcinoma,
cutaneous melanoma, non-small cell lung cancer, clear cell renal cell carcinoma, and head and neck squamous cell
carcinoma. Safety, efficacy and biomarker data were presented in June 2024 at the American Society of Clinical Oncology
annual meeting and in November 2024 at the Society for Immunotherapy of Cancer 39th Annual Meeting.
Additionally, the Company continues to create a pipeline of product candidates to deliver novel therapies to underserved
patients suffering from a wide range of serious diseases, including neuromuscular disorders, cardiometabolic disorders,
cancer, fibrosis, and iron-restricted anemia. The Company was originally formed in May 2012. Its principal offices are in
Cambridge, Massachusetts.
Since its inception, the Company’s operations have focused on research and development of monoclonal antibodies that
selectively inhibit activation of growth factors for therapeutic effect, as well as establishing the Company’s intellectual
property portfolio and performing research and development activities. The Company has primarily financed its operations
through various equity financings, including in October 2024 (Note 9), as well as research and development collaboration
agreements and the Company’s debt facility (Note 13).
Revenue generation activities have been limited to two collaborations, both containing research services and the issuance
of a license. No revenues have been recorded from the sale of any commercial product.
The Company is subject to a number of risks similar to other life science companies, including, but not limited to,
successful discovery and development of its drug candidates, raising additional capital, development by its competitors of
new technological innovations, protection of proprietary technology and regulatory approval and market acceptance of the
Company’s product candidates. The Company anticipates that it will continue to incur significant operating losses for the
next several years as it continues to develop its product candidates. The Company believes that its existing cash, cash
equivalents, and marketable securities at December 31, 2024 will be sufficient to allow the Company to fund its current
operations through at least a period of one year after the date these financial statements are issued.
Basis of Presentation
The consolidated financial statements include the accounts of Scholar Rock Holding Corporation and its wholly owned
subsidiaries. All intercompany balances have been eliminated in consolidation.
These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in
the U.S. (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as
found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial
Accounting Standards Board (“FASB”).
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments
that may affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at
the date of the financial statements and the related reporting of revenues and expenses during the reporting period.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable
under the circumstances. Actual results could differ from those estimates.
Concentration of Credit Risk and Off-Balance Sheet Risk
The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts or other foreign-hedging
arrangements. The Company follows an investment policy approved by the Board of Directors. Its primary objectives are
the preservation of capital and maintenance of liquidity. The Company invests only in fixed income instruments
denominated and payable in U.S. dollars including obligations of the U.S. government and its agencies and money market
funds registered according to SEC Rule 2a-7 of the Investment Company Act of 1940. All securities must have a readily
ascertainable market value, must be readily marketable and be U.S. dollar denominated.
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As of December 31,
2024
2023
Cash and cash equivalents
$ 177,878
$ 101,855
Restricted cash
2,407
2,407
$ 180,285
$ 104,262
Marketable Securities
The Company classifies its marketable securities as available-for-sale. Marketable securities with a remaining maturity date
greater than one year are classified as non-current if the Company does not intend to utilize the marketable securities to
fund current operations. Marketable securities are maintained by an investment manager and consist of U.S. treasury
obligations and government agency securities. Marketable securities are carried at fair value with the unrealized gains and
losses included in accumulated other comprehensive income (loss) as a component of stockholders’ equity until realized.
Any premium or discount arising at purchase is amortized and/or accreted to interest income and/or expense over the life of
the underlying marketable security.
Although available to be sold to meet operating needs or otherwise, securities are generally held through maturity. The cost
of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income
(expense) within the statement of operations and comprehensive loss.
The Company reviews its portfolio of available-for-sale debt securities, using both quantitative and qualitative factors, to
determine if declines in fair value below cost have resulted from a credit loss or other factors. If the decline in fair value is
due to credit loss factors, a loss is recognized in net income. To date, the Company has not experienced any credit losses
and does not believe it is exposed to any significant credit risk on these investments.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major renewals or betterments that extend the useful lives of
property and equipment are capitalized; expenditures for maintenance and repairs are charged to expense as incurred.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the related asset. Property and
equipment are depreciated as follows:
Estimated Useful Life
(in Years)
Laboratory equipment
3 – 5
Computer equipment & software
3
Furniture & fixtures
5
Machinery & equipment
3 – 5
Leasehold improvements
Shorter of the useful life or remaining lease term
Impairment of Long-Lived Assets
Long-lived assets consist of property and equipment and right-of-use assets. 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
Cash, Cash Equivalents and Restricted Cash
The Company considers highly liquid investments with a maturity of three months or less when purchased to be cash
equivalents. Cash equivalents are stated at cost, which approximates market value. At December 31, 2024 and 2023, cash
equivalents include money market funds that invest primarily in U.S. government-backed securities and treasuries.
At December 31, 2024 and 2023, restricted cash consists of letters of credit related to its leased facility. The following table
reconciles cash, cash equivalents and restricted cash per the balance sheet to the statement of cash flows (in thousands):
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Level 1 — Quoted market prices in active markets for identical assets or liabilities.
Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted market
prices, interest rates and yield curves.
Level 3 — Unobservable inputs developed using estimates of assumptions developed by the Company, which
reflect those that a market participant would use.
To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the
determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in
determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value
hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment
review include significant underperformance of the business in relation to expectations, significant negative industry or
economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed
to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows
expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment
loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group
are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired
asset group over its fair value, determined based on discounted cash flows. The Company did not record any impairment
losses on long-lived assets during the years ended December 31, 2024 or 2023.
Leases
The Company accounts for leases using ASC Topic 842, Leases (“ASC 842”). At the inception of an arrangement, the
Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present.
Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if
applicable, long-term lease liabilities. Operating lease liabilities and their corresponding right-of-use assets are recorded
based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the right-of-
use asset may be required for items such as incentives received. The interest rate implicit in lease contracts is typically not
readily determinable. As a result, the Company utilizes its estimated incremental borrowing rates, which are the rates
incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar
economic environment.
In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components
(e.g., land, building, etc.), non-lease components (e.g., common area maintenance, consumables, etc.), and non-
components (e.g., property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including
any related to non-components) must be allocated based on the respective relative fair values to the lease components and
non-lease components. For operating leases, lease expense relating to fixed payments is recognized on a straight-line basis
over the term and lease expense relating to variable payments is expensed as incurred.
Fair Value Measurements
ASC Topic 820, Fair Value Measurement ("ASC 820"), establishes a fair value hierarchy for instruments measured at fair
value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own
assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or
liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that
reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and
are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange
price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. As a basis for considering market participant assumptions in fair value
measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:
Segment Information
Operating segments are defined as components of an entity about which separate discrete information is available for
evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in
assessing performance. The Company views its operations and manages its business in one operating segment (Note 16).
Revenue Recognition
The Company accounts for revenue using the provisions of ASC Topic 606, Revenue from Contracts with Customers
(“ASC 606”). Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or
services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or
services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the
scope of ASC 606, the Company performs the following five steps: (i) identification of the contract(s) with the customer,
(ii) identification of the promised goods or services in the contract and determination of whether the promised goods or
services are performance obligations, (iii) measurement of the transaction price, (iv) allocation of the transaction price to
the performance obligations, and (v) recognition of revenue when (or as) the Company satisfies each performance
obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect
consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once
the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within
each contract and determines those that are performance obligations and assesses whether each promised good or service is
distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective
performance obligation when (or as) the performance obligation is satisfied.
The Company accounts for a contract with a customer that is within the scope of ASC 606 when all of the following
criteria are met: (i) the arrangement has been approved by the parties and the parties are committed to perform their
respective obligations, (ii) each party’s rights regarding the goods or services to be transferred can be identified, (iii) the
payment terms for the goods or services to be transferred can be identified, (iv) the arrangement has commercial substance
and (v) collection of substantially all of the consideration to which the Company will be entitled in exchange for the goods
or services that will be transferred to the customer is probable.
The Company first evaluates license and/or collaboration arrangements to determine whether the arrangement (or part of
the arrangement) represents a collaborative arrangement pursuant to ASC Topic 808, Collaborative Arrangements, based
on the risks and rewards and activities of the parties pursuant to the contractual arrangement. The Company accounts for
collaborative arrangements (or elements within the contract that are deemed part of a collaborative arrangement), which
represent a collaborative relationship and not a customer relationship, outside of the scope of ASC 606. The Company’s
two collaborations represented revenue arrangements.
For the arrangements or arrangement components that are subject to revenue accounting guidance, in determining the
appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company
performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of
whether the promised goods or services are performance obligations including whether they are distinct in the context of
the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of
the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies
each performance obligation. As part of the accounting for these arrangements, the Company must use significant
judgment to determine: a) the number of performance obligations based on the determination under step (ii) above and
whether those performance obligations are distinct from other performance obligations in the contract; b) the transaction
price under step (iii) above; and c) the standalone selling price for each performance obligation identified in the contract
for the allocation of transaction price in step (iv) above. The Company uses judgment to determine whether milestones or
other variable consideration, except for royalties, should be included in the transaction price as described further below.
The transaction price is allocated to each performance obligation on a relative stand-alone selling price basis, for which the
Company recognizes revenue as or when the performance obligations under the contract are satisfied. In determining the
stand-alone selling price of a license to the Company’s proprietary technology or a material right provided by a customer
option, the Company considers market conditions as well as entity-specific factors, including those factors contemplated in
negotiating the agreements as well as internally developed estimates that
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include assumptions related to the market opportunity, estimated development costs, probability of success and the time
needed to commercialize a product candidate pursuant to the license. In validating its estimated stand-alone selling prices,
the Company evaluates whether changes in the key assumptions used to determine its estimated stand-alone selling prices
will have a significant effect on the allocation of arrangement consideration between performance obligations.
The Company estimates the transaction price based on the amount of consideration the Company expects to be received for
transferring the promised goods or services in the contract. The consideration may include both fixed consideration and
variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates
the amount of the potential payments and the likelihood that the payments will be received. The Company utilizes either
the most likely amount method or expected value method to estimate the transaction price based on which method better
predicts the amount of consideration expected to be received. If it is probable that a significant revenue reversal would not
occur, the variable consideration is included in the transaction price.
Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer.
Promised goods or services are considered distinct when: (i) the customer can benefit from the good or service on its own
or together with other readily available resources and (ii) the promised good or service is separately identifiable from other
promises in the contract. In assessing whether promised goods or services are distinct, the Company considers factors such
as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the
intellectual property on their own and whether the required expertise is readily available.
The Company allocates the transaction price based on the estimated standalone selling price. The Company must develop
assumptions that require judgment to determine the standalone selling price for each performance obligation identified in
the contract. The Company utilizes key assumptions to determine the standalone selling price, which may include other
comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Estimating costs for
research and development programs is subjective as the Company estimates the costs anticipated to successfully complete
the research performance obligations. As the research is novel, efforts to be successful may be significantly different than
the estimated costs at the beginning of the contract. Certain variable consideration is allocated specifically to one or more
performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the
performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amounts
the Company would expect to receive for each performance obligation.
For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the
nature of the combined performance obligation in order to determine whether the combined performance obligation is
satisfied over time or at a point in time. The Company determines the appropriate method of measuring progress of
combined performance obligations satisfied over time for purposes of recognizing revenue. The Company evaluates the
measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue
recognition. The estimated remaining costs is highly subjective, as the research is novel, therefore efforts to be successful
may be significantly different than the estimated costs made at the balance sheet date. If the license to the Company’s
intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the
Company will recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred
to the customer and the customer is able to use and benefit from the license. The Company receives payments from
customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred
revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts expected
to be recognized as revenue within the 12 months following the balance sheet date are classified as the current portion of
deferred revenue in the accompanying consolidated balance sheets. Amounts not expected to be recognized as revenue
within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion. Amounts
are recorded as accounts receivable when the Company’s right to consideration is unconditional. Amounts recognized as
revenue, but not yet received or invoiced, are generally recognized as contract assets.
Exclusive Licenses – If the license granted in the arrangement is determined to be distinct from the other promises or
performance obligations identified in the arrangement, which generally include research and development services, the
Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license is transferred to
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the customer and the customer is able to use and benefit from the license. In assessing whether a license is distinct from the
other promises, the Company considers relevant facts and circumstances of each arrangement, including the research and
development capabilities of the collaboration partner and the availability of the associated expertise in the general
marketplace. In addition, the Company considers whether the collaboration partner can benefit from the license for its
intended purpose without the receipt of the remaining promise, whether the value of the license is dependent on the
unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether it is separately
identifiable from the remaining promise. For licenses that are combined with other promises, the Company utilizes
judgment to assess the nature of the combined performance obligation to determine whether the combined performance
obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for
purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary,
adjusts the measure of performance and related revenue recognition. The measure of progress, and thereby periods over
which revenue should be recognized, are subject to estimates by management and may change over the course of the
arrangement.
Research and Development Services – The promises under the Company’s collaboration and license agreements generally
include research and development services to be performed by the Company on behalf of the collaboration partner. For
performance obligations that include research and development services, the Company generally recognizes revenue
allocated to such performance obligations based on an appropriate measure of progress. The Company utilizes judgment to
determine the appropriate method of measuring progress for purposes of recognizing revenue, which is generally an input
measure, such as costs incurred. The Company evaluates the measure of progress each reporting period as described
under Exclusive Licenses above. Reimbursements from the partner that are the result of a collaborative relationship with
the partner, instead of a customer relationship, such as co-development activities, are generally recorded as a reduction to
research and development expense.
Customer Options – The Company’s arrangements may provide a collaborator with the right to certain optional purchases,
such as the right to license a target either at the inception of the arrangement or within a pre-defined option period. Under
these agreements, fees may be due to the Company (i) at the inception of the arrangement as an upfront fee or payment or
(ii) upon the exercise of an option to acquire a license. If an arrangement is determined to contain customer options that
allow the customer to acquire additional goods or services, the goods and services underlying the customer options are not
considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. The
Company evaluates the customer options for material rights, or options to acquire additional goods or services for free or at
a discount. If the customer options are determined to represent a material right, the material right is recognized as a
separate performance obligation at the inception of the arrangement. The Company allocates the transaction price to
material rights based on the relative stand-alone selling price, which is determined based on the identified discount, and the
probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue
until, at the earliest, the option is exercised or expires.
Milestone Payments – At the inception of each arrangement that includes milestone payments based on certain events, the
Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be
included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal
would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within
the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved
until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial,
and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable
judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of
each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to
constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a
cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. If a milestone or other
variable consideration relates specifically to the Company’s efforts to satisfy a single performance obligation or to a
specific outcome from satisfying the performance obligation, the Company generally allocates the milestone amount
entirely to that performance obligation once it is probable that a significant revenue reversal would not occur.
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Royalties – For arrangements that include sales-based royalties, including milestone payments based on a level of sales,
and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the
later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been
allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting
from any of its licensing arrangements.
Research and Development Expenses and Related Accruals/Prepaids
Research and development expenses are expensed as incurred and consist of costs incurred in performing research and
development activities, including compensation related expenses for research and development personnel, preclinical and
clinical activities including cost of clinical drug supply, overhead expenses including facilities expenses, materials and
supplies, amounts paid to consultants and outside service providers, and depreciation of equipment. Upfront license
payments related to acquired technologies which have not yet reached technological feasibility and have no alternative
future use are also included in research and development expense.
The Company has entered into various research and development service arrangements under which vendors perform
various services. The Company records accrued expenses for estimated costs incurred under the arrangements in excess of
vendor invoices received while cash payments to vendors, including those that are nonrefundable, in excess of estimated
costs incurred are recorded as prepaid expenses. Prepaid expenses are expensed as the related services are performed or
goods are received. When evaluating the adequacy and accuracy of the accrued and prepaid expenses, the Company
reviews open contracts and purchase orders, the level of service performed, invoices received, contracted costs, and
progress of studies, clinical trials or other activities based on communication with internal and/or external personnel.
Significant judgments and estimates are made in determining the accrued and prepaid expense balances at the end of each
reporting period, and payments for these activities are due based on the terms of individual arrangements, which may differ
from the pattern of costs incurred.
Equity-Based Compensation
The Company accounts for equity awards, including restricted stock units, and common stock options, granted as equity
award compensation in accordance with ASC Topic 718, Compensation — Stock Compensation ("ASC 718"). ASC 718
requires all stock-based payments to employees, which includes grants of employee equity awards, to be recognized as
expense in the statements of operations based on their grant date fair values.
The fair value of each restricted stock unit is based on the fair value of the Company’s common stock less any purchase
price, if applicable. The fair value of each stock option award is estimated using the Black-Scholes option-pricing model,
which uses as inputs the fair value of the Company’s common stock and certain subjective assumptions, including the
expected stock price volatility, the expected term of the award, the risk-free rate, and expected dividends. Through the
second quarter of 2024, expected volatility was calculated based on a blend of the Company’s reported volatility data for
the length of time that market data was available for the Company’s stock and the historical data for a representative group
of publicly traded companies, for which historical information was available. As of the third quarter of 2024, the
Company’s own volatility data covered a period of time that was sufficient to meet the expected term of the granted awards
and the blended approach was no longer needed. The historical volatility is generally calculated based on a period of time
commensurate with the expected term assumptions. The risk-free interest rate is based on the U.S. Treasury yield curve in
effect at the time of grant commensurate with the expected term assumption. The Company uses the simplified method,
under which the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term.
The Company utilizes this method due to lack of historical exercise data and the plain nature of its stock-based awards. The
expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay
any dividends on common stock.
Compensation expense related to equity awards to employees that are subject to graded vesting is recognized on a straight-
line basis, based on the grant date fair value, over the requisite service period of the award, which is generally the vesting
term. For awards subject to performance conditions, the Company recognizes equity award compensation expense using an
accelerated recognition method over the remaining service period when management determines that
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achievement of the milestone is probable. Management evaluates when the achievement of a performance-based milestone
is probable based on the relative satisfaction of the performance conditions as of the reporting date.
The Company classifies equity-based compensation expense in its consolidated statements of operations in the same
manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service
payments are classified.
The Company accounts for forfeitures when they occur.
Comprehensive Loss
Comprehensive loss is the change in equity of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. Comprehensive loss includes net loss and the change in accumulated other
comprehensive income (loss) for the period. Accumulated other comprehensive income (loss) consisted entirely of
unrealized gains and losses on available-for-sale marketable securities during the period ending December 31, 2024 and
2023.
Net Loss per Share
The Company applies the two-class method to compute basic and diluted net loss per share because it has issued shares that
meet the definition of participating securities. The two-class method determines net income (loss) per share for each class
of common and participating securities according to dividends declared or accumulated and participation rights in
undistributed earnings. The two-class method requires income (losses) available to common stockholders for the period to
be allocated between common and participating securities based upon their respective rights to share in the earnings as if
all income (losses) for the period had been distributed. During periods of loss, there is no allocation required under the two-
class method since the participating securities do not have a contractual obligation to fund the losses of the Company.
The Company calculates basic net loss per share by dividing net loss by the weighted average number of common shares
outstanding, including pre-funded warrants and excluding restricted common stock. The Company calculates diluted net
loss per share by dividing net loss by the weighted average number of common shares outstanding, as applicable, after
giving consideration to the dilutive effect of restricted stock units, warrants, pre-funded warrants, and stock options that are
outstanding during the period.
Income Taxes
Income taxes are recorded in accordance with ASC Topic 740, Income Taxes ("ASC 740"), which provides for deferred
taxes using an asset and liability approach. Under this method, deferred income tax assets and liabilities are recognized
based on future income tax consequences attributable to differences between the financial statement carrying amount of
existing assets and liabilities, and their respective income tax basis. Deferred income tax assets and liabilities are measured
using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions,
as necessary. The tax benefits recorded are based on a determination of whether and how much of a tax benefit taken by the
Company in its tax filings or positions is "more likely than not" to be realized following resolution of any uncertainty
related to the tax benefit, assuming that the matter in question will be raised by the tax authorities.
The Company is open to examination by the Internal Revenue Service for the tax years ended December 31, 2013 to
December 31, 2024. Since the Company is in a U.S. loss carryforward position, carryforward tax attributes generated in
prior years may still be adjusted upon future examination if they have or will be used in a future period. The Company is
currently not under examination by the Internal Revenue Service or any other jurisdictions for any tax years. The Company
has not recorded any interest or penalties on any unrecognized tax benefits since its inception.
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Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures. The standard requires disclosure of incremental segment information on an annual and interim basis and
allows for multiple measures of a segment’s profit or loss provided that one of those measures is consistent with GAAP.
The amendments in this update do not change how a public company identifies its operating segments, aggregates those
operating segments, or applies the quantitative thresholds to determine its reportable segments, but rather requires public
entities to disclose significant segment expenses and other segment items on an annual and interim basis and provide in
interim periods all disclosures about a reporting segment’s profit or loss and assets that are currently required annually.
ASU 2023-07 becomes effective for the annual period starting on January 1, 2024, and for interim periods starting on
January 1, 2025 (see Note 16).
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures,
which enhances the transparency of income tax disclosures to provide information to investors to better assess how a
company’s operations and related tax risks, tax planning and operational opportunities affect its tax rate and prospects for
future cash flows. This requires public entities to disclose additional categories in the rate reconciliation regarding federal
and state income taxes and provide more details surrounding reconciling items if a quantitative threshold is met. The
effective date for public companies is for annual periods starting on January 1, 2025. Early adoption is permitted for annual
financial statements that have not yet been issued or made available for issuance, however, the Company has decided not to
early adopt, does not anticipate a material impact to its net financial position, and is still evaluating the impact on its
disclosures in future years as a result of the adoption of ASU 2023-09.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, and in January 2025, the
FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40): Clarifying the Effective Date. ASU 2024-03 requires additional disclosure of the nature of
expenses included in the income statement as well as disclosures about specific types of expenses included in the expense
captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for public companies
for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.
Early adoption is permitted. The Company is still evaluating the impact on its disclosures in future years as a result of the
adoption of ASU 2024-03.
F-18
3. Fair Value of Financial Assets and Liabilities
The following tables summarize the assets and liabilities measured at fair value on a recurring basis at December 31, 2024
and 2023 (in thousands):
Fair Value Measurements at December 31, 2024
Total
Level 1
Level 2
Level 3
Assets:
Money market funds, included in cash and cash equivalents
$
97,290
$
97,290
$
—
$
—
U.S. treasury obligations, included in cash and cash equivalents
63,171
63,171
—
—
Marketable securities:
U.S. treasury obligations and government agency securities
259,400
259,400
—
—
Total assets
$ 419,861
$ 419,861
$
—
$
—
Fair Value Measurements at December 31, 2023
Total
Level 1
Level 2
Level 3
Assets:
Money market funds, included in cash and cash equivalents
$
61,764
$
61,764
$
—
$
—
U.S. treasury obligations, included in cash and cash equivalents
30,765
30,765
—
—
Marketable securities:
U.S. treasury obligations and government agency securities
178,083
178,083
—
—
Total assets
$ 270,612
$ 270,612
$
—
$
—
Cash, cash equivalents and marketable securities are Level 1 assets and include investments in money market funds, U.S.
treasury obligations and government agency securities that are valued using quoted market prices. Accordingly, money
market funds and government funds are categorized as Level 1 as of December 31, 2024 and 2023. There were no transfers
of assets between fair value measurement levels during the years ended December 31, 2024 and 2023.
The carrying amounts reflected in the balance sheets for prepaid expenses and other current assets, accounts payable, and
accrued expenses approximate their fair values at December 31, 2024 and 2023, due to their short-term nature.
The Company believes the terms of its debt reflect current market conditions for an instrument with similar terms and
maturity, therefore the carrying value of the Company's debt approximates its fair value based on Level 3 of the fair value
hierarchy.
4. Marketable Securities
The following table summarizes the Company’s investments as of December 31, 2024 (in thousands):
Gross
Amortized
Unrealized
Estimated
Cost
Gains
Losses
Fair Value
Marketable securities available-for-sale:
U.S. treasury obligations and government agency securities
$ 259,240
$
180
$
(20)
$ 259,400
Total available-for-sale securities
$ 259,240
$
180
$
(20)
$ 259,400
F-19
The following table summarizes the Company’s investments as of December 31, 2023 (in thousands):
Gross
Amortized
Unrealized
Estimated
Cost
Gains
Losses
Fair Value
Marketable securities available-for-sale:
U.S. treasury obligations and government agency securities
$ 177,991
$
93
$
(1)
$ 178,083
Total available-for-sale securities
$ 177,991
$
93
$
(1)
$ 178,083
Amortized cost approximated fair value for money market funds and U.S. treasury obligations included in cash and cash
equivalents. The aggregate fair value of marketable securities with unrealized losses was $23.9 million and $11.9 million at
December 31, 2024 and 2023, respectively. At December 31, 2024 and 2023, 12 investments and three investments,
respectively, were in an unrealized loss position. All such investments have been in an unrealized loss position for less than
a year and these losses are considered temporary. The Company has the ability and intent to hold these investments until a
recovery of their amortized cost, which may not occur until maturity.
The Company believes that U.S. treasury obligations and government agency securities are subject to minimal credit risk.
As a result, the Company did not record any charges for credit-related impairments for its available-for-sale securities for
the year ended December 31, 2024.
5. Prepaid Expenses and Other Assets
At December 31, 2024 and 2023, prepaid expenses and other current assets consist of the following (in thousands):
As of
December 31, December 31,
2024
2023
Prepaid external research and development expenses
$
7,716
$
4,059
Prepaid other
2,961
2,281
Receivables
2,151
1,076
Prepaid insurance
640
635
Prepaid professional and consulting expense
419
205
$
13,887
$
8,256
At December 31, 2024 and 2023, other long-term assets consist of the following (in thousands):
As of
December 31, December 31,
2024
2023
Prepaid external research and development expenses
$
2,395
$
4,074
Prepaid other
536
312
Prepaid insurance
14
31
$
2,945
$
4,417
F-20
6. Property and Equipment, Net
At December 31, 2024 and 2023, property and equipment consists of the following (in thousands):
December 31, December 31,
2024
2023
Laboratory equipment
$
10,305
$
10,270
Leasehold improvements
3,613
3,581
Computer equipment & software
1,059
1,029
Furniture & fixtures
1,002
1,002
Machinery & equipment
—
44
15,979
15,926
Less: Accumulated depreciation and amortization
(13,218)
(11,326)
$
2,761
$
4,600
Depreciation and amortization expense was $1.9 million and $2.8 million for the years ended December 31, 2024 and
2023, respectively.
7. Accrued Expenses
At December 31, 2024 and 2023, accrued expenses consist of the following (in thousands):
As of
December 31, December 31,
2024
2023
Accrued payroll and related expenses
$
14,776
$
10,591
Accrued external research and development expense
12,116
6,825
Accrued professional and consulting expense
3,296
2,267
Accrued other
879
766
$
31,067
$
20,449
8. Preferred Stock
The Board of Directors or any authorized committee thereof is expressly authorized, to the fullest extent permitted by law,
to provide by resolution or resolutions for, out of the unissued shares of Preferred Stock, the issuance of the shares of
Preferred Stock in one or more series of such stock, and by filing a certificate of designations pursuant to applicable law of
the State of Delaware, to establish or change from time to time the number of shares of each such series, and to fix the
designations, powers, including voting powers, full or limited, or no voting powers, preferences and the relative,
participating, optional or other special rights of the shares of each series and any qualifications, limitations and restrictions
thereof.
9. Common Stock
In June 2024, the stockholders approved an amendment to the Company’s amended and restated certificate of incorporation
to increase the number of authorized shares of common stock from 150,000,000 to 300,000,000.
In October 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with J.P. Morgan
Securities LLC, Jefferies LLC and Piper Sandler & Co., as representatives of the several underwriters named therein (the
“Underwriters”), relating to the issuance and sale of an aggregate of 10,265,488 shares of the Company’s common stock at
$28.25 per share and pre-funded warrants to purchase 353,983 shares of its common stock. The offering price per pre-
funded warrant was $28.2499, which equals the per share public offering price for the common shares less the $0.0001
exercise price for each such pre-funded warrant. The pre-funded warrants are exercisable at any time and only expire when
exercised in full. The offering closed on October 10, 2024. Pursuant to the Underwriting Agreement, the Underwriters were
granted a 30-day option to purchase up to 1,592,920 additional shares (the “Option
F-21
As of
December 31,
2024
Common shares reserved for exercise of pre-funded warrants
17,362,147
Common shares reserved for issuance upon exercise of outstanding warrants
8,678,664
Common shares reserved for exercise of outstanding stock options and unvested restricted stock units
under the 2017 and 2018 Plans
8,349,147
Common shares reserved for exercise of outstanding stock options and unvested restricted stock units
under the 2022 Inducement Plan
3,607,447
Common shares reserved for future issuance under the 2018 Plan
1,814,874
Common shares reserved for future issuance under the 2022 Inducement Plan
1,117,137
Common shares reserved for future issuance under the 2018 ESPP
2,196,691
43,126,107
10. Equity-Based Compensation
Equity Plans
As of December 31, 2024, the Company has four active equity plans, the 2018 Stock Option and Incentive Plan (the “2018
Plan”), the 2017 Stock Option and Incentive Plan (the “2017 Plan”), the 2018 Employee Stock Purchase Plan (the “2018
ESPP”) and the 2022 Inducement Equity Plan (the “2022 Inducement Plan”).
2018 Stock Option and Incentive Plan
The 2018 Plan was adopted by the Board of Directors on May 2, 2018, and approved by the Company’s stockholders on
May 11, 2018. The 2018 Plan has replaced the 2017 Plan as no additional awards will be granted under that plan following
the consummation of the Initial Public Offering (“IPO”).
Shares”) of common stock, which was exercised in full on October 16, 2024. Total proceeds of the transaction, including
the Option Shares were approximately $324.4 million, net of underwriting discounts and estimated offering expenses.
The Company has had a sales agreement in place during various time periods with Jefferies LLC (“Jefferies”) with respect
to an at-the-market (“ATM”) offering program. Under this program, the Company is able to offer and sell, from time to
time at its sole discretion, shares of its common stock through Jefferies as its sales agent. In an ATM offering, exchange-
listed companies incrementally sell newly issued shares into the secondary trading market through a designated broker-
dealer at prevailing market prices. The current ATM agreement, established in November 2022, allows for the sale of
shares of common stock having an aggregate offering price of up to $100 million. As of December 31, 2024, the Company
has sold 619,290 shares, generating net proceeds of $5.2 million, under the ATM program. No sales were made under the
ATM program during the year ended December 31, 2024.
The Company has issued pre-funded warrants to purchase common stock, as well as warrants to purchase common stock as
part of its financing activities. Both the pre-funded warrants and warrants meet the conditions for equity classification and
are recorded as a component of stockholders’ equity within additional paid-in capital. In October 2024, June 2022 and
November 2020, the Company issued 353,983, 25,510,205 and 2,179,487 pre-funded warrants, respectively. During the
years ended December 31, 2024 and 2023, 2,526,833 and 8,154,695, respectively of the Company’s pre-funded warrants
were exercised. As of December 31, 2024, the Company has 17,362,147 pre-funded warrants outstanding. In June 2022,
the Company also issued 10,459,181 warrants with an exercise price of $7.35. During the years ended December 31, 2024
and 2023, 1,309,492 and 471,025, respectively of the Company’s warrants were exercised. As of December 31, 2024, the
Company has 8,678,664 warrants outstanding.
Shares Reserved For Future Issuance
As of December 31, 2024, the Company had common shares reserved for issuance as follows:
The 2018 Plan provides for the grant of equity-based incentive awards, including incentive stock options, non-qualified
stock options, restricted stock awards, unrestricted stock awards and restricted stock units to the Company’s officers,
employees, directors and other key persons (including consultants). Stock options and restricted stock units granted under
the 2018 Plan to employees generally vest over four years. The shares of common stock underlying any awards that are
forfeited, cancelled, repurchased or are otherwise terminated by the Company under the 2018 Plan will be added back to
the shares of common stock available for issuance under the 2018 Plan.
The 2018 Plan provides that the number of shares reserved and available for issuance under the plan will automatically
increase each January 1, beginning on January 1, 2019, by 4% of the outstanding number of shares of common stock on the
immediately preceding December 31 or such lesser number of shares as determined by the Board of Directors or
compensation committee (the “Annual Increase”). These limits are subject to adjustment in the event of a stock split, stock
dividend or other change in the Company’s capitalization.
2017 Stock Option and Incentive Plan
The 2017 Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock awards,
unrestricted stock awards and restricted stock units. Stock options granted under the 2017 Plan to employees generally vest
over four years. The Company no longer issues grants from the 2017 Plan. The shares of common stock underlying any
awards that are forfeited, cancelled, repurchased or are otherwise terminated by the Company under the 2017 Plan will be
added back to the shares of common stock available for issuance under the 2018 Plan.
2018 Employee Stock Purchase Plan
On May 2, 2018, the Board of Directors adopted the 2018 ESPP, and it was approved by the stockholders on May 11, 2018.
At December 31, 2024 there were 2,196,691 shares available to grant under the 2018 ESPP and no shares had been issued.
The ESPP provides that the number of shares reserved and available for issuance will automatically increase each
January 1, beginning on January 1, 2019 through January 1, 2028, by the lesser of (i) 353,614 shares of common stock,
(ii) 1% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31
or (iii) such lesser number of shares as determined by the 2018 ESPP administrator. The number of shares reserved under
the 2018 ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s
capitalization.
2022 Inducement Equity Plan
The 2022 Inducement Plan was approved by the Board of Directors on June 16, 2022 and provides for the grant of non-
qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, unrestricted stock awards
and dividend equivalent rights to individuals that were not previously an employee or director of the Company or
individuals returning to employment after a bona fide period of non-employment with the Company. Stock options and
restricted stock units granted under the 2022 Inducement Plan to employees generally vest over four years. The shares of
common stock underlying any awards that are forfeited, cancelled, repurchased or are otherwise terminated by the
Company under the 2022 Inducement Plan will be added back to the shares of common stock available for issuance under
the 2022 Inducement Plan. The 2022 Inducement Plan was approved for 1,000,000 shares of common stock in June 2022.
Since its inception and through December 31, 2024, an additional 4,000,000 shares of common stock have been added to
the 2022 Inducement Plan.
F-22
F-23
Year Ended
December 31,
2024
2023
Research and development expense
$
16,002
$
11,203
General and administrative expense
20,626
15,939
$
36,628
$
27,142
The following table summarizes the Company’s unrecognized equity-based compensation expense as of December 31,
2024:
As of December 31, 2024
Unrecognized Expense
(in thousands)
Weighted Average
Remaining Period
of Recognition
(years)
Restricted Stock Units
$
36,249
2.6
Stock Options
41,141
2.5
$
77,390
Restricted Stock Units
The following table summarizes the Company’s restricted stock unit activity for the current year:
Weighted
Average Grant
Number of Units Date Fair Value
Restricted stock units as of December 31, 2023
2,089,552
$
11.92
Granted
2,269,450
$
15.13
Vested
(679,694)
$
12.50
Forfeited
(192,640)
$
12.64
Restricted stock units as of December 31, 2024
3,486,668
$
13.86
The total fair value of restricted stock units vested during the year ended December 31, 2024 was $9.7 million.
Total Equity-Based Compensation Expense
The Company recorded equity-based compensation expense related to all equity-based awards, which was allocated as
follows in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2024 and
2023 (in thousands):
F-24
Stock Options
The following table summarizes the Company’s stock option activity for the current year:
Weighted
Weighted
Average
Number of
Average
Remaining
Aggregate
Shares
Exercise Price
Contractual Term
Intrinsic Value
(in years)
(in thousands)
Outstanding as of December 31, 2023
7,300,953
$
15.00
7.90
$
52,299
Granted
3,025,926
$
15.13
Exercised
(1,469,756)
$
12.91
Cancelled
(387,197)
$
26.60
Outstanding as of December 31, 2024
8,469,926
$
15.19
7.83
$
244,677
Options exercisable as of December 31, 2024
3,904,470
$
17.40
6.82
$
107,399
Using the Black-Scholes option pricing model, the weighted average fair value of options granted during the year ended
December 31, 2024 was $11.79.
The following weighted average assumptions were used in determining the fair value of options granted in the years ended
December 31, 2024 and 2023:
Year Ended
December 31,
2024
2023
Risk-free interest rate
4.09 %
3.87 %
Expected dividend yield
0.0 %
0.0 %
Expected term (years to liquidity)
6.01
6.06
Expected volatility
92.30 %
89.67 %
11. Income Taxes
The Company has not recorded a current tax provision for the years ended December 31, 2024 and 2023.
The effective income tax rate differed from the amount computed by applying the federal statutory rate to the Company’s
loss before income taxes as follows:
For Year Ended
December 31,
2024
2023
Tax effected at statutory rate
21.0 %
21.0 %
State taxes
5.9
6.3
Stock compensation
(0.5)
(2.3)
Non-deductible expenses
(0.3)
(0.3)
Federal research and development credits
5.8
4.9
Other
(0.8)
0.1
Change in valuation allowance
(31.1)
(29.7)
— %
— %
F-25
Deferred tax assets (liabilities) consist of the following at December 31, 2024 and 2023 (in thousands):
As of
December 31,
2024
2023
Deferred tax assets:
Net operating loss carryforwards
$ 139,160
$ 110,120
Tax credits
61,027
45,621
Capitalized research & development
80,357
49,699
Stock based compensation
8,920
8,328
Operating lease liability
3,971
3,217
Reserve and accruals
4,139
3,294
Total gross deferred tax assets
297,574
220,279
Valuation allowance
(293,064)
(216,524)
Total deferred tax assets
4,510
3,755
Total deferred tax liabilities:
Operating lease right-of-use asset
(4,148)
(3,113)
Fixed and intangible assets
(362)
(642)
Total deferred tax liabilities
(4,510)
(3,755)
Total net deferred tax assets
$
—
$
—
Total Net Deferred Tax Assets
Deferred tax assets are reduced by a valuation allowance if, based on the weight of available positive and negative
evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, a
full valuation allowance has been established against the net deferred tax assets as of December 31, 2024 and 2023. The
valuation allowance for deferred tax assets increased by $76.5 million and $49.2 million in 2024 and 2023, respectively.
This increase mainly relates to the establishment of a valuation allowance against the Company’s net domestic deferred tax
assets in connection with net operating losses generated in each year, capitalized research expenses and additional tax
credit carryforwards generated. Starting with tax years beginning after December 31, 2021, entities are required to
capitalize all research and experimentation “R&D” expenses as defined under Section 174 of the Internal Revenue Code
and amortize them over five years for domestic expenses and over fifteen years for foreign expenses. During the year, the
Company capitalized $121.5 million of R&D expenses, net of current and prior year amortization deductions. The
corresponding deferred tax asset as of December 31, 2024 is $80.4 million. As of December 31, 2024, the Company had
approximately $512.6 million and $498.8 million of Federal and State operating loss carryforwards respectively, which
begin to expire in 2032, except for $462.1 million of the Company’s federal net operating loss carryforwards, and $0.2
million of state net operating losses that do not expire. These loss carryforwards may be available to reduce future taxable
income, if any. These loss carryforwards are subject to review and possible adjustment by the appropriate taxing
authorities. As of December 31, 2024, the Company also had federal and state credit carryovers of $54.9 million and $7.7
million, respectively, which begin to expire in 2034 and 2025, respectively. The amount of loss and credit carryforwards
that may be utilized in any future period may be limited based upon changes in the ownership of the Company’s ultimate
parent. Additionally, the deductibility of federal net operating losses generated after December 31, 2017 and the indefinite
state net operating losses is limited to 80% of the Company’s taxable income in any future taxable year.
The Company follows the provisions of ASC 740-10, “Accounting for Uncertainty in Income Taxes,” which specifies how
tax benefits for uncertain tax positions are to be recognized, measured, and recorded in financial statements; requires
certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the
balance sheet; and provides transition and interim period guidance, among other provisions. As of December 31, 2024 and
2023, the Company has not recorded any amounts for uncertain tax positions. The Company’s policy is to recognize
interest and penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in its statements
of income.
F-26
For Year Ended
December 31,
2024
Lease Cost:
Operating lease cost
$
7,004
Variable lease cost
1,449
Total lease cost
$
8,453
For Year Ended
December 31,
2024
Other information:
Operating cash flows used for operating leases
$
8,051
Weighted average remaining lease term
2.7
Weighted average incremental borrowing rate
13.1 %
The Company’s net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of
certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50
percent as defined under Section 382 and 383 of the U.S. Internal Revenue Code of 1986, respectively, as well as similar
state provisions. The amount of the annual limitation is determined based on the value of the Company immediately prior
to the ownership change. The Company conducted a Section 382 study covering the period of November 26, 2013 through
December 31, 2023. The study concluded that ownership changes occurred during that period which limit the amount of
the Company’s net operating losses and tax credit carryforwards that can be utilized before expiring. The carryforwards
disclosed represent the amount of attributes that can be utilized based on the results of the study.
All of the Company’s tax years will remain open for examination by the federal and state tax authorities to the extent that
the Company's tax attributes are utilized in future years to offset income or income taxes.
12. Commitments and Contingencies
Operating Lease
In November 2019, the Company entered into a lease of office and laboratory space at 301 Binney Street in Cambridge,
Massachusetts to be used as its new corporate headquarters (“the Lease”). The expiration date of the Lease was originally
in August 2025 and included an option to extend the term by two years. The base rent under the original Lease was $6.9
million per year, subject to an annual increase of 3.5%. Variable lease payments include the Company’s allocated share of
costs incurred and expenditures made by the landlord in the operation and management of the building. The Lease included
incentives of $14.1 million in the form of an allowance for tenant improvements related to the design and build out of the
space. In connection with the Lease, the Company has secured a letter of credit for $2.3 million which renews
automatically each year.
In May 2024, the Company entered into the First Amendment (the “Lease Amendment”) to the Lease to extend the term
for approximately two years, commencing on August 19, 2025 (the “First Extension Term”) with the base rent to start at
approximately $6.2 million per year, followed by a 3% annual increase. Pursuant to the Lease Amendment, the Company
also has an option to extend the term of the Lease by five years, upon the expiration of the First Extension Term.
Other information related to the Lease is as follows (in thousands, except lease term and discount rate):
F-27
The following is a maturity analysis of the annual undiscounted cash flows reconciled to the carrying value of the operating
lease liabilities as of December 31, 2024 (in thousands):
Year Ending December 31,
2025
7,368
2026
6,433
2027
3,818
Total lease payments
17,619
Less imputed interest
(2,639)
Total operating lease liability
$
14,980
Short-term portion of operating lease liability
5,774
Long-term portion of operating lease liability
9,206
The Company recorded approximately $7.0 million and $8.3 million in rent expense for the years ended December 31,
2024 and 2023, respectively.
Legal Proceedings
The Company, from time to time, may be party to litigation arising in the ordinary course of its business. The Company
was not subject to any material legal proceedings during the years ended December 31, 2024 and 2023.
13. Debt
On October 16, 2020 (the “Closing Date”) the Company entered into a Loan and Security Agreement with Oxford Finance
LLC (“Oxford”) and Silicon Valley Bank (“SVB”) for $50.0 million (the “Loan and Security Agreement”). Tranche 1 of
$25.0 million was funded on the Closing Date. The Company had an additional $25.0 million in loan proceeds available
under Tranche 2 which was funded in December 2021, in conjunction with the Company entering into the First
Amendment to Loan and Security Agreement with Oxford and SVB. The Loan and Security Agreement was to mature on
May 1, 2025 and required interest-only payments through November 2022, with principal payments to commence in
December 2022. Pursuant to the Loan and Security Agreement, the Company was required to maintain cash in an SVB
account equal to the lesser of 100% of the Company’s consolidated cash or 105% of the dollar amount of the outstanding
debt.
On November 10, 2022, the Company entered into the Second Amendment to Loan and Security Agreement (“Amendment
2”) to increase the Company’s borrowing capacity under the Loan and Security Agreement to an amount up to $100.0
million, comprised of the original $50.0 million loan which remains outstanding and two additional $25.0 million tranches.
The first $25.0 million tranche available under Amendment 2, was available at the Company’s discretion through
December 2023 upon achievement of certain development and business performance milestones. The Company did not
exercise this tranche. The second $25.0 million tranche available under Amendment 2, may be available upon the
Company’s request, at Oxford and SVB’s discretion. Amendment 2 also extended the interest-only payment period for an
additional 24 months through November 2024, with principal payments to commence in December 2024. The maturity of
the loan was extended to November 2027.
Effective upon Amendment 2, the interest rate on the unpaid principal is the greater of the Wall Street Journal prime rate
plus 4.60% or 9.35% per annum. Prepayment is permitted and may include a pre-payment fee ranging from 0% - 3% (of
the principal amount being prepaid), depending on when the prepayment is made. The Company is also required to make a
final payment equal to 2% of the original principal amount.
In conjunction with Amendment 2, the Company was required to pay $0.9 million for the accrued portion of the final
payment on the previous outstanding balance.
On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which
appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Afterward, the FDIC transferred all deposits of
the former Silicon Valley Bank to Silicon Valley Bridge Bank, N.A., as operated by the FDIC. On March 27, 2023,
F-28
Year Ending December 31,
Total future payments
2025-2028
$
—
2029
40,909
Total payments
$
40,909
The Company incurred costs on behalf of the lender recorded as a debt discount of $0.5 million and incurred debt issuance
costs of $0.1 million, both of which are recorded as a deduction from the carrying amount of the debt and are being
amortized as interest expense over the term of the loan. The final payment fee will be treated as an additional debt discount
and accreted to the debt balance over the term.
Silicon Valley Bridge Bank was closed by the Office of the Comptroller of the Currency, and the FDIC was appointed as
receiver. First Citizens Bank then entered into an agreement with the FDIC to purchase out of FDIC receivership
substantially all loans and certain other assets and assume all customer deposits and certain other liabilities of Silicon
Valley Bridge Bank. On March 27, 2023, Silicon Valley Bridge Bank and its U.S. branches began operating as Silicon
Valley Bank, a division of First Citizens Bank.
On April 18, 2023, the Company entered into Amendment 3 to the Loan and Security Agreement to amend certain
provisions relating to the Company’s operating accounts.
On May 17, 2024, the Company entered into the Fourth Amendment to the Loan and Security Agreement (“Amendment
4”). The Company currently has $50.0 million outstanding under the Loan and Security Agreement, which was drawn
down in two equal tranches. The third $25.0 million tranche is available at the Company’s discretion through December
2024, upon achievement of certain clinical and business milestones, which were amended under Amendment 4. The fourth
$25.0 million tranche may be available through June 1, 2025 (or through December 1, 2025, upon achievement of certain
business milestones) upon the Company’s request, at Oxford and SVB’s discretion. Amendment 4 also extends the interest-
only payment period for an additional six months through May 2025, with principal payments to commence in June 2025.
Additionally, upon achievement of certain business performance milestones, which were achieved in October 2024, the
interest-only payment period was extended through November 2025, with principal payments to commence in December
2025.
On February 10, 2025, the Company entered into an Amended and Restated Loan and Security Agreement (the “Amended
and Restated Loan and Security Agreement”) with Oxford. The Amended and Restated Loan and Security Agreement
amends and restates in its entirety that certain Loan and Security Agreement, as amended.
The Amended and Restated Loan and Security Agreement provides for term loans in an aggregate principal amount of up
to $200.0 million (each, a “Term Loan” and together, the “Term Loans”) subject to funding in four tranches. To date, the
Company has received $50.0 million of Term Loans. The remaining three tranches, each in an amount of $50.0 million, are
available to be borrowed (a) in the case of the second tranche, until December 31, 2025, (b) in the case of the third tranche,
after the achievement of certain development and business performance milestones until September 30, 2026, and (c) in the
case of the fourth tranche, after the achievement of certain development and business performance milestones until
December 31, 2027. The Amended and Restated Loan and Security Agreement consolidates the existing outstanding loan
tranches solely with Oxford and also extends the interest-only payment period through March 2029, with principal
payments to commence in April 2029.
The outstanding principal of each Term Loan has an annual interest rate of (a) the greater of (i) the 1-Month CME Term
SOFR on the last business day of the month that immediately precedes the month in which the interest will accrue and (ii)
3% , plus (b) 5.5%. Interest is payable on a monthly basis based on the principal amount outstanding during the preceding
month. In addition, the Company is required to pay Oxford a final payment fee equal to 2.00% of the original principal
amount of each Term Loan advanced to the Company.
Adjusted for the Amended and Restated Loan and Security Agreement entered into in February 2025, the following table
shows required payments (excluding interest), during the next five years on debt outstanding at December 31, 2024 (in
thousands):
F-29
For the years ended December 31, 2024 and 2023, the Company recorded total interest expense for the debt of $6.6 million
and $6.5 million, respectively.
14. Net Loss per Share
The Company calculates basic net loss per share by dividing net loss by the weighted average number of common shares
outstanding, excluding restricted common stock. The weighted average number of common shares used in the basic and
diluted net loss per share calculation includes the pre-funded warrants issued in connection with the Company’s November
2020, June 2022 and October 2024 follow-on offerings as the pre-funded warrants are exercisable at any time for nominal
cash consideration. As of December 31, 2024, 10,681,528 pre-funded warrants have been exercised and 17,362,147 pre-
funded warrants are outstanding. The Company has generated a net loss in all periods presented, so the basic and diluted
net loss per share are the same, as the inclusion of the potentially dilutive securities would be anti-dilutive.
Basic and diluted net loss per share is calculated as follows (in thousands, except share and per share data):
Year Ended
Year Ended
December 31, 2024 December 31, 2023
Net loss
$
(246,294)
$
(165,789)
Weighted average common shares outstanding, basic and
diluted
99,838,102
83,347,086
Net loss per share, basic and diluted
$
(2.47)
$
(1.99)
The following table sets forth the outstanding common stock equivalents, presented based on amounts outstanding at each
period end, that have been excluded from the calculation of diluted net loss per share for the periods indicated because their
inclusion would have been anti-dilutive:
Year Ended December 31,
2024
2023
Restricted stock units
3,486,668
2,089,552
Stock options
8,469,926
7,300,953
Warrants
8,678,664
9,988,156
20,635,258
19,378,661
15. Retirement Plan
The Company sponsors a 401(k) retirement plan, in which substantially all employees are eligible to participate upon
employment. Participants may contribute a percentage of their annual compensation to this plan, subject to statutory
limitations. Effective January 1, 2020, the Company adopted a policy to match 50% of the employee contributions to the
401(k) plan up to a maximum of 6% of the participating employee’s eligible earnings, resulting in a maximum company
match of 3% of the participating employee’s eligible earnings subject to statutory limitations. The Company recognized
$1.1 million and $0.9 million in expense related to the match during the years ended December 31, 2024 and 2023,
respectively.
16. Segment Reporting
The Company operates and manages its business as a single segment for the purposes of assessing performance and
making operating decisions. The Company’s president and chief executive officer, who is the chief operating decision
maker (“CODM”), reviews the Company’s financial information on a consolidated basis for purposes of evaluating
financial performance and allocating resources and; therefore we have presented segment information on the same basis.
When evaluating the Company’s financial performance, the CODM regularly reviews net loss, non-operating expenses and
operating expenses with non-cash expenses such as depreciation and equity-based compensation expense removed. The
CODM considers net loss in making decisions on how to allocate resources. The measure of segment assets is
F-30
reported on the balance sheet as total consolidated assets. All of the Company's long-lived assets are held in the United
States.
The following table presents significant expense information about the Company’s operating segment:
Year Ended December 31,
2024
2023
Operating expenses:
Employee related expense
$
68,790
$
48,294
External R&D expense - SMA
68,076
40,141
External R&D expense - oncology
9,957
14,200
External R&D expense - cardiometabolic/obesity
21,843
1,914
External R&D expense - Early Research and other
3,055
4,464
External expense - G&A
22,384
13,973
Other segment related expense*
19,383
18,313
Employee related equity-based compensation expense
36,628
27,141
Depreciation and amortization expense
1,937
2,855
Interest income
(12,682)
(12,099)
Interest expense
6,837
6,738
Other non-operating income/(expense), net
86
(145)
Net loss
$
246,294
$
165,789
* Consists of other segment expenses related to supplies, corporate and facilities expenses.
17. Subsequent Events
On February 10, 2025, the Company entered into the Amended and Restated Loan and Security Agreement with Oxford
for up to $200.0 million of which $25.0 million from Tranche 1 was received in October 2020 and $25.0 million from
Tranche 2 was received in December 2021. The Amended and Restated Loan and Security Agreement consolidates the
existing outstanding loan tranches solely with Oxford and extends the interest-only payment period through March 2029,
with principal payments to commence in April 2029. Additional details of the Amended and Restated Loan and Security
Agreement can be found in Note 13 and as an exhibit to these financial statements.
Exhibit 4.4
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of Scholar Rock Holding Corporation (“us,” “our,” “we” or the “Company”) is a
summary of the rights of our common stock, par value $0.001 per share (the “common stock”), and certain provisions of our
amended and restated certificate of incorporation, as amended (the “charter”), and our amended and restated bylaws currently in
effect (“bylaws”). This summary does not purport to be complete and is qualified in its entirety by the provisions of our charter and
bylaws, each previously filed with the Securities and Exchange Commission and incorporated by reference as an exhibit to the
Annual Report on Form 10-K of which this Exhibit 4.4 is a part, as well as to the applicable provisions of the Delaware General
Corporation Law (the “DGCL”). We encourage you to read our charter and bylaws, and the applicable portions of the DGCL
carefully.
Authorized Capital Stock
Our authorized capital stock consists of 300,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of
preferred stock, par value $0.001 per share, all of which preferred stock is undesignated.
Dividend Rights
Holders of our common stock are entitled to receive ratably any dividends declared by the board of directors out of funds legally
available for that purpose, subject to any preferential dividend rights of any outstanding preferred stock.
Liquidation Rights
In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in all assets
remaining after payment of all debts and other liabilities and any liquidation preference of any outstanding preferred stock.
Voting Rights
The holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders.
The holders of our common stock do not have any cumulative voting rights.
Other Matters
Our common stock has no preemptive rights, conversion rights or other subscription rights or redemption or sinking fund
provisions. The shares to be issued by us will be, when issued and paid for, validly issued, fully paid and non-assessable. The rights,
preferences, and privileges of our common shareholders are subject to the rights of the shareholders of any series of preferred stock
that we may designate in the future. Our charter and bylaws do not restrict the ability of a holder of our common stock to transfer
his, her or its shares of common stock.
Transfer Agent and Listing
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A. Our common stock is listed on The
Nasdaq Global Select Market under the symbol “SRRK.” The transfer agent and registrar’s address is P.O. Box 43006, Providence,
Rhode Island 02940-3006, and its telephone number within the U.S. is (800) 736-3001 and outside the U.S. is (781) 575-3100.
Anti-Takeover Effects of Our Certificate of Incorporation and Our Bylaws
Our charter and bylaws contain certain provisions that are intended to enhance the likelihood of continuity and stability in the
composition of the board of directors and which may have the effect of delaying, deferring or preventing a future takeover or
change in control of the company unless such takeover or change in control is approved by the board of directors.
These provisions include:
Classified Board. Our charter provides that our board of directors is divided into three classes of directors, with the classes as nearly
equal in number as possible. As a result, approximately one-third of our board of directors will be elected each year. The
classification of directors has the effect of making it more difficult for stockholders to change the composition of our board. Our
charter provides that, subject to any rights of holders of preferred stock to elect additional directors under specified circumstances,
the number of directors will be fixed exclusively pursuant to a resolution adopted by our board of directors. Our board of directors
has eight members. Our charter provides that the affirmative vote of at least two-thirds of the outstanding shares of capital stock
entitled to vote, and the affirmative vote of at least two-thirds of the outstanding shares of each class entitled to vote as a class, is
required to amend or repeal the foregoing provision. This requirement of a supermajority vote to amend or repeal that provision of
our bylaws could enable a minority of our stockholders to prevent a declassification of our Board.
Action by Written Consent; Special Meetings of Stockholders. Our charter provides that stockholder action can be taken only at an
annual or special meeting of stockholders and cannot be taken by written consent in lieu of a meeting. This limit may lengthen the
amount of time required to take stockholder actions and would prevent the amendment of our bylaws or removal of directors by our
stockholders without holding a meeting of stockholders. Our charter provides that the affirmative vote of at least two-
thirds of the outstanding shares of capital stock entitled to vote, and the affirmative vote of at least two-thirds of the outstanding
shares of each class entitled to vote as a class, is required to amend or repeal the foregoing provision. Our charter and bylaws
provide that, except as otherwise required by law, special meetings of the stockholders can be called only by or at the direction of
the board of directors pursuant to a resolution adopted by a majority of the total number of directors, and only those matters set
forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our bylaws limit the
business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.
Stockholders are not permitted to call a special meeting or to require the board of directors to call a special meeting. Our bylaws
provide that the affirmative vote of at least two thirds of the outstanding shares entitled to vote, and of each class entitled to vote,
respectively, is required to amend the or repeal the provision in our bylaws that provides that special meetings of the stockholders
can be called only by or at the direction of the board of directors pursuant to a resolution adopted by a majority of the total number
of directors, unless the Board first recommends such amendment or repeal to stockholders. This requirement of a supermajority vote
to amend or repeal that provision of our bylaws could enable a minority of our stockholders to prevent a change to such provision
and has the effect of making it more difficult for stockholders to call a special meeting of stockholders.
Removal of Directors. Our charter provides that our directors may be removed only for cause and then only by the affirmative vote
of the holders of two-thirds or more of the shares then entitled to vote at an election of directors, at a meeting of the stockholders
called for that purpose. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from
an increase in the size of our board, may only be filled by the affirmative vote of a majority of our directors then in office even if
less than a quorum. This requirement of a supermajority vote to remove directors could enable a minority of our stockholders to
prevent a change in the composition of our board, and the treatment of vacancies also has the effect of making it more difficult for
stockholders to change the composition of our board.
Advance Notice Procedures. Our bylaws establish an advance notice procedure for stockholder proposals to be brought before an
annual meeting of our stockholders, including proposed nominations of persons for election to the board of directors. These
procedures provide that notice of stockholder proposals must be timely given in writing to our corporate secretary prior to the
meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less
than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. Our bylaws
specify the requirements as to form and content of all stockholders’ notices. Stockholders at an annual meeting will only be able to
consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the
board of directors or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at
the meeting and who has given our secretary timely written notice, in proper form, of the stockholder’s intention to bring that
business before the meeting. Although the bylaws do not give the board of directors the power to approve or disapprove stockholder
nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, the bylaws may
have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may
discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of the company.
Super Majority Approval Requirements and Amendment to Charter and Bylaws. Any amendment of our charter must first be
approved by a majority of our board of directors, and if required by law or our charter, must thereafter be approved by a majority of
the outstanding shares entitled to vote on the amendment and a majority of the outstanding shares of each class entitled to vote
thereon as a class, except that the amendment of the provisions relating to stockholder action, board composition, limitation of
liability and the amendment of our bylaws and charter must be approved by not less than two-thirds of the outstanding shares
entitled to vote on the amendment, and not less than two-thirds of the outstanding shares of each class entitled to vote thereon as a
class. Our bylaws may be amended by the affirmative vote of a majority of the directors then in office, subject to any limitations set
forth in the bylaws, and may also be amended by the affirmative vote of at least two-thirds of the outstanding shares entitled to vote
on the amendment, or, if our board of directors recommends that the stockholders approve the amendment, by the affirmative vote
of the majority of the outstanding shares entitled to vote on the amendment, in each case voting together as a single class.
Authorized but Unissued Shares. Our authorized but unissued shares of common stock and preferred stock are available for future
issuance without stockholder approval. These additional shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital and corporate acquisitions. The existence of authorized but unissued shares of common
stock and preferred stock could render more difficult or discourage an attempt to obtain control of a majority of our common stock
by means of a proxy contest, tender offer, merger or otherwise. For example, if in the due exercise of its fiduciary obligations, our
board of directors were to determine that a takeover proposal is not in the best interests of our stockholders, our board of directors
could cause shares of convertible preferred stock to be issued without stockholder approval in one or more private offerings or other
transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In
this regard, our charter grants our board of directors broad power to establish the rights and preferences of authorized and unissued
shares of convertible preferred stock. The issuance of shares of convertible preferred stock could decrease the amount of earnings
and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and
powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control of
us.
Choice of Forum. Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of
Chancery of the State of Delaware will be the sole and exclusive forum for: (1) any derivative action or proceeding brought on
our behalf; (2) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers,
employees or agents to us or our stockholders; (3) any action asserting a claim against us arising pursuant to any provision of the
General Corporation Law of the State of Delaware or our charter or bylaws; (4) any action to interpret, apply, enforce or determine
the validity of our charter or bylaws; or (5) any action asserting a claim governed by the internal affairs doctrine.
In addition, our bylaws contain a provision by virtue of which, unless we consent in writing to the selection of an alternative forum,
the United States District Court for the District of Massachusetts will be the exclusive forum for any complaint asserting a cause of
action arising under the Securities Act. In addition, our 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 provisions.
We have chosen the United States District Court for the District of Massachusetts as the exclusive forum for such causes of action
because our principal executive offices are located in Cambridge, Massachusetts. Some companies that have adopted similar federal
district court forum selection provisions have had such provisions challenged in legal proceedings by stockholders. While the
Delaware Supreme Court ruled in March 2020 in Salzburg et al. v. Sciabacucchi 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 selection provision, and we may incur additional costs of litigation should
such enforceability be challenged.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the DGCL (“Section 203”). In general, Section 203 prohibits a publicly-held
Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following
the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed
manner. A “business combination” includes, among other things, a merger, asset or stock sale or other transaction resulting in a
financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates,
owns, or did own within three years prior to the determination of interested stockholder status, 15% or more of the corporation’s
voting stock.
Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one
of the following conditions: before the stockholder became interested, the board of directors approved either the business
combination or the transaction which resulted in the stockholder becoming an interested stockholder; upon consummation of the
transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the
voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances;
or at or after the time the stockholder became interested, the business combination was approved by the board of directors of the
corporation and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the
outstanding voting stock which is not owned by the interested stockholder.
A Delaware corporation may “opt out” of these provisions with an express provision in its original certificate of incorporation or an
express provision in its certificate of incorporation or bylaws resulting from a stockholders’ amendment approved by at least a
majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or
change in control attempts of us may be discouraged or prevented.
EXHIBIT 10.23
SCHOLAR ROCK, INC.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (“Agreement”) is made between Scholar Rock, Inc.,
a Delaware corporation (the “Company”), and Edward H. Myles (the “Employee”) and is effective as of
December 8, 2024 (the “Effective Date”). Except with respect to the Equity Documents and the Restrictive
Covenant Agreement (each as defined below) and subject to Section 10 below, this Agreement supersedes in all
respects all prior agreements between the Employee and the Company regarding the subject matter herein,
including without limitation (i) the Employment Agreement between the Employee and the Company dated July
16, 2020 (the “Prior Agreement”), and (ii) any other offer letter, employment agreement or severance agreement.
WHEREAS, the Company desires to continue to employ the Employee and the Employee desires to
continue to be employed by the Company on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1.
Employment.
(a)
Term. The term of this Agreement shall commence on the Effective Date and continue
until terminated in accordance with the provisions hereof (the “Term”). The Employee’s employment with the
Company will continue to be “at will,” meaning that the Employee’s employment may be terminated by the
Company or the Employee at any time and for any reason subject to the terms of this Agreement.
(b)
Position and Duties. During the Term, the Employee shall serve as the Chief Operating
Officer and Chief Financial Officer of the Company, and shall have such duties and authorities as may from time
to time be prescribed by the Chief Executive Officer (“CEO”). The Employee shall devote the Employee’s full
working time and efforts to the business and affairs of the Company. Notwithstanding the foregoing, the
Employee may serve on other boards of directors, in each instance with the approval of the CEO (not to be
unreasonably withheld and subject to any applicable Company policies), or engage in religious, charitable or other
community activities as long as such services and activities do not interfere with the Employee’s performance of
the Employee’s duties to the Company as provided in this Agreement.
(c)
Work Location. During the Term, the Employee’s primary work location will be the
Company’s offices in Massachusetts; provided that the Employee may sometimes work from the Employee’s
home office in accordance with the Company’s policies and procedures relating to remote work, as may be in
effect from time to time.
2.
Compensation and Related Matters.
(a)
Base Salary. During the Term, the Employee’s annual base salary shall be $506,000. The
Employee’s base salary shall be reviewed from time to time by the Company. The base salary in effect at any
given time is referred to herein as “Base Salary.” The Base Salary shall be payable in a manner that is consistent
with the Company’s usual payroll practices.
(b)
Incentive Compensation. During the Term, the Employee shall be eligible to receive cash
incentive compensation as determined by the Company from time to time. The Employee’s target annual
2
incentive compensation shall be 40% of the Employee’s Base Salary. The target annual incentive compensation in
effect at any given time is referred to herein as the “Target Annual Incentive Compensation”. Except as otherwise
provided herein, to earn incentive compensation, the Employee must be employed by the Company on the day
such incentive compensation is paid. The incentive compensation, if any, will be paid out no later than March 15
of the year following the applicable bonus year.
(c)
Expenses. The Employee shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Employee during the Term in performing services hereunder, in accordance
with the policies and procedures then in effect and established by the Company.
(d)
Other Benefits. During the Term, the Employee shall be eligible to participate in or receive
benefits under the Company’s employee benefit plans in effect from time to time, subject to the terms of such
plans.
(e)
Vacations. During the Term, the Employee shall be entitled to paid vacation in accordance
with the Company’s policies and procedures, as may be amended from time to time. The Employee shall also be
entitled to all paid holidays given by the Company in accordance with the policies and procedures then in effect
and established by the Company.
(f)
Equity. The equity awards held by the Employee shall continue to be governed by the terms
and conditions of the applicable equity incentive plan(s) of Scholar Rock Holding Corporation (“SR Holding”)
and the applicable award agreement(s) (collectively, the “Equity Documents”). The Employee may also be
eligible to receive future equity awards, in the sole discretion of the Board of Directors of SR Holding (the
“Board”) or the Compensation Committee of the Board. Notwithstanding anything to the contrary in the Equity
Documents or any other applicable option agreement or stock-based award agreement, in the event that the
Employee’s employment is terminated by the Company without Cause or by the Employee for Good Reason, in
either case during the Change in Control Period (as such terms are defined below), then all time-based stock
options and other time-based stock-based awards held by the Employee that are subject solely to time-based
vesting (the “Time-Based Equity Awards”) shall immediately accelerate and become fully vested and exercisable
or nonforfeitable as of the Date of Termination (as defined below) or, if later, the Change in Control Date (as
defined below); provided that, for the avoidance of doubt, in the event of a termination by the Company without
Cause or by the Employee for Good Reason, in either case outside of the Change in Control Period, the
termination or forfeiture of any unvested Time-Based Equity Awards that would otherwise occur on the Date of
Termination will be delayed until the earlier of (i) the Change in Control Date (at which time acceleration will
occur) or (ii) the date that is three (3) months after the Date of Termination (at which time the unvested portion of
the Employee’s Time-Based Equity Awards will terminate or be forfeited); provided further, that no additional
vesting of the Time-Based Equity Awards shall occur after the Date of Termination unless the Change in Control
Date occurs within three (3) months after the Date of Termination.
It is acknowledged and agreed that as of the effective date of the Prior Agreement, the Employee ceased vesting in
the equity awards that the Employee received in connection with his prior Board service (the “Director Awards”,
together with the applicable underlying equity award agreements and equity plan(s), the “Director Award
Documents”), notwithstanding anything to the contrary in the Director Award Documents. It is further
acknowledged and agreed that, notwithstanding anything to the contrary in the Director Award Documents, the
Company has extended the exercise period with respect to the vested portion of the Director Awards until the
earlier of (i) three (3) months after the Employee’s service relationship with the Company ends, or (ii) the
expiration date for such vested stock options as provided in the applicable Director Award Documents (the
“Extended Exercise Period”). Except as expressly stated herein, all other terms of the Director Award Documents
remain in full force and effect
3.
Termination. During the Term, the Employee’s employment hereunder may be terminated without
any breach of this Agreement under the following circumstances:
3
(a)
Death. The Employee’s employment hereunder shall terminate upon the Employee’s death.
(b)
Termination by Company for Cause. The Company may terminate the Employee’s
employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the
Employee constituting a material act of misconduct in connection with the performance of the Employee’s duties,
including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or
affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; (ii)
the commission by the Employee of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or
fraud, or any conduct by the Employee that would reasonably be expected to result in material injury or
reputational harm to the Company or any of its subsidiaries or affiliates if the Employee were retained in the
Employee’s position; (iii) continued non-performance by the Employee of the Employee’s duties hereunder (other
than by reason of the Employee’s physical or mental illness, incapacity or disability) which has continued for
more than 30 days following written notice of such non-performance from the CEO; (iv) a material breach by the
Employee of any of the Continuing Obligations (as defined below) which has not been cured (or is incapable of or
otherwise cannot be cured) within 30 days after the CEO gives the Employee written notice regarding such
breach; (v) a material violation by the Employee of the Company’s written employment policies which has not
been cured (or which is incapable of or otherwise cannot be cured) within 30 days after the Company gives the
Employee written notice regarding such violation; or (vi) failure to cooperate with a bona fide internal
investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the
Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be
relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other
materials in connection with such investigation.
(c)
Termination Without Cause. The Company may terminate the Employee’s employment
hereunder at any time without Cause. Any termination by the Company of the Employee’s employment under this
Agreement which does not constitute a termination for Cause under Section 3(b) and does not result from the
death of the Employee under Section 3(a) shall be deemed a termination without Cause.
(d)
Termination by the Employee. The Employee may terminate the Employee’s employment
hereunder at any time for any reason, including but not limited to Good Reason. For purposes of this Agreement,
“Good Reason” shall mean that the Employee has complied with the Good Reason Process (hereinafter defined)
following the occurrence of any of the following events without the Employee’s consent: (i) a material diminution
in the Employee’s responsibilities, authority or duties; (ii) a material diminution in the Employee’s Base Salary
except for across-the-board salary reductions based on the Company’s financial performance applied equally, as a
percentage of Base Salary, to all or substantially all senior management employees of the Company; (iii) a change
of more than 30 miles in the geographic location at which the Employee is required to provide services to the
Company, except for required travel for the Company’s business; (iv) the material breach by the Company of this
Agreement; or (v) any directive to the Employee by the Company to engage in a willful violation of law. “Good
Reason Process” shall mean that (i) the Employee discovers and reasonably determines in good faith that a “Good
Reason” condition has occurred; (ii) the Employee notifies the Company in writing of the first occurrence of the
Good Reason condition within 60 days of the Employee’s discovery of the first occurrence of such condition; (iii)
the Employee cooperates in good faith with the Company’s efforts, for a period not less than 30 days following
such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason
condition continues to exist; and (v) the Employee terminates the Employee’s employment within 60 days after
the end of the Cure Period. If the Company cures the Good Reason condition during the Cure Period, Good
Reason shall be deemed not to have occurred.
(e)
Notice of Termination. Except for termination as specified in Section 3(a), any termination
of the Employee’s employment by the Company or any such termination by the Employee shall be
4
communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a
“Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this
Agreement relied upon.
(f)
Date of Termination. For purposes of this Agreement, “Date of Termination” shall mean:
(i) if the Employee’s employment is terminated by the Employee’s death, the date of the Employee’s death; (ii) if
the Employee’s employment is terminated by the Company for Cause under Section 3(b), the date on which a
Notice of Termination is given; (iii) if the Employee’s employment is terminated by the Company without Cause
under Section 3(c), the date on which a Notice of Termination is given or the date otherwise specified by the
Company in the Notice of Termination; (iv) if the Employee’s employment is terminated by the Employee under
Section 3(d) other than for Good Reason, 14 days after the date on which a Notice of Termination is given, and (v)
if the Employee’s employment is terminated by the Employee under Section 3(d) for Good Reason, the date on
which a Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the
event that the Employee gives a Notice of Termination to the Company, the Company may unilaterally accelerate
the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of
this Agreement.
(g)
Accrued Benefit. If the Employee’s employment with the Company is terminated for any
reason, the Company shall pay or provide to the Employee (or to the Employee’s authorized representative or
estate) (i) any Base Salary earned through the Date of Termination, unpaid expense reimbursements (subject to,
and in accordance with, Section 2(c) of this Agreement) and unused vacation that accrued through the Date of
Termination on or before the time required by law but in no event more than 30 days after the Employee’s Date of
Termination; and (ii) any vested benefits the Employee may have under any employee benefit plan of the
Company through the Date of Termination, which vested benefits shall be paid and/or provided in accordance
with the terms of such employee benefit plans (collectively, the “Accrued Benefit”).
4.
Severance Pay and Benefits Upon Termination by the Company without Cause or by the Employee
for Good Reason Outside the Change in Control Period. During the Term, if the Employee’s employment is
terminated by the Company without Cause as provided in Section 3(c), or the Employee terminates the
Employee’s employment for Good Reason as provided in Section 3(d), then the Company shall pay the Employee
the Employee’s Accrued Benefit. In addition, subject to (i) the Employee signing a separation agreement in a
form and manner satisfactory to the Company, containing, among other provisions, a general release of claims in
favor of the Company and related persons and entities, preservation of all of the Employee’s Continuing
Obligations, and, in the Company’s sole discretion, a one-year post employment noncompetition agreement, and
shall provide that if Employee breaches any of the Continuing Obligations, all payments of the Severance Amount
shall immediately cease (the “Separation Agreement and Release”) and (ii) the Separation Agreement and Release
becoming irrevocable and fully effective, all within 60 days after the Date of Termination (or such shorter time
period provided in the Separation Agreement and Release), which shall include a seven (7) business day
revocation period:
(a)
the Company shall pay the Employee an amount equal to the sum of (i) nine (9) months of
the Employee’s Base Salary (or the Employee’s Base Salary in effect before Good Reason existed under Section
3(d)(ii), if higher than the Employee’s then-current Base Salary) plus (ii) the Employee’s Prorated Incentive
Compensation (the “Severance Amount”). For purposes of this Agreement, “Prorated Incentive Compensation”
shall mean the Target Annual Incentive Compensation the Employee would have been entitled to receive in the
fiscal year of the Date of Termination prorated by the number of days the Employee was employed by the
Company during the fiscal year of the Date of Termination; for the avoidance of doubt, in no event shall “Prorated
Incentive Compensation” include any sign-on bonus, retention bonus, or any other special bonus;
(b)
if the Date of Termination occurs after the completion of a calendar year but prior to the
payment of annual bonuses for such year, the Company will pay the Employee the bonus amount that the
5
Employee otherwise would have earned if the Employee remained employed on the date of payment, as
determined in the sole discretion of the Company (the “Prior Year Bonus”); and
(c)
if the Employee was participating in the Company’s group health plan immediately prior to
the Date of Termination and elects COBRA health continuation, then the Company shall, for the period of nine (9)
months following the Date of Termination or the Employee’s COBRA health continuation period, whichever is
shorter, pay the cost of the monthly employer contribution (either by direct payment to the group health plan
provider or the COBRA provider or by reimbursing the Employee for such cost) that the Company would have
made to provide health insurance to the Employee if the Employee had remained employed by the Company;
provided, however, if the Company determines that it cannot pay such amounts to the group health plan provider
or the COBRA provider (if applicable) without potentially violating applicable law (including, without limitation,
Section 2716 of the Public Health Service Act), then the Company shall convert such payments to payroll
payments directly to the Employee for the time period specified above. Such payments shall be subject to tax-
related deductions and withholdings and paid on the Company’s regular payroll dates.
The amounts payable under Section 4(a) and (c), to the extent taxable, shall be paid out in substantially equal
installments in accordance with the Company’s payroll practice over nine (9) months commencing within 60 days
after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in
a second calendar year, the Severance Amount shall begin to be paid in the second calendar year by the last day of
such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts
retroactive to the day immediately following the Date of Termination. If applicable, the Prior Year Bonus shall be
paid to the Employee at the time that the Company’s other executives receive their annual bonuses, which shall be
no later than March 15 of the calendar year in which the Date of Termination occurs. Each payment pursuant to
this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-
2(b)(2).
5.
Severance Pay and Benefits Upon Termination by the Company without Cause or by the Employee
for Good Reason During the Change in Control Period. The provisions of this Section 5 set forth certain terms of
an agreement reached between the Employee and the Company regarding the Employee’s rights and obligations
upon the occurrence of a Change in Control (as defined below). These provisions are intended to assure and
encourage in advance the Employee’s continued attention and dedication to the Employee’s assigned duties and
the Employee’s objectivity during the pendency and after the occurrence of any such event. These provisions
shall apply in lieu of, and expressly supersede, the provisions of Section 4 regarding the Severance Amount and
other benefits upon a termination of employment, if such termination of employment occurs during the period
beginning three (3) months immediately before the date of the first event constituting a Change in Control and
ending on the 18 month anniversary of the first event constituting a Change in Control (such period, the “Change
in Control Period”). These provisions shall terminate and be of no further force or effect after the Change in
Control Period. For the avoidance of doubt, (i) in no event will the Employee be entitled to severance benefits
under both Section 4 and Section 5 of this Agreement, and (ii) if the Company has commenced providing
severance pay and benefits to the Employee under Section 4 prior to the date that the Employee becomes eligible
to receive severance pay and benefits under this Section 5, the severance pay and benefits previously provided to
the Employee under Section 4 shall reduce the severance pay and benefits to be provided under this Section 5.
(a)
Change in Control. During the Term, if during the Change in Control Period, the
Employee’s employment is terminated by the Company without Cause as provided in Section 3(c) or the
Employee terminates the Employee’s employment for Good Reason as provided in Section 3(d), then, subject to
the signing of the Separation Agreement and Release by the Employee and the Separation Agreement and Release
becoming irrevocable and fully effective, all within 60 days after the Date of Termination (or such shorter time
period provided in the Separation Agreement and Release), which shall include a seven (7) business day
revocation period:
6
(i)
the Company shall pay the Employee a lump sum in cash in an amount equal to one
(1) times the sum of (A) the Employee’s Base Salary (or the Employee’s Base Salary in effect immediately
prior to the Change in Control or before Good Reason existed under Section 3(d)(ii), if higher than the
Employee’s then-current Base Salary) plus (B) the Employee’s Annual Incentive Compensation
(collectively, the “Change in Control Payment”). For purposes of this Agreement, “Annual Incentive
Compensation” shall mean the Target Annual Incentive Compensation the Employee would have been
entitled to receive in the fiscal year of the Date of Termination (or the Employee’s Target Annual Incentive
Compensation in the fiscal year immediately prior to the Change in Control, if higher). For the avoidance
of doubt, in no event shall “Annual Incentive Compensation” include any sign-on bonus, retention bonus
or any other special bonus;
(ii)
if the Date of Termination occurs after the completion of a calendar year but prior to
the payment of annual bonuses for such year, the Company will pay the Employee the Prior Year Bonus (if
any); and
(iii)
if the Employee was participating in the Company’s group health plan immediately
prior to the Date of Termination and elects COBRA health continuation, then the Company shall, for the
period of 12 months following the Date of Termination or the Employee’s COBRA health continuation
period, whichever is shorter, pay the cost of the monthly employer contribution (either by direct payment
to the group health plan provider or the COBRA provider or by reimbursing the Employee for such cost)
that the Company would have made to provide health insurance to the Employee if the Employee had
remained employed by the Company; provided, however, if the Company determines that it cannot pay
such amounts to the group health plan provider or the COBRA provider (if applicable) without potentially
violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act),
then the Company shall convert such payments to payroll payments directly to the Employee for the time
period specified above. Such payments shall be subject to tax-related deductions and withholdings and
paid on the Company’s regular payroll dates.
The amounts payable under Section 5(a)(i) and (iii), to the extent taxable, shall be paid or commence to be
paid within 60 days after the Date of Termination or, if later, the Change in Control Date; provided,
however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such
payment shall be paid or commence to be paid in the second calendar year by the last day of such 60-day
period. If applicable, the Prior Year Bonus shall be paid to the Employee at the time that the Company’s
other executives receive their annual bonuses, which shall be no later than March 15 of the calendar year
in which the Date of Termination occurs.
(b)
Additional Limitation.
(i)
Anything in this Agreement to the contrary notwithstanding, in the event that the
amount of any compensation, payment or distribution by the Company to or for the benefit of the
Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise, calculated in a manner consistent with Section 280G of the Internal Revenue Code of 1986,
as amended (the “Code”) and the applicable regulations thereunder (the “Aggregate Payments”), would be
subject to the excise tax imposed by Section 4999 of the Code, then the Aggregate Payments shall be
reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the
amount at which the Employee becomes subject to the excise tax imposed by Section 4999 of the Code;
provided that such reduction shall only occur if it would result in the Employee receiving a higher After
Tax Amount (as defined below) than the Employee would receive if the Aggregate Payments were not
subject to such reduction. In such event, the Aggregate Payments shall be reduced in the following order,
in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the
furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (1) cash
payments not subject to Section 409A
7
of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and
acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate
Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-
24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-
1, Q&A-24(b) or (c).
(ii)
For purposes of this Section 5(b), the “After Tax Amount” means the amount of the
Aggregate Payments less all federal, state, and local income, excise and employment taxes imposed on the
Employee as a result of the Employee’s receipt of the Aggregate Payments. For purposes of determining
the After Tax Amount, the Employee shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation applicable to individuals for the calendar year in which the determination is
to be made, and state and local income taxes at the highest marginal rates of individual taxation in each
applicable state and locality, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
(iii)
The determination as to whether a reduction in the Aggregate Payments shall be
made pursuant to Section 5(b)(i) shall be made by a nationally recognized accounting firm selected by the
Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the
Company and the Employee within 15 business days of the Date of Termination, if applicable, or at such
earlier time as is reasonably requested by the Company or the Employee. Any determination by the
Accounting Firm shall be binding upon the Company and the Employee.
(c)
Definitions. For purposes of this Agreement, the following terms shall have the following
meanings:
“Change in Control” shall mean any of the following:
(i)
any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Act”) (other than SR Holding, any of its subsidiaries, or any
trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of
SR Holding or any of its subsidiaries), together with all “affiliates” and “associates” (as such terms are
defined in Rule 12b-2 under the Act) of such person, shall become the “beneficial owner” (as such term is
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of SR Holding representing 50
percent or more of the combined voting power of SR Holding’s then outstanding securities having the right
to vote in an election of the Board (“Voting Securities”) (in such case other than as a result of an
acquisition of securities directly from SR Holding); or
(ii)
the date a majority of the members of the Board is replaced during any 12-month
period by directors whose appointment or election is not endorsed by a majority of the members of the
Board before the date of the appointment or election; or
(iii)
the consummation of (A) any consolidation or merger of SR Holding where the
stockholders of SR Holding, immediately prior to the consolidation or merger, would not, immediately
after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate more than 50 percent of the voting shares of SR
Holding issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if
any), or (B) any sale or other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the assets of SR Holding and its
affiliates on a consolidated basis.
Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred for purposes of
the foregoing clause (i) solely as the result of an acquisition of securities by SR Holding which, by reducing
8
the number of shares of Voting Securities outstanding, increases the proportionate number of Voting Securities
beneficially owned by any person to 50 percent or more of the combined voting power of all of the then
outstanding Voting Securities; provided, however, that if any person referred to in this sentence shall thereafter
become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split,
stock dividend, or similar transaction or as a result of an acquisition of securities directly from SR Holding) and
immediately thereafter beneficially owns 50 percent or more of the combined voting power of all of the then
outstanding Voting Securities, then a Change in Control shall be deemed to have occurred for purposes of the
foregoing clause (i).
“Change in Control Date” shall mean, with respect to a Change in Control, the date of consummation of
such Change in Control.
6.
Section 409A.
(a)
Anything in this Agreement to the contrary notwithstanding, if at the time of the
Employee’s separation from service within the meaning of Section 409A of the Code, the Company determines
that the Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to
the extent any payment or benefit that the Employee becomes entitled to under this Agreement on account of the
Employee’s separation from service would be considered deferred compensation otherwise subject to the 20
percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section
409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the
date that is the earlier of (A) six (6) months and one (1) day after the Employee’s separation from service, or (B)
the Employee’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first
payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-
month period but for the application of this provision, and the balance of the installments shall be payable in
accordance with their original schedule.
(b)
All in-kind benefits provided and expenses eligible for reimbursement under this
Agreement shall be provided by the Company or incurred by the Employee during the time periods set forth in
this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall
any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense
was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year
shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable
year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to
reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(c)
To the extent that any payment or benefit described in this Agreement constitutes “non-
qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit
is payable upon the Employee’s termination of employment, then such payments or benefits shall be payable only
upon the Employee’s “separation from service.” The determination of whether and when a separation from
service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section
1.409A-1(h).
(d)
The parties intend that this Agreement will be administered in accordance with Section
409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with
Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply
with Section 409A of the Code. Each payment pursuant to this Agreement is intended to constitute a separate
payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The parties agree that this Agreement may
be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A
of the Code and all related rules and regulations in order to preserve the payments and benefits provided
hereunder without additional cost to either party.
9
(e)
The Company makes no representation or warranty and shall have no liability to the
Employee or any other person if any provisions of this Agreement are determined to constitute deferred
compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of,
such Section.
7.
Continuing Obligations.
(a)
Restrictive Covenant Agreement. The terms of the Amended and Restated Employee Non-
Competition, Non-Solicitation, Confidentiality and Assignment Agreement attached hereto as Exhibit A (the
“Restrictive Covenant Agreement”) continue to be in full force and effect. For purposes of this Agreement, the
obligations in this Section 7 and those that arise in the Restrictive Covenant Agreement and any other agreement
related to confidentiality, assignment of inventions, or other restrictive covenants shall collectively be referred to
as the “Continuing Obligations”. For the avoidance of doubt, all restrictive covenant obligations are supplemental
to one another, and in the event of any conflict between restrictive covenant obligations, the most restrictive
provision that is enforceable shall govern. In the event the Employee is entitled to both payments pursuant to the
Restrictive Covenant Agreement and severance payments pursuant to Section 4 or Section 5 of this Agreement,
then the severance payments pursuant to Section 4 or Section 5 of this Agreement received in any calendar year
will be reduced by the amount the Employee is paid in the same such calendar year pursuant to the Restrictive
Covenant Agreement.
(b)
Third-Party Agreements and Rights. The Employee hereby confirms that the Employee is
not bound by the terms of any agreement with any previous employer or other party which restricts in any way the
Employee’s use or disclosure of information, other than confidentiality restrictions (if any), or the Employee’s
engagement in any business. The Employee represents to the Company that the Employee’s execution of this
Agreement, the Employee’s employment with the Company and the performance of the Employee’s proposed
duties for the Company will not violate any obligations the Employee may have to any such previous employer or
other party. In the Employee’s work for the Company, the Employee will not disclose or make use of any
information in violation of any agreements with or rights of any such previous employer or other party, and the
Employee will not bring to the premises of the Company any copies or other tangible embodiments of non-public
information belonging to or obtained from any such previous employment or other party.
(c)
Litigation and Regulatory Cooperation. During and after the Employee’s employment, the
Employee shall cooperate fully with any reasonable request of the Company in the defense or prosecution of any
claims or actions now in existence or which may be brought in the future against or on behalf of the Company
which relate to events or occurrences that transpired while the Employee was employed by the Company. The
Employee’s full cooperation in connection with such claims or actions shall include, but not be limited to, being
available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at
mutually convenient times. During and after the Employee’s employment, the Employee also shall cooperate
fully with the Company in connection with any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or occurrences that transpired while the Employee
was employed by the Company. The Company shall reimburse the Employee for any reasonable out-of-pocket
expenses incurred in connection with the Employee’s performance of obligations pursuant to this Section 7(c).
(d)
Relief. The Employee agrees that it would be difficult to measure any damages caused to
the Company which might result from any breach by the Employee of the Continuing Obligations, and that in any
event money damages would be an inadequate remedy for any such breach. Accordingly, subject to Section 8 of
this Agreement, the Employee agrees that if the Employee breaches, or proposes to breach, any portion of this
Agreement, the Company shall be entitled, in addition to all other remedies that it may have, to an injunction or
other appropriate equitable relief to restrain any such breach without showing or proving any actual damage to the
Company.
10
(e)
Protected Disclosures and Other Protected Action. Nothing contained in this Agreement
limits the Employee’s ability to communicate with any federal, state or local governmental agency or commission,
including to provide documents or other information, without notice to the Company.
8.
Arbitration of Disputes. Any controversy or claim arising out of or relating to this Agreement or
the breach thereof or otherwise arising out of the Employee’s employment or the termination of that employment
(including, without limitation, any claims of unlawful employment discrimination or retaliation, whether based on
race, religion, national origin, sex, gender, age, disability, sexual orientation, or any other protected class under
applicable law, including without limitation Massachusetts General Laws Chapter 151B) shall, to the fullest
extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the
absence of such an agreement, under the auspices of the American Arbitration Association (“AAA”) in Boston,
Massachusetts in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not
limited to, the rules and procedures applicable to the selection of arbitrators. For the avoidance of doubt, nothing
in this Agreement requires the Employee to arbitrate claims that cannot be arbitrated under applicable law, such as
(i) claims under the Sarbanes-Oxley Act and (ii) claims constituting, relating to, and/or alleging sexual harassment
or sexual assault based on conduct arising on or after March 3, 2022 (or earlier date, to the extent applicable state
or local law provides for an earlier date), unless the Employee chooses to proceed with such claims in arbitration.
In the event that any person or entity other than the Employee or the Company may be a party with regard to any
such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person
or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. This Section 8 shall be specifically enforceable. Notwithstanding the foregoing, this Section
8 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary
restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that
any other relief shall be pursued through an arbitration proceeding pursuant to this Section 8.
9.
Consent to Jurisdiction. To the extent that any court action is permitted consistent with or to
enforce Section 8 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the
Commonwealth of Massachusetts and the United States District Court for the District of Massachusetts.
Accordingly, with respect to any such court action, the Employee (a) submits to the personal jurisdiction of such
courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule
of court, or otherwise) with respect to personal jurisdiction or service of process.
10.
Integration. This Agreement, together with the Continuing Obligations, the Director Award
Documents (subject to the terms of this Agreement), the Director Indemnification Agreement dated as of
November 19, 2018, the Employee’s indemnification agreement with the Company and the Equity Documents,
constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all
prior agreements between the parties concerning such subject matter, including, without limitation, the Prior
Agreement.
11.
Withholding. All payments made by the Company to the Employee under this Agreement shall be
net of any tax or other amounts required to be withheld by the Company under applicable law.
12.
Successor to the Employee. This Agreement shall inure to the benefit of and be enforceable by the
Employee’s personal representatives, executors, administrators, heirs, distributees, devisees and legatees. In the
event of the Employee’s death after the Employee’s termination of employment but prior to the completion by the
Company of all payments due to the Employee under this Agreement, the Company shall continue such payments
to the Employee’s beneficiary designated in writing to the Company prior to the Employee’s death (or to the
Employee’s estate, if the Employee fails to make such designation).
13.
Enforceability. If any portion or provision of this Agreement (including, without limitation, any
portion or provision of any section of this Agreement) shall to any extent be declared illegal or unenforceable
11
by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or
provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be
affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
14.
Survival. The provisions of this Agreement shall survive the termination of this Agreement and/or
the termination of the Employee’s employment to the extent necessary to effectuate the terms contained herein.
15.
Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by
the waiving party. The failure of any party to require the performance of any term or obligation of this
Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
16.
Notices. Any notices, requests, demands and other communications provided for by this
Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight
courier service or by registered or certified mail, postage prepaid, return receipt requested, to the Employee at the
last address the Employee has filed in writing with the Company or, in the case of the Company, at its main
offices, attention of the Chief Executive Officer. Notices, requests, demands and other communications provided
for by this Agreement shall also be sufficient if sent by email to the Company email address of the Employee or,
in the case of Company, the Company email address of the Chief Executive Officer, with confirmation of receipt.
17.
Amendment. This Agreement may be amended or modified only by a written instrument signed by
the Employee and by a duly authorized representative of the Company.
18.
Effects on Other Plans and Agreements. An election by the Employee to resign for Good Reason
under the provisions of this Agreement shall not be deemed a voluntary termination of employment by the
Employee for the purpose of interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed to limit the rights of the Employee under the Company’s
benefit plans, programs or policies except that the Employee shall have no rights to any severance benefits under
any Company severance pay plan, offer letter or otherwise. Notwithstanding anything to the contrary in this
Agreement, all severance pay and benefits provided to the Employee pursuant to Section 4 or Section 5 of this
Agreement (as applicable) shall be reduced and/or offset by any amounts or benefits paid to the Employee to
satisfy the federal Worker Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. § 2101 et seq., as
amended, and any applicable state plant or facility closing or mass layoff law (whether as damages, as payment of
salary or other wages during an applicable notice period or otherwise).
19.
Governing Law. This is a Massachusetts contract and shall be construed under and be governed in
all respects by the laws of the Commonwealth of Massachusetts without giving effect to the conflict of laws
principles thereof.
20.
Counterparts. This Agreement may be executed in any number of counterparts, each of which
when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one
and the same document.
21.
Successor to Company. The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company
expressly to assume and agree to perform this Agreement to the same extent that the Company would be required
to perform it if no succession had taken place. Failure of the Company to obtain an assumption of this Agreement
at or prior to the effectiveness of any succession shall be a material breach of this Agreement.
12
22.
Clawback Acknowledgement. The Employee acknowledges that the Employee may become
subject to the Scholar Rock Holding Corporation Compensation Recovery Policy adopted pursuant to Rule 10D-1
promulgated under the Securities Exchange Act of 1934 and Nasdaq Rule 5608, or any successor rule (the
“Clawback Policy”). The Employee understands that if the Employee is or becomes subject to the Clawback
Policy, the Company and/or the Board shall be entitled to recover all Erroneously Awarded Compensation (as
defined in the Clawback Policy) from the Employee pursuant to such means as the Company and/or the Board
may elect. The Employee agrees that the Employee shall take all required action to enable such recovery. The
Employee understands that such recovery may be sought and occur after the Employee’s employment or service
with the Company terminates. The Employee further agrees that the Employee is not entitled to indemnification
for any Erroneously Awarded Compensation or for any claim or losses arising out of or in any way related to
Erroneously Awarded Compensation recovered pursuant to the Clawback Policy and, to the extent any agreement
or organizational document purports to provide otherwise, the Employee hereby irrevocably agrees to forego such
indemnification. The Employee acknowledges and agrees that the Employee has received and has had an
opportunity to review the Clawback Policy. Any action by the Company to recover Erroneously Awarded
Compensation under the Clawback Policy from the Employee shall not, whether alone or in combination with any
other action, event or condition, be deemed (i) a Good Reason condition or serve as a basis for a claim of
constructive termination under any benefits or compensation arrangement applicable to the Employee, or (ii) to
constitute a breach of a contract or other arrangement to which the Employee is a party. This Section 22 is a
material term of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGES FOLLOW.]
IN WITNESS WHEREOF, the parties have executed this Agreement effective on the Effective Date.
SCHOLAR ROCK, INC.
/s/ Caryn Parlavecchio
By:
Caryn Parlavecchio
Its:
CHRO
EMPLOYEE
/s/ Edward H. Myles
Edward H. Myles
Exhibit A
Amended and Restated Employee Non-Competition, Non-Solicitation,
Confidentiality and Assignment Agreement
Exhibit 10.25
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT
BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS
AS PRIVATE OR CONFIDENTIAL. INFORMATION THAT WAS OMITTED HAS BEEN NOTED
IN THIS DOCUMENT WITH A PLACEHOLDER IDENTIFIED BY THE MARK “[***]”.
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (as the same may from
time to time be amended, modified, supplemented or restated, this “Agreement”) dated as of February 10, 2025 (the
“Effective Date”) among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at
115 South Union Street, Suite 300, Alexandria, Virginia 22314 (“Oxford”), as collateral agent (in such capacity,
“Collateral Agent”), the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time to time including
Oxford in its capacity as a Lender, OXFORD FINANCE CREDIT FUND II LP, by its manager Oxford Finance
Advisors, LLC, and OXFORD FINANCE CREDIT FUND III LP, by its manager Oxford Finance Advisors, LLC, each
with an office located at 115 South Union Street, Suite 300, Alexandria, Virginia 22314 (each a “Lender” and
collectively, the “Lenders”), SCHOLAR ROCK HOLDING CORPORATION, a Delaware corporation (“Parent”), and
SCHOLAR ROCK, INC., a Delaware corporation (together with Parent, individually and collectively, jointly and
severally, “Borrower”), with an office located at 301 Binney Street, 3rd Floor, Cambridge, MA 02142, and amends and
restates in its entirety that certain Loan and Security Agreement dated as of October 16, 2020, as the same may from
time to time be amended, modified, supplemented or restated, including without limitation, by that certain First
Amendment to Loan and Security Agreement dated as of November 16, 2021, that certain Second Amendment to Loan
and Security Agreement dated as of November 10, 2022, that certain Third Amendment to Loan and Security
Agreement dated as of April 18, 2023 and that certain Fourth Amendment to Loan and Security Agreement dated as of
May 17, 2024) among the Collateral Agent, the Lenders and Borrower (as amended prior to the Effective Date, the
“Prior Agreement”), and provides the terms on which the Lenders shall lend to Borrower and Borrower shall repay the
Lenders. The parties agree as follows:
1.
ACCOUNTING AND OTHER TERMS
1.1
Accounting terms not defined in this Agreement shall be construed in accordance with GAAP;
provided that if at any time any change in GAAP would require that operating leases entered into in the ordinary course
of business be treated in a manner similar to capital leases under GAAP, all financial covenants, requirements and terms
in this Agreement shall continue to be calculated or construed as if such change in GAAP had not occurred and no
operating lease in effect at the time of such change, or new lease entered into after such change that would have been
treated as an operating lease before such change, shall be treated as a capital lease for any purpose hereunder.
Calculations and determinations must be made in accordance with GAAP. Capitalized terms not otherwise defined in
this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. All
references to “Dollars” or “$” are United States Dollars, unless otherwise noted.
2.
LOANS AND TERMS OF PAYMENT
2.1
Promise to Pay. Borrower hereby unconditionally promises to pay each Lender the outstanding
principal amount of all Term Loans advanced to Borrower by such Lender and accrued and unpaid interest thereon and
any other amounts due hereunder as and when due in accordance with this Agreement.
2.2
Term Loans.
(a)
Availability.
(i)
Subject to the terms and conditions of the Prior Agreement, the Lenders (as defined
in the Prior Agreement), severally and not jointly, made term loans to Borrower in an aggregate amount of Fifty Million
Dollars ($50,000,000.00) according to each Lender’s Term Loan Commitment as set forth on Schedule 1.1 of the Prior
Agreement (such term loans are hereinafter referred to singly as an “Original Term Loan”, and collectively as the
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“Original Term Loans”). SVB made Original Term Loans in an aggregate amount of Twenty-Five Million Dollars
($25,000,000.00) and Oxford made Original Term Loans in an aggregate amount of Twenty-Five Million Dollars
($25,000,000.00). Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly,
on the Effective Date, (A) to amend and restate the secured promissory notes that evidence the Original Term Loans
made by Oxford and subsequently assigned to Oxford Finance Funding XIII, LLC, Oxford Finance Funding IX, LLC
and Oxford Finance Funding 2023-1, LLC in an aggregate amount equal to Twenty-Five Million Dollars
($25,000,000.00) and according to each Lender’s Term A-1 Loan Commitment as set forth on Schedule 1.1 hereto (such
term loans are hereinafter referred to singly as a “Term A-1 Loans”, and collectively as the “Term A-1 Loans”); and
(B) to make term loans to Borrower on the Effective Date in an aggregate amount equal to Twenty-Five Million Dollars
($25,000,000.00) according to each Lender’s Term A-2 Loan Commitment as set forth on Schedule 1.1 hereto (such
term loans are hereinafter referred to singly as a “Term A-2 Loan”, and collectively as the “Term A-2 Loans”; each
Term A-1 Loan and Term A-2 is hereinafter referred to singly as a “Term A Loan” and the Term A-1 Loans and Term
A-2 Loans are hereinafter referred to collectively as the “Term A Loans”). Borrower shall use the proceeds of the
Term A-2 Loans to fully repay the Original Term Loans held by SVB in the original principal amount of Twenty-Five
Million Dollars ($25,000,000.00) on the Effective Date. After repayment, no Term A Loan may be re-borrowed.
(ii)
Subject to the terms and conditions of this Agreement, the Lenders agree, severally
and not jointly, during the Term B Draw Period, to make term loans to Borrower (but in a single disbursement) in an
aggregate amount equal to Fifty Million Dollars ($50,000,000.00) according to each Lender’s Term B Loan
Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term B
Loan”, and collectively as the “Term B Loans”). After repayment, no Term B Loan may be re-borrowed.
(iii)
Subject to the terms and conditions of this Agreement, the Lenders agree, severally
and not jointly, during the Term C Draw Period, to make term loans to Borrower (but in a single disbursement) in an
aggregate amount equal to Fifty Million Dollars ($50,000,000.00) according to each Lender’s Term C Loan
Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term C
Loan”, and collectively as the “Term C Loans”). After repayment, no Term C Loan may be re-borrowed.
(iv)
Subject to the terms and conditions of this Agreement, the Lenders agree, severally
and not jointly, during the Term D Draw Period, to make term loans to Borrower (but in a single disbursement) in an
aggregate amount equal to Fifty Million Dollars ($50,000,000.00) according to each Lender’s Term D Loan
Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “Term D
Loan”, and collectively as the “Term D Loans”; each Term A Loan, Term B Loan, Term C Loan or Term D Loan is
hereinafter referred to singly as a “Term Loan” and the Term A Loans, the Term B Loans, Term C Loans and the Term
D Loans are hereinafter referred to collectively as the “Term Loans”). After repayment, no Term D Loan may be re-
borrowed.
(b)
Repayment. Borrower shall make monthly payments in arrears of interest only commencing
on the first (1st) Payment Date following the first full calendar month to occur after the Funding Date of each Term
Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Date
immediately preceding the Amortization Date. Borrower agrees to pay, on the Funding Date of each Term Loan, any
initial partial monthly interest payment otherwise due for the period between the Funding Date of such Term Loan and
the last calendar day of the month in which such Term Loan funds. Commencing on the Amortization Date, and
continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of
principal, together with applicable interest, in arrears, to each Lender, as calculated by Collateral Agent (which
calculations shall be deemed correct absent manifest error) based upon: (1) the amount of such Lender’s Term Loan, (2)
the effective rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule equal to eleven (11) months.
All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on the
Maturity Date. Each Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).
(c)
Mandatory Prepayments. If the Term Loans are accelerated following the occurrence and
during the continuance of an Event of Default (unless such Event of Default has been waived in writing by Collateral
Agent or the Lenders in its (or their, as applicable) sole discretion), Borrower shall immediately pay to Lenders, payable
to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of, without duplication:
(i) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date,
(ii) the Final Payment, (iii) the Prepayment Fee, if applicable, plus (iv) all other Obligations that are due and payable,
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including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. Notwithstanding
(but without duplication with) the foregoing, on the Maturity Date, if the Final Payment had not previously been paid in
full in connection with the prepayment of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment
to each Lender in accordance with its respective Pro Rata Share, the Final Payment in respect of the Term Loan(s).
(d)
Permitted Prepayment of Term Loans. Borrower shall have the option to prepay all, but not
less than all, of the Term Loans advanced by the Lenders under this Agreement, provided Borrower (i) provides written
notice to Collateral Agent of its election to prepay the Term Loans at least ten (10) days prior to such prepayment, and
(ii) pays to the Lenders on the date of such prepayment, payable to each Lender in accordance with its respective Pro
Rata Share, an amount equal to the sum of, without duplication: (A) all outstanding principal of the Term Loans plus
accrued and unpaid interest thereon through the prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus
(D) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with
respect to any past due amounts.
2.3
Payment of Interest on the Credit Extensions.
(a)
Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under the Term
Loans shall accrue interest at a floating per annum rate equal to the Basic Rate, determined by Collateral Agent on the
Funding Date of the applicable Term Loan and monthly thereafter, which interest, in each case, shall be payable
monthly in arrears in accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan commencing
on, and including, the Funding Date of such Term Loan, and shall accrue on the principal amount outstanding under
such Term Loan through and including the day on which such Term Loan is paid in full.
(b)
Default Rate. Immediately upon the occurrence and during the continuance of an Event of
Default, Obligations shall accrue interest at a floating per annum rate equal to the rate that is otherwise applicable
thereto plus four percentage points (4.00%) (the “Default Rate”). Payment or acceptance of the increased interest rate
provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent.
(c)
360-Day Year. Interest shall be computed on the basis of a three hundred sixty (360) day
year, and the actual number of days elapsed.
(d)
Debit of Accounts. Collateral Agent and each Lender may debit (or ACH) any deposit
accounts (other than deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of Borrower’s employees), maintained by Borrower or any other Loan Party, including
the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Collateral
Agent or the Lenders under the Loan Documents when due hereunder. Any such debits (or ACH activity) shall not
constitute a set-off.
(e)
Payments. Except as otherwise expressly provided herein, all payments by Borrower under
the Loan Documents shall be made to Collateral Agent (and Collateral Agent shall then make payments to the
respective Lender to which such payments are owed), at Collateral Agent’s office in immediately available funds on the
date specified herein. Unless otherwise provided, interest is payable monthly on the Payment Date of each month.
Payments of principal and/or interest received after 2:00 P.M. Eastern time are considered received at the opening of
business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the
next Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be
made by Borrower hereunder or under any other Loan Document, including payments of principal and interest, and all
fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim, in lawful
money of the United States and in immediately available funds.
2.4
Secured Promissory Notes. The Term Loans shall be evidenced by a Secured Promissory Note or
Notes in the form attached as Exhibit D hereto (each a “Secured Promissory Note”), and shall be repayable as set forth
in this Agreement. Borrower irrevocably authorizes each Lender to make or cause to be made, on or about the Funding
Date of any Term Loan or at the time of receipt of any payment of principal on such Lender’s Secured Promissory Note,
an appropriate notation on such Lender’s Secured Promissory Note Record reflecting the making of such Term Loan or
(as the case may be) the receipt of such payment. The outstanding amount of each Term Loan set
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forth on such Lender’s Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof
owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such
Lender’s Secured Promissory Note Record shall not limit or otherwise affect Borrower’s obligations under any Secured
Promissory Note or any other Loan Document to make payments of principal of or interest on any Secured Promissory
Note when due. Upon receipt of an affidavit of an officer of a Lender as to the loss, theft, destruction, or mutilation of
its Secured Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same
principal amount thereof and of like tenor.
2.5
Fees. Borrower shall pay to Collateral Agent:
(a)
Facility Fee. A fully earned, non-refundable facility fee of Two Hundred Fifty Thousand
Dollars ($250,000.00) was paid to the Lenders pursuant to their respective Commitment Percentages on the Original
Closing Date;
(b)
Final Payment. The Final Payment, when due hereunder, to be shared between the Lenders
in accordance with their respective Pro Rata Shares;
(c)
Prepayment Fee. The Prepayment Fee, if and when due hereunder, to be shared between the
Lenders in accordance with their respective Pro Rata Shares;
(d)
Lenders’ Expenses. All Lenders’ Expenses (including reasonable and documented out-of-
pocket attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after
the Effective Date, when due;
(e)
Second Amendment Accrued Final Payment. The Second Amendment Accrued Final
Payment (as defined in the Prior Agreement) was paid to the Lenders on the Second Amendment Effective Date in
accordance with their respective Pro Rata Shares; and
(f)
First Interest-Only Extension Milestone Fee. The First Interest-Only Extension Milestone
Fee (as defined in the Prior Agreement) was paid to the Lenders on the Fourth Amendment Effective Date in
accordance with their respective Pro Rata Shares.
(g)
Second Interest-Only Extension Milestone Fee. The Second Interest-Only Extension
Milestone Fee (as defined in the Prior Agreement) due to Lenders who are Affiliates of Oxford is hereby waived and is
no longer due and payable to such Lenders.
(h)
Effective Date Accrued Final Payment. A fully-earned, non-refundable Final Payment in the
aggregate amount of One Hundred Fifty Thousand Dollars ($150,000.00) in respect of the Original Term Loans made
by Oxford (the “Effective Date Accrued Final Payment”) to be shared between the Lenders that are Affiliates of
Oxford and held the Original Term Loans immediately prior the Effective Date in accordance with their Pro Rata Shares
due and payable on the Effective Date. The Effective Date Accrued Final Payment shall not reduce the Final Payment
otherwise due pursuant to Section 2.5(b) hereof. From and after the Effective Date, the Final Payment in respect of the
Term A Loans shall accrue from the Effective Date.
2.6
Withholding. Payments received by the Lenders from Borrower hereunder will be made free and
clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any governmental authority (including any interest, additions to tax or
penalties applicable thereto) (“Taxes”). Specifically, however, if at any time any Governmental Authority, applicable
law, regulation or international agreement requires Borrower to make any withholding or deduction from any such
payment or other sum payable hereunder to the Lenders, Borrower hereby covenants and agrees that the amount due
from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary
to ensure that, after the making of such required withholding or deduction, each Lender receives a net sum equal to the
sum which it would have received had no withholding or deduction been required and Borrower shall pay the full
amount withheld or deducted to the relevant Governmental Authority; provided, that Borrower shall not be required to
make such increased payment to a Lender who is not a United States Person (as defined in Section 7701(a)(30) of the
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IRC) or who has not provided a duly executed original IRS Form W-9 certifying that such Lender is exempt from U.S.
federal backup withholding tax. Borrower will, upon request, furnish the Lenders with proof reasonably satisfactory to
the Lenders indicating that Borrower has made such withholding payment; provided, however, that Borrower need not
make any withholding payment if the amount or validity of such withholding payment is contested in good faith by
appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The
agreements and obligations of Borrower contained in this Section 2.6 shall survive the termination of this Agreement.
3.
CONDITIONS OF LOANS
3.1
Conditions Precedent to Initial Credit Extension. Each Lender’s obligation to make a Term A-
2 Loan is subject only to the condition precedent that Collateral Agent and each Lender shall consent to or shall have
received, in form and substance reasonably satisfactory to Collateral Agent and each Lender, such documents, and
completion of such other matters, as Collateral Agent and each Lender may have reasonably requested, including,
without limitation:
(a)
original Loan Documents, each duly executed by Borrower and each Subsidiary, as
applicable;
(b)
duly executed original Control Agreements with respect to any Collateral Accounts
maintained by Borrower or any of its Subsidiaries as required pursuant to Section 6.6;
(c)
(i) duly executed original Secured Promissory Notes in favor of each Lender according to its
Term A-2 Loan Commitment Percentage; and (ii) duly executed original Amended and Restated Secured Promissory
Notes in favor of each Lender according to its Term A-1 Loan Commitment Percentage;
(d)
with respect to the Shares, the Assignments Separate from Certificate, duly executed in
blank;
(e)
the Operating Documents and good standing certificates of Borrower and its Subsidiaries
certified by the Secretary of State (or equivalent agency) of Borrower’s and such Subsidiaries’ jurisdiction of
organization or formation and each jurisdiction in which Borrower and each Subsidiary is qualified to conduct business
(in each case to the extent applicable in the relevant jurisdiction(s) of such Subsidiary), each as of a date no earlier than
thirty (30) days prior to the Effective Date;
(f)
a completed Perfection Certificate for Borrower;
(g)
the Annual Projections, for the current calendar year;
(h)
duly executed original officer’s certificate for Borrower and each Subsidiary that is a party to
the Loan Documents, in a form reasonably acceptable to Collateral Agent and the Lenders;
(i)
certified copies, dated as of date no earlier than thirty (30) days prior to the Effective Date, of
financing statement searches, as Collateral Agent shall reasonably request, accompanied by written evidence (including
any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted
Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;
(j)
a duly executed legal opinion of counsel to Borrower dated as of the Effective Date;
(k)
evidence reasonably satisfactory to Collateral Agent and the Lenders that the insurance
policies required by Section 6.5 hereof are in full force and effect; and
(l)
payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.
3.2
Conditions Precedent to all Credit Extensions. The obligation of each Lender to make each Credit
Extension, including the initial Credit Extension, is subject only to the following conditions precedent:
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(a)
receipt by the Lenders of an executed Disbursement Letter substantially in the form of
Exhibit B attached hereto;
(b)
the representations and warranties in Section 5 hereof shall be true, accurate and complete in
all material respects on the date of the Disbursement Letter and on the Funding Date of each Credit Extension;
provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and provided, further that those representations and
warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such
date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit
Extension is Borrower’s representation and warranty on that date that the representations and warranties in Section 5
hereof are true, accurate and complete in all material respects as of such date; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material respects as of such date;
(c)
in such Lender’s sole but reasonable discretion, there has not been any Material Adverse
Change;
(d)
to the extent not delivered at the Effective Date, duly executed original Secured Promissory
Notes, in number, form and content reasonably acceptable to each Lender, and in favor of each Lender according to its
Commitment Percentage, with respect to each Credit Extension made by such Lender after the Effective Date; and
(e)
payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.
3.3
Covenant to Deliver. Borrower agrees to deliver to Collateral Agent and the Lenders each item
required to be delivered to Collateral Agent under this Agreement as a condition precedent to any Credit Extension.
Notwithstanding the foregoing, Borrower shall not be required to make duplicative payments to the Lenders if
Borrower has already paid Collateral Agent for fees and/or expenses incurred by or on behalf of Collateral Agent
pursuant to any Loan Documents, but, for the avoidance of doubt, Borrower shall continue to be responsible for the
payment of all fees and Lenders’ Expenses in accordance with the terms of this Agreement and the other Loan
Documents. Borrower expressly agrees that a Credit Extension made prior to the receipt by Collateral Agent or any
Lender of any such item shall not constitute a waiver by Collateral Agent or any Lender of Borrower’s obligation to
deliver such item, and any such Credit Extension in the absence of a required item shall be made in each Lender’s sole
discretion.
3.4
Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the
making of a Term Loan set forth in this Agreement, to obtain a Term Loan, Borrower shall notify the Lenders (which
notice shall be irrevocable) by electronic mail, facsimile, or telephone by 2:00 P.M. Eastern time ten (10) Business Days
prior to the date the Term Loan is to be made. Together with any such electronic, facsimile or telephonic notification,
Borrower shall deliver to the Lenders by electronic mail or facsimile a completed Disbursement Letter executed by a
Responsible Officer or his or her designee. The Lenders may rely on any telephone notice given by a person whom a
Lender reasonably believes is a Responsible Officer or designee. On the Funding Date, each Lender shall credit and/or
transfer (as applicable) to the Designated Deposit Account, an amount equal to its Term Loan Commitment.
4.
CREATION OF SECURITY INTEREST
4.1
Grant of Security Interest. Borrower hereby grants Collateral Agent, for the ratable benefit of the
Lenders, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and
pledges to Collateral Agent, for the ratable benefit of the Lenders, the Collateral, wherever located, whether now owned
or hereafter acquired or arising, and all proceeds and products thereof; provided, however, that solely with respect to
Borrower’s Intellectual Property, such security interest shall only become effective on the date on which the IP Trigger
Event occurs and shall remain effective at all times thereafter. Borrower represents, warrants, and covenants that the
security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the
Collateral (other than with respect to perfection of the security interest on the Shares of any Foreign Subsidiary, which
are governed by local law share pledges (if any)), subject only to Permitted Liens that are permitted by the terms of this
Agreement to have priority to Collateral Agent’s Lien. If Borrower shall acquire a commercial tort claim (as defined
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in the Code), Borrower, shall promptly notify Collateral Agent in a writing signed by Borrower, as the case may be, of
the general details thereof (and further details as may be required by Collateral Agent) and grant to Collateral Agent, for
the ratable benefit of the Lenders, in such writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Collateral Agent.
If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall continue until the Obligations
(other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations
(other than inchoate indemnity obligations) and at such time as the Lenders’ obligation to make Credit Extensions has
terminated, Collateral Agent shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all
rights therein shall revert to Borrower.
4.2
Authorization to File Financing Statements. Borrower hereby authorizes Collateral Agent to file
financing statements or take any other action required to perfect Collateral Agent’s security interests in the Collateral,
without notice to Borrower, with all appropriate jurisdictions to perfect or protect Collateral Agent’s interest or rights
under the Loan Documents, including a notice that any disposition of the Collateral, except to the extent permitted by
the terms of this Agreement, by Borrower, or any other Person, shall be deemed to violate the rights of Collateral Agent
under the Code.
4.3
Pledge of Collateral. Borrower hereby pledges, assigns and grants to Collateral Agent, for the
ratable benefit of the Lenders, a security interest in all the Shares, together with all proceeds and substitutions thereof,
all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in
connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performance of the
Obligations. On the Effective Date, or, to the extent not certificated as of the Effective Date, within ten (10) days of the
certification of any Shares of any Domestic Subsidiary, the certificate or certificates for such Shares will be delivered to
Collateral Agent, accompanied by an instrument of assignment duly executed in blank by Borrower, and the Perfection
Certificates delivered on the Effective Date describe the certificated Shares as of the Effective Date. To the extent
required by the terms and conditions governing the Shares, Borrower shall cause the books of each Subsidiary whose
Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares. Upon the occurrence and
during the continuance of an Event of Default hereunder, upon written notice by Collateral Agent to Borrower,
Collateral Agent may effect the transfer of any securities included in the Collateral (including but not limited to the
Shares) into the name of Collateral Agent and cause new (as applicable) certificates representing such securities to be
issued in the name of Collateral Agent or its transferee. Borrower will execute and deliver such documents, and take or
cause to be taken such actions, as Collateral Agent may reasonably request to perfect or continue the perfection of
Collateral Agent’s security interest in the Shares. Unless an Event of Default shall have occurred and be continuing and
Collateral Agent has provided written notice thereof, Borrower shall be entitled to exercise any voting rights with
respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be
cast or consent, waiver or ratification given or action taken which would be inconsistent with any of the terms of this
Agreement or which would constitute or create any violation of any of such terms. All such rights to vote and give
consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default after
Collateral Agent has provided Borrower written notice thereof.
5.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Collateral Agent and the Lenders as follows:
5.1
Due Organization, Authorization: Power and Authority. Borrower and each of its Subsidiaries is
duly existing and in good standing as a Registered Organization in its jurisdictions of organization or formation and
Borrower and each of its Subsidiaries is qualified and licensed to do business and is in good standing in any jurisdiction
in which the conduct of its businesses or its ownership of property requires that it be qualified except where the failure
to do so could not reasonably be expected to have a Material Adverse Change. In connection with this Agreement,
Borrower has delivered to Collateral Agent a completed perfection certificate for Borrower, prepared on a consolidating
basis, and signed by an officer of Borrower (each a “Perfection Certificate” and collectively, the “Perfection
Certificates”). Borrower represents and warrants that (a) Borrower and each of its Subsidiaries’ exact legal name is
that which is indicated on its respective Perfection Certificate and on the signature page of each Loan Document to
which it is a party; (b) Borrower and each of its Subsidiaries is an organization of the type and is organized in the
jurisdiction set forth on its respective Perfection Certificate; (c) each Perfection Certificate accurately sets forth each
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of Borrower’s and its Subsidiaries’ organizational identification number or accurately states that Borrower or such
Subsidiary has none; (d) each Perfection Certificate accurately sets forth Borrower’s and each other Loan Party’s (and,
as of the Effective Date and as of the date of any Perfection Certificate delivered after the Effective Date, each of its
Subsidiaries’ that are not Loan Parties) place of business, or, if more than one, its chief executive office as well as
Borrower’s and each of its Subsidiaries’ mailing address (if different than its chief executive office); (e) except as may
be set forth on its respective Perfection Certificate, Borrower and each of its Subsidiaries (and each of its respective
predecessors) have not, in the past five (5) years, changed its jurisdiction of organization, organizational structure or
type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection
Certificates pertaining to Borrower and each of its Subsidiaries, is accurate and complete (it being understood and
agreed that Borrower may from time to time update certain information in the Perfection Certificates (including the
information set forth in clause (d) above) after the Effective Date to the extent Borrower is permitted to take such action
resulting in the applicable update by one or more specific provisions in this Agreement, and any notices delivered in
accordance with the provisions in this Agreement shall be deemed to be updates to such information (subject to the
review and approval of Collateral Agent as provided below) without any further requirement of Borrower to make such
updates until the next Perfection Certificate is delivered); such updated Perfection Certificates subject to the review and
approval of Collateral Agent unless such facts, events or circumstances being updated first arose or occurred after the
Effective Date and do not constitute a breach, default, or Event of Default under this Agreement or any other Loan
Document. If Borrower or any of its Subsidiaries is not now a Registered Organization but later becomes one,
Borrower shall notify Collateral Agent of such occurrence and provide Collateral Agent with such Person’s
organizational identification number within five (5) Business Days of receiving such organizational identification
number.
The execution, delivery and performance by Borrower and each of its Subsidiaries of the Loan Documents to
which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s or such Subsidiaries’
organizational documents, including its respective Operating Documents, (ii) contravene, conflict with, constitute a
default under or violate any material Requirement of Law applicable thereto, (iii) contravene, conflict or violate any
applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which
Borrower or such Subsidiary, or any of their property or assets may be bound or affected, (iv) require any action by,
filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except for (A)
a filing by Borrower on Form 8-K with the Securities and Exchange Commission promptly following the Effective Date
with respect to Borrower’s execution and delivery of this Agreement and (B) such Governmental Approvals which have
already been obtained and are in full force and effect) or are being obtained pursuant to Section 6.1(b), or (v) constitute
an event of default under any material agreement by which Borrower or any of such Subsidiaries, or their respective
properties, is bound. Neither Borrower nor any of its Subsidiaries is in default under any agreement to which it is a
party or by which it or any of its assets is bound in which such default could reasonably be expected to have a Material
Adverse Change.
5.2
Collateral.
(a)
Borrower and each other Loan Party have good title to, have rights in, and the power to
transfer each item of the Collateral upon which it purports to grant a Lien under the Loan Documents, free and clear of
any and all Liens except Permitted Liens, and neither Borrower nor any of its Subsidiaries have any Deposit Accounts,
Securities Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or the other
investment accounts, if any, described in the Perfection Certificates delivered to Collateral Agent in connection
herewith (as may be updated from time to time in accordance with the terms hereof) with respect of which Borrower or
such Loan Party has given Collateral Agent notice and taken such actions as are necessary to give Collateral Agent a
perfected security interest therein unless otherwise provided pursuant to Section 6.6. The Accounts are bona fide,
existing obligations of the Account Debtors.
(b)
On the Effective Date, and except as disclosed on the Perfection Certificate (i) the Collateral
is not in the possession of any third party bailee (such as a warehouse), and (ii) no such third party bailee possesses
components of the Collateral in excess of One Million Dollars ($1,000,000.00). None of the components of the
Collateral shall be maintained at locations other than as disclosed in the Perfection Certificates on the Effective Date or
as permitted pursuant to Section 6.11.
(c)
All Inventory (other than raw materials, parts, supplies, packing and shipping materials and
work in process) is in all material respects of good and marketable quality, free from material defects.
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(d)
Borrower and each of its Subsidiaries is the sole owner of the Intellectual Property each
respectively purports to solely own, and is the joint owner of the Intellectual Property each respectively purports to own
jointly, in each case free and clear of all Liens other than Permitted Liens. From and after the IP Trigger Event occurs,
(i) each of Borrower’s and its Subsidiaries’ Patents that is material to its business is valid and enforceable and no part of
Borrower’s or its Subsidiaries’ Intellectual Property that is material to its business has been judged invalid or
unenforceable, in whole or in part, and (ii) to the Borrower’s knowledge, no claim has been made that any part of the
Intellectual Property or any practice by Borrower or its Subsidiaries violates the rights of any third party except to the
extent such claim could not reasonably be expected to have a Material Adverse Change. Except as noted on the
Perfection Certificates (as may be updated from time to time in accordance with the terms hereof), neither Borrower nor
any of its Subsidiaries is a party to, nor is bound by, any material license or other material agreement with respect to
which Borrower or such Subsidiary is the licensee that (i) prohibits or otherwise restricts Borrower or its Subsidiaries
from granting a security interest in Borrower’s or such Subsidiary’s interest in such material license or material
agreement or any other property, or (ii) for which a default under or termination of could interfere with Collateral
Agent’s or any Lender’s right to sell any Collateral. Borrower shall provide written notice to Collateral Agent and each
Lender with the next Compliance Certificate due to be delivered to Lenders pursuant to Section 6.2(b) of Borrower or
any other Loan Party entering into or becoming bound by any license or agreement with respect to which Borrower or
such Loan Party is the licensee (other than (y) over-the-counter software that is commercially available to the public and
(z) non-exclusive licenses from or to contract manufacturers, clinical research organizations, clinical trial or research
sites, and service providers and other entities, in each case, (A) entered into in the ordinary course of business, (B) the
principal purpose of which does not include the acquisition of licensing rights, but which contain such non-exclusive
licenses merely ancillary to, and for the limited purpose of, facilitating the principal purposes of the agreement and
(C) so long as Borrower has complied with all other applicable terms of the Loan Documents applicable thereto).
5.3
Litigation. Except as disclosed (i) on the Perfection Certificates, or (ii) in accordance with
Section 6.9 hereof, there are no actions, suits, investigations, or proceedings pending or, to the knowledge of the
Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than One
Million Dollars ($1,000,000.00).
5.4
No Material Deterioration in Financial Condition; Financial Statements. All consolidated
financial statements for Borrower and its Subsidiaries, delivered to Collateral Agent fairly present, in conformity with
GAAP, in all material respects the consolidated financial condition of Borrower and its Subsidiaries, and the
consolidated results of operations of Borrower and its Subsidiaries as of the date of such financial statements. There has
not been any material deterioration in the consolidated financial condition of Borrower and its Subsidiaries, taken as a
whole, since the date of the most recent financial statements submitted to any Lender.
5.5
Solvency. Borrower is Solvent and Borrower and its Subsidiaries, on a consolidated basis, are
Solvent.
5.6
Regulatory Compliance. Neither Borrower nor any of its Subsidiaries is an “investment company”
or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended.
Neither Borrower nor any of its Subsidiaries is engaged as one of its important activities in extending credit for margin
stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower and each of its
Subsidiaries has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any
of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a
“holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Neither
Borrower nor any of its Subsidiaries has violated any laws, ordinances or rules, the violation of which could reasonably
be expected to have a Material Adverse Change. Neither Borrower’s nor any of its Subsidiaries’ properties or assets has
been used by Borrower or such Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing, producing,
storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws.
Borrower and each of its Subsidiaries has obtained all material consents, approvals and authorizations of, made all
material declarations or filings with, and given all material notices to, all Governmental Authorities that are necessary to
continue their respective businesses as currently conducted.
None of Borrower, any of its Subsidiaries, or any of Borrower’s or its Subsidiaries’ Affiliates or any of their
respective agents acting or benefiting in any capacity in connection with the transactions contemplated by this
Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or conspiring to engage in any transaction
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that evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of the prohibitions set forth
in any Anti-Terrorism Law, or (iii) is a Blocked Person. None of Borrower, any of its Subsidiaries, or to the knowledge
of Borrower and any of their Affiliates or agents, acting or benefiting in any capacity in connection with the transactions
contemplated by this Agreement, (x) conducts any business or engages in making or receiving any contribution of
funds, goods or services to or for the benefit of any Blocked Person, or (y) deals in, or otherwise engages in any
transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar
executive order or other Anti-Terrorism Law.
5.7
Investments. Neither Borrower nor any of its Subsidiaries owns any stock, shares, partnership
interests or other equity securities except for Permitted Investments.
5.8
Tax Returns and Payments; Pension Contributions. Borrower and each of its Subsidiaries has
timely filed (or timely filed extensions to file) all required tax returns and reports, and Borrower and each of its
Subsidiaries, has timely paid all federal, material foreign, material state, and material local taxes, assessments, deposits
and contributions owed by Borrower and such Subsidiaries, in all jurisdictions in which Borrower or any such
Subsidiary is subject to taxes, including the United States, unless (i) such taxes are being contested in accordance with
the following sentence or (ii) in the case of material foreign, material state and material local taxes, assessments,
deposits and contributions owed, such taxes, assessments, deposits and contributions do not, individually or in the
aggregate, exceed Two Hundred Fifty Thousand Dollars ($250,000.00). Borrower and each of its Subsidiaries, may
defer payment of any contested taxes, provided that Borrower or such Subsidiary, (a) in good faith contests its
obligation to pay the taxes by appropriate proceedings instituted and conducted with reasonable promptness and
diligence, (b) notifies Collateral Agent in writing of the commencement of, and any material development in, the
proceedings, and (c) posts bonds or takes any other steps required to prevent the Governmental Authority levying such
contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien.” Neither
Borrower nor any of its Subsidiaries is aware of any claims or adjustments proposed for any of Borrower’s or such
Subsidiaries’, prior tax years which could result in additional taxes, in excess of Twenty-Five Thousand Dollars
($25,000.00) in the aggregate, becoming due and payable by Borrower or its Subsidiaries. Borrower and each of its
Subsidiaries have paid all amounts necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms, and neither Borrower nor any of its Subsidiaries have, withdrawn from
participation in, and have not permitted partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower or its
Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other
Governmental Authority.
5.9
Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as working capital
and to fund its general business requirements in accordance with the provisions of this Agreement, and not for personal,
family, household or agricultural purposes. Additionally, Borrower will be permitted to use the proceeds of the Credit
Extensions of the Term A-2 Loan to repay all outstanding Credit Extensions made by SVB pursuant to the Prior
Agreement.
5.10
Shares. Borrower has full power and authority to create a first lien on the Shares and no disability or
contractual obligation exists that would prohibit Borrower from pledging the Shares pursuant to this Agreement. To
Borrower’s knowledge, there are no subscriptions, warrants, rights of first refusal or other restrictions on transfer
relative to, or options exercisable with respect to the Shares. The Shares have been and will be duly authorized and
validly issued, and are fully paid and non-assessable. To Borrower’s knowledge, the Shares are not the subject of any
present or threatened suit, action, arbitration, administrative or other proceeding, and Borrower knows of no reasonable
grounds for the institution of any such proceedings.
5.11
Full Disclosure. No written representation, warranty or other statement of Borrower or any of its
Subsidiaries in any certificate or written statement given to Collateral Agent or any Lender in connection with the Loan
Documents or the transactions contemplated thereby, as of the date such representation, warranty, or other statement
was made, taken together with all such written certificates and written statements given to Collateral Agent or any
Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the
statements contained in the certificates or statements not misleading in light of the circumstances in which they were
made (it being recognized that the projections and forecasts provided by Borrower in good faith and based upon
reasonable
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assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and
forecasts may differ from the projected or forecasted results).
5.12
“Know Your Customer” Information. All materials and information provided to Collateral Agent
and Lenders in connection with applicable “know your customer” and Anti-Terrorism Legislation are true and correct.
5.13
Definition of “Knowledge.” For purposes of the Loan Documents, whenever a representation or
warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar
qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible
Officers.
6.
AFFIRMATIVE COVENANTS
Borrower shall, and shall cause each of its Subsidiaries to, do all of the following:
6.1
Government Compliance.
(a)
Maintain its and (except as permitted by the second sentence of Section 7.3) all its
Subsidiaries’ legal existence and good standing (to the extent applicable in the relevant jurisdiction(s) of such
Subsidiary) in their respective jurisdictions of organization and maintain qualification in each jurisdiction in which the
failure to so qualify could reasonably be expected to have a Material Adverse Change. Comply with all laws,
ordinances and regulations to which Borrower or any of its Subsidiaries is subject, the noncompliance with which could
reasonably be expected to have a Material Adverse Change.
(b)
Obtain and keep in full force and effect, all of the material Governmental Approvals
necessary for the performance by Borrower and its Subsidiaries of their respective businesses and obligations under the
Loan Documents and the grant of a security interest to Collateral Agent for the ratable benefit of the Lenders, in all of
the Collateral. Borrower shall promptly provide copies to Collateral Agent of any material Governmental Approvals
obtained by Borrower or any of its Subsidiaries.
6.2
Financial Statements, Reports, Certificates.
(a)
Deliver to Collateral Agent:
(i)
as soon as available, but no later than forty-five (45) days after the last day of each
fiscal quarter, a company prepared consolidated and consolidating balance sheet, income statement and cash flow
statement covering the consolidated operations of Borrower and its Subsidiaries for such quarter certified by a
Responsible Officer and in a form reasonably acceptable to Collateral Agent;
(ii)
as soon as available, but no later than the earlier of (A) ninety (90) days after the
last day of Borrower’s fiscal year or (B) within five (5) days of filing with the SEC, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements
(other than any qualification that is with respect to, or resulting from an upcoming maturity date of any Term Loan or
any other material Indebtedness) from an independent certified public accounting firm acceptable to Collateral Agent in
its reasonable discretion (each of the “Big Four” accounting firms and Borrower’s existing accounting firm are
acceptable to Collateral Agent);
(iii)
as soon as available after approval thereof by Parent’s Board of Directors, but no
later than sixty (60) days after the last day of each of Borrower’s fiscal years, Borrower’s annual financial projections
for the entire current fiscal year as most recently approved by Parent’s Board of Directors, which such annual financial
projections shall be set forth in a quarter-by-quarter format (such annual financial projections as originally delivered to
Collateral Agent are referred to herein as the “Annual Projections”; provided that, any revisions of the Annual
Projections approved by Parent’s Board of Directors shall be delivered to Collateral Agent no later than seven (7) days
after such approval);
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(iv)
within five (5) days of delivery, copies of all statements, reports and notices made
available to Borrower’s security holders or holders of Subordinated Debt;
(v)
within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission;
(vi)
prompt notice of any amendments of or other changes to the capitalization table of
Borrower and to the Operating Documents of Borrower or any of its Subsidiaries, together with any copies reflecting
such amendments or changes with respect thereto;
(vii)
(A) prompt notice of any event that could reasonably be expected to materially and
adversely affect the value of the Intellectual Property, and (B) at all times after the IP Trigger Event occurs, (1) each of
the following on each Certificate of Compliance: (y) a summary of any material change in the composition of the
Intellectual Property, and (z) a report of the registered patents, trademarks, service marks, copyrights, mask works, or
any pending applications for any of the foregoing, whether as owner, licensee or otherwise, by Borrower or any of its
Subsidiaries, and noting any changes from the report provided for the prior fiscal quarter, and (2) at least fifteen (15)
days prior written notice of Borrower’s or any other Loan Party’s intent to register such copyrights or mask works
together with a copy of the application it intends to file with the United States Copyright Office (excluding exhibits
thereto);
(viii)
as soon as available, but no later than thirty (30) days after the last day of each
fiscal quarter, copies of the month-end account statements for the month-end of such fiscal quarter for each Collateral
Account maintained by Borrower or its Subsidiaries, which statements may be provided to Collateral Agent and each
Lender by Borrower or directly from the applicable institution(s); and
(ix)
other information as reasonably requested by Collateral Agent or any Lender.
Notwithstanding the foregoing, documents required to be delivered pursuant to the terms hereof (to the extent any such
documents are included in materials otherwise filed with the Securities and Exchange Commission or posted on
Borrower’s website) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the
date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the internet at
Borrower’s website address.
(b)
No later than forty-five (45) days after the last day of each fiscal quarter, deliver to each
Lender, a duly completed Compliance Certificate signed by a Responsible Officer.
(c)
Keep proper books of record and account in accordance with GAAP in all material respects,
in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and
activities. Borrower shall, and shall cause each of its Subsidiaries to, allow, at the sole cost of Borrower, Collateral
Agent or any Lender, during regular business hours upon reasonable prior notice (provided that no notice shall be
required when an Event of Default has occurred and is continuing), to visit and inspect any of its properties, to examine
and make abstracts or copies from any of its books and records, and to conduct a collateral audit and analysis of its
operations and the Collateral. Such audits shall be conducted no more often than once every year unless (and more
frequently if) an Event of Default has occurred and is continuing.
6.3
Inventory; Returns. Keep all Inventory in good and marketable condition (ordinary wear and tear
excepted), free from material defects. Returns and allowances between Borrower, or any of its Subsidiaries, and their
respective Account Debtors shall follow Borrower’s, or such Subsidiary’s, customary practices as they exist at the
Effective Date. Borrower must promptly notify Collateral Agent and the Lenders of all returns, recoveries, disputes and
claims that involve more than Two Hundred Fifty Thousand Dollars ($250,000.00) individually or in the aggregate in
any calendar year.
6.4
Taxes; Pensions. Timely file and require each of its Subsidiaries to timely file, all required tax
returns and reports and timely pay, and require each of its Subsidiaries to timely file, all federal, material foreign,
material state, and material local taxes, assessments, deposits and contributions owed by Borrower or its Subsidiaries,
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except (a) in the case of material foreign, material state and material local taxes, assessments, deposits and contributions
owed do not, individually or in the aggregate, exceed Two Hundred Fifty Thousand Dollars ($250,000.00) or (b) for
deferred payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to the Collateral
Agent, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present
pension, profit sharing and deferred compensation plans in accordance with the terms of such plans.
6.5
Insurance. Keep Borrower’s and its Subsidiaries’ business and the Collateral insured for risks and in
amounts standard for companies in Borrower’s and its Subsidiaries’ industry and location and as Collateral Agent may
reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are reasonably
satisfactory to Collateral Agent and Lenders. All property policies shall have a lender’s loss payable endorsement
showing Collateral Agent as lender loss payee and waive subrogation against Collateral Agent, and all liability policies
shall show, or have endorsements showing, Collateral Agent, as additional insured. The Collateral Agent shall be
named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect
of any Collateral, and each provider of any such insurance shall agree, by endorsement upon the policy or policies
issued by it or by independent instruments furnished to the Collateral Agent, that it will give the Collateral Agent thirty
(30) days prior written notice before any such policy or policies shall be materially altered or canceled. At Collateral
Agent’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy shall, at Collateral Agent’s option, be payable to Collateral Agent, for the ratable benefit of
the Lenders, on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has
occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to One
Million Dollars ($1,000,000.00) with respect to any loss, but not exceeding One Million Dollars ($1,000,000.00), in the
aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or
damaged property; provided that any such replaced or repaired property (i) shall be of better, equal or like value or
usefulness as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Collateral Agent has been
granted a first priority security interest (subject only to Permitted Liens that are permitted pursuant to the terms of this
Agreement to have superior priority to Collateral Agent’s Lien), and (b) after the occurrence and during the continuance
of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Collateral Agent, be
payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations. If Borrower or any of
its Subsidiaries fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required
proof of payment to third persons, Collateral Agent and/or any Lender may make, at Borrower’s expense, all or part of
such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies
Collateral Agent or such Lender deems prudent.
6.6
Operating Accounts.
(a)
Maintain all of Borrower’s and its Subsidiaries Collateral Accounts at the banks and
financial institutions as disclosed in the Perfection Certificates delivered on the Effective Date, or such other Collateral
Accounts as to which Borrower provided notice pursuant to Section 6.6(b), which are subject to a Control Agreement in
favor of Collateral Agent (other than any Collateral Account that is not required to constitute Collateral). Borrower
shall at all times have on deposit in Collateral Accounts that are subject to a Control Agreement in favor of Collateral
Agent cash in an amount equal to the lesser of (i) one hundred percent (100.00%) of the Dollar value of all of
Borrower’s consolidated cash, including any Subsidiaries’, in the aggregate, at all financial institutions, and (ii) one
hundred five percent (105.00%) of the Dollar amount of the then-outstanding Obligations. Clause (i) of the previous
sentence shall not be applicable to (and no additional amounts need to be maintained to cover the amounts in) deposit
accounts exclusively used for (x) payroll, payroll taxes and other employee wage and benefit payments to or for the
benefit of Borrower’s, or any of its Subsidiaries’, employees identified to Collateral Agent by Borrower as such in the
Perfection Certificates (as may be updated from time to time in accordance with the terms hereof) so long as the
amounts in such deposit accounts do not exceed one month of payroll at any time and (y) cash collateral purposes to
secure obligations for the Indebtedness permitted by clause (g) of the defined term “Permitted Indebtedness”.
(b)
Borrower shall provide Collateral Agent five (5) days’ prior written notice before Borrower
or any of its Subsidiaries establishes any Collateral Account. In addition, for each Collateral Account that Borrower or
such other Loan Party at any time opens or maintains, to the extent constituting Collateral, Borrower or such other Loan
Party shall cause the applicable bank or financial institution at or with which such Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account of
Borrower or such other Loan Party to perfect Collateral Agent’s Lien in such Collateral Account in
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accordance with the terms hereunder prior to the establishment of such Collateral Account, which Control Agreement
may not be terminated without the prior written consent of Collateral Agent or by such bank or financial institution in
accordance with its terms. The provisions of the previous sentence shall not apply to deposit accounts exclusively used
for (i) payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s, or any
of its Subsidiaries’, employees so long as the amounts in such deposit accounts do not exceed one month of payroll at
any time and (ii) cash collateral purposes to secure obligations for the Indebtedness permitted by clause (g) of the
defined term “Permitted Indebtedness”, in each case identified to Collateral Agent by Borrower as such in the
Perfection Certificates (as may be updated from time to time in accordance with the terms hereof).
(c)
Neither Borrower nor any other Loan Party shall maintain any Collateral Accounts except
Collateral Accounts maintained in accordance with Sections 6.6(a) and (b).
6.7
Protection of Intellectual Property Rights. Borrower and each of its Subsidiaries shall: (a) use
commercially reasonable efforts to protect, defend and maintain the validity and enforceability of its Intellectual
Property that is material to Borrower’s business; (b) promptly advise Collateral Agent in writing of infringement by a
third party of its Intellectual Property if such Intellectual Property has material value; and (c) not allow any Intellectual
Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Collateral
Agent’s prior written consent. At all times after the IP Trigger Event occurs, if Borrower or any other Loan Party
(i) obtains any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending
application for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any patent or the
registration of any trademark or servicemark, then Borrower or such Loan Party shall execute such intellectual property
security agreements and other documents and take such other actions as Collateral Agent shall reasonably request in its
good faith business judgment to perfect and maintain a first priority (subject only to Permitted Liens that are permitted
pursuant to the terms of this Agreement to have superior priority to Collateral Agent’s Lien) perfected security interest
in favor of Collateral Agent, for the ratable benefit of the Lenders, in such Intellectual Property. At all times after the IP
Trigger Event occurs, if Borrower or any other Loan Party decides to register any copyrights or mask works in the
United States Copyright Office, Borrower or such Loan Party shall: (y) execute an intellectual property security
agreement and such other documents and take such other actions as Collateral Agent may reasonably request in its good
faith business judgment to perfect and maintain a first priority (subject only to Permitted Liens that are permitted
pursuant to the terms of this Agreement to have superior priority to Collateral Agent’s Lien) perfected security interest
in favor of Collateral Agent, for the ratable benefit of the Lenders, in the copyrights or mask works intended to be
registered with the United States Copyright Office; and (z) record such intellectual property security agreement with the
United States Copyright Office contemporaneously with filing the copyright or mask work application(s) with the
United States Copyright Office. Notwithstanding anything to the contrary in this Section 7.7, within thirty (30) days
after the occurrence of the IP Trigger Event, Borrower and each other Loan Party, as applicable, shall execute such
intellectual property security agreements and other documents and take such other actions as Collateral Agent shall
reasonably request in its good faith business judgment to perfect and maintain a first priority (subject only to Permitted
Liens that are permitted pursuant to the terms of this Agreement to have superior priority to Collateral Agent’s Lien)
perfected security interest in favor of Collateral Agent, for the ratable benefit of the Lenders, in the Intellectual
Property.
6.8
Litigation Cooperation. Commencing on the Effective Date and continuing through the termination
of this Agreement, make available to Collateral Agent and the Lenders, without expense to Collateral Agent or the
Lenders and, provided no Event of Default has occurred, upon reasonable written prior notice, Borrower and each of
Borrower’s officers, employees and agents and Borrower’s Books, to the extent that Collateral Agent or any Lender
may reasonably deem them necessary to prosecute or defend any third-party suit or proceeding instituted by or against
Collateral Agent or any Lender with respect to any Collateral or relating to Borrower.
6.9
Notices of Litigation and Default. Borrower will give prompt written notice to Collateral Agent and
the Lenders of any litigation or governmental proceedings pending or threatened (in writing) against Borrower or any of
its Subsidiaries, which could reasonably be expected to result in damages or costs to Borrower or any of its Subsidiaries
of One Million Dollars ($1,000,000.00) or more or which could reasonably be expected to have a Material Adverse
Change. Without limiting or contradicting any other more specific provision of this Agreement, promptly (and in any
event within three (3) Business Days) upon Borrower becoming aware of the existence of any Event of Default or event
which, with the giving of notice or passage of time, or both, would constitute an Event of Default, Borrower shall give
written notice to Collateral Agent and the Lenders of such occurrence, which such notice shall
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include a reasonably detailed description of such Event of Default or event which, with the giving of notice or passage
of time, or both, would constitute an Event of Default.
6.10
Financial Covenant. Commencing on March 31, 2027 and on the last day of each fiscal quarter
thereafter (each, a “Testing Date”) if (a) at any time during the fiscal quarter of such Testing Date the aggregate amount
of Borrower’s unrestricted (other than Permitted Liens) cash, Cash Equivalents and other marketable securities is less
than [***] of the outstanding principal balance of the Term Loans as of such Testing Date and (b) at any time during
such fiscal quarter the Market Capitalization is less than [***], then as of such Testing Date, Borrower shall have Net
Product Revenue (calculated on a trailing six (6) month basis), of at least the amount set forth on Annex A for such
Testing Date.
6.11
Landlord Waivers; Bailee Waivers. In the event that Borrower or any other Loan Party, after the
Effective Date, intends to add any new offices or business locations, including warehouses, or otherwise store any
portion of the Collateral with, or deliver any portion of the Collateral to, a bailee, in each case pursuant to Section 7.2,
then Borrower or such other Loan Party will first provide written notice to Collateral Agent to the extent such location
is not already set forth on a Perfection Certificate and, in the event that the new location is the chief executive office of
the Borrower or such other Loan Party or the Collateral at any such new location is valued in excess of [***]in the
aggregate, such Loan Party shall use commercially reasonable efforts to cause such bailee or landlord, as applicable, to
execute and deliver a bailee waiver or landlord waiver, as applicable, in form and substance reasonably satisfactory to
Collateral Agent prior to the addition of such new offices or business locations, or any such storage with or delivery to
any such bailee, as the case may be.
6.12
Creation/Acquisition of Subsidiaries. In the event Borrower or any of its Subsidiaries creates or
acquires any Subsidiary (including, without limitation, pursuant to a Division) after the Effective Date, Borrower shall
provide prior written notice to Collateral Agent of the creation or acquisition of such new Subsidiary and take all such
action as may be reasonably required by Collateral Agent or any Lender to cause each such Subsidiary to become a co-
Borrower hereunder or to guarantee the Obligations of Borrower under the Loan Documents and, in each case, grant a
continuing pledge and security interest in and to the assets of such Subsidiary (substantially as described on Exhibit A
hereto); and Borrower (or its Subsidiary, as applicable) shall grant and pledge to Collateral Agent, for the ratable benefit
of the Lenders, a perfected security interest in the Shares of each such newly created Subsidiary; provided, however,
that solely in the circumstance in which Borrower or any Subsidiary creates or acquires a Foreign Subsidiary in an
acquisition approved by the Required Lenders, (i) such Foreign Subsidiary shall not be required to guarantee the
Obligations of Borrower under the Loan Documents and grant a continuing pledge and security interest in and to the
assets of such Foreign Subsidiary, and (ii) Borrower shall not be required to grant and pledge to Collateral Agent, for
the ratable benefit of Lenders, a perfected security interest in more than sixty-five percent (65%) of the Shares of such
Foreign Subsidiary, if Borrower demonstrates to the reasonable satisfaction of Collateral Agent that such Foreign
Subsidiary providing such guarantee or pledge and security interest or Borrower providing a perfected security interest
in more than sixty-five percent (65%) of the Shares would create a present and existing adverse tax consequence to
Borrower under the IRC. For the avoidance of doubt, neither Scholar Rock Netherlands, nor any Subsidiary of Scholar
Rock Netherlands that is a Foreign Subsidiary, shall be required to become a Loan Party until sixty (60) days after the
occurrence of the Foreign Subsidiary Trigger Event.
6.13
Further Assurances.
(a)
Execute any further instruments and take further action as Collateral Agent or any Lender
reasonably requests to perfect or continue Collateral Agent’s Lien in the Collateral or to effect the purposes of this
Agreement.
(b)
Deliver to Collateral Agent, within five (5) days after the same are sent or received, copies of
all material written correspondence, reports, documents and other filings of Borrower or any Subsidiary with any
Governmental Authority that could reasonably be expected to have a material adverse effect on any of the
Governmental Approvals material to Borrower’s business or otherwise could reasonably be expected to have a Material
Adverse Change.
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7.
NEGATIVE COVENANTS
Borrower shall not, and shall not permit any of its Subsidiaries to, do any of the following without the prior
written consent of the Required Lenders:
7.1
Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (including, without
limitation, pursuant to a Division) (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part
of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn out,
obsolete or surplus Equipment or other Equipment which is being replaced by Equipment of reasonably equivalent or
better value or usefulness; (c) in connection with Permitted Liens, Permitted Investments and Permitted Licenses; (d)
pursuant to the Permitted Royalty Transaction; (e) of cash and Cash Equivalents in connection with transactions not
prohibited hereunder to the extent such transactions are in the ordinary course of business and consistent with the then
applicable Annual Projections most recently approved by Borrower’s Board of Directors; and (f) of other assets
(excluding Intellectual Property) having a book value not exceeding One Million Dollars ($1,000,000.00) during any
fiscal year.
7.2
Changes in Business, Management, Ownership, or Business Locations. (a) Engage in or permit
any of its Subsidiaries to engage in any business other than the businesses engaged in by Borrower as of the Effective
Date or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person shall cease to be actively engaged
in the management of Borrower unless written notice thereof is provided to Collateral Agent within five (5) Business
Days of such change, or (ii) enter into any transaction or series of related transactions in which the stockholders of
Borrower who were not stockholders immediately prior to the first such transaction own more than forty nine percent
(49.00%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such
transactions (other than by the sale of Borrower’s equity securities in a public offering, a private placement of public
equity or to venture capital investors so long as Borrower identifies to Collateral Agent the venture capital investors
prior to the closing of the transaction) (an “Acquisition of Borrower”). Borrower shall not, without at least thirty (30)
days’ prior written notice to Collateral Agent: (A) add any new office or business location, including a warehouse
(unless such new office or business location (i) contains assets or property of Borrower or any other Loan Party with a
value of less than One Million Dollars ($1,000,000.00) and (ii) is not Borrower’s or any other Loan Party’s chief
executive office (it being understood that any such locations set forth on a Perfection Certificate shall not require such
prior written notice)); (B) change its jurisdiction of organization, (C) change its organizational structure or type, (D)
change its legal name, or (E) change any organizational number (if any) assigned by its jurisdiction of organization.
7.3
Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock, shares or property of another Person (including, without limitation, pursuant to a Division). A Subsidiary
may merge or consolidate into another Subsidiary (provided that if either Subsidiary is a Loan Party, the surviving
Subsidiary of such consolidation or merger shall be a Loan Party) or with (or into) Borrower provided Borrower is the
surviving legal entity, and as long as no Event of Default is occurring prior thereto or arises as a result therefrom.
7.4
Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to
do so, other than Permitted Indebtedness.
7.5
Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any
right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted herein (except for
Permitted Liens that are permitted by the terms of this Agreement to have superior priority over Collateral Agent’s Lien
or to the extent Collateral Agent has not perfected its security interest with respect to the Shares of any Foreign
Subsidiary), or enter into any agreement, document, instrument or other arrangement (except with or in favor of
Collateral Agent, for the ratable benefit of the Lenders) with any Person which directly or indirectly prohibits or has the
effect of prohibiting Borrower, or any of its Subsidiaries, from collaterally assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of Borrower’s or such Subsidiary’s Intellectual Property, except as is
otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein.
7.6
Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms
of Section 6.6 hereof.
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7.7
Distributions; Investments. (a) Except for any Tax Distributions, pay any dividends (other than
dividends payable solely in capital stock) or make any distribution or payment in respect of or redeem, retire or
purchase any capital stock (other than repurchases pursuant to the terms of stock purchase plans, employee restricted
stock agreements, stockholder rights plans, director or consultant stock option plans, or similar plans, or repurchases
from current or former employees, officers, consultants or directors pursuant to stock repurchase agreements or similar
by the cancellation of indebtedness owed by such employees, officers, consultants or directors to Borrower, provided
such repurchases do not exceed Five Hundred Thousand Dollars ($500,000.00) in the aggregate per fiscal year),
provided that (i) Borrower may convert any of its convertible securities into equity securities of Borrower (which equity
securities do not have a put or redemption right) pursuant to the terms of such convertible securities or otherwise in
exchange thereof, (ii) Borrower’s or its Subsidiaries may make distributions and pay dividends to Borrower, and (iii)
Borrower may make cash payments in lieu of the issuance of fractional shares upon conversion of convertible securities
in an aggregate amount not to exceed Fifty Thousand Dollars ($50,000.00) during the term of this Agreement, or
(b) directly or indirectly make any Investment other than Permitted Investments.
7.8
Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower or any of its Subsidiaries, except for (a) transactions that are in the ordinary
course of Borrower’s or such Subsidiary’s business, upon fair and reasonable terms that are no less favorable to
Borrower or such Subsidiary than would be obtained in an arm’s length transaction with a non-affiliated Person,
(b) Subordinated Debt or equity investments by Borrower’s investors in Borrower or its Subsidiaries, (c) customary
compensation and other benefits arrangements (including retirement, health, stock option, and other benefit plans and
indemnification arrangements) with Borrower’s or its Subsidiaries’ employees, officers, directors and managers
approved by Borrower’s or such Subsidiary’s board of directors consistent with the industry practices in Borrower’s or
such Subsidiary’s industry, and (d) transactions permitted pursuant to Section 7.3, 7.4 or 7.7 to be carried out with
Affiliates.
7.9
Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the
terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or
(b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or
adversely affect the subordination thereof to Obligations owed to the Lenders.
7.10
Compliance. Become an “investment company” or a company controlled by an “investment
company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities
extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal
Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to
comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could
reasonably be expected to have a Material Adverse Change, or permit any of its Subsidiaries to do so; withdraw or
permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which
could reasonably be expected to result in any liability of Borrower or any of its Subsidiaries, including any liability to
the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.
7.11
Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies Borrower and each of its
Subsidiaries that pursuant to the requirements of Anti-Terrorism Laws, and Collateral Agent’s policies and practices,
Collateral Agent is required to obtain, verify and record certain information and documentation that identifies Borrower
and each of its Subsidiaries and their principals, which information includes the name and address of Borrower and each
of its Subsidiaries and their principals and such other information that will allow Collateral Agent to identify such party
in accordance with Anti-Terrorism Laws. Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any
of its Subsidiaries permit any Affiliate to, directly or indirectly, knowingly enter into any documents, instruments,
agreements or contracts with any Person listed on the OFAC Lists. Borrower and each of its Subsidiaries shall
immediately notify Collateral Agent if Borrower or such Subsidiary has knowledge that Borrower, or any Subsidiary or
Affiliate of Borrower, is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted
on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering.
Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries, permit any Affiliate to,
directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person,
including, without limitation, the making or receiving of any contribution of funds, goods or services to or for
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the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224 or any similar executive order or other Anti-
Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of
evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-
Terrorism Law.
7.12
MSC Subsidiary. Cause or permit (i) MSC Subsidiary to incur any Indebtedness, (ii) any Lien on any
assets of MSC Subsidiary, and (iii) any transfers from any deposit or securities account maintained by MSC Subsidiary
other than to accounts of Borrower which are subject to a Control Agreement in favor of Collateral Agent. Borrower
shall not permit MSC Subsidiary to engage in any business, make any Investments or hold any assets that would cause
MSC Subsidiary to fail to qualify as a Massachusetts security corporation under 830 CMR 63.38B.1 of the
Massachusetts tax code and applicable regulations (as the same may be amended, modified or replaced from time to
time).
8.
EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:
8.1
Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit
Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are
due and payable (which three (3) Business Day grace period shall not apply to payments due on the Maturity Date or
the date of acceleration pursuant to Section 9.1 (a) hereof). During the cure period, the failure to cure the payment
default is not an Event of Default (but no Credit Extension will be made during the cure period);
8.2
Covenant Default.
(a)
Borrower or any of its Subsidiaries fails or neglects to perform any obligation in Sections 6.2
(Financial Statements, Reports, Certificates), 6.4 (Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of
Intellectual Property Rights), 6.9 (Notice of Litigation and Default), 6.10 (Financial Covenant), 6.11 (Landlord Waivers;
Bailee Waivers), 6.12 (Creation/Acquisition of Subsidiaries) or 6.13 (Further Assurances) or Borrower violates any
covenant in Section 7; or
(b)
Borrower, or any of its Subsidiaries, fails or neglects to perform, keep, or observe any other
term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any
default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that
if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower
be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and
within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit
Extensions shall be made during such cure period). Grace periods provided under this Section 8.2(b) shall not apply,
among other things, to financial covenants, if any, or any other covenants set forth in subsection (a) above;
8.3
Material Adverse Change. A Material Adverse Change occurs;
8.4
Attachment; Levy; Restraint on Business.
(a)
(i) The service of process seeking to attach, by trustee or similar process, any funds of
Borrower or any of its Subsidiaries or of any entity under control of Borrower or its Subsidiaries on deposit with any
Lender or any Lender’s Affiliate or any bank or other institution at which Borrower or any of its Subsidiaries maintains
a Collateral Account, or (ii) a notice of lien, levy, or assessment is filed against Borrower or any of its Subsidiaries or
their respective assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten
(10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise);
provided, however, no Credit Extensions shall be made during any ten (10) day cure period; and
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(b)
(i) any material portion of Borrower’s or any of its Subsidiaries’ assets is attached, seized,
levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents
Borrower or any of its Subsidiaries from conducting any part of its business;
8.5
Insolvency. (a) Borrower is or becomes Insolvent or Borrower and its Subsidiaries, on a consolidated
basis, are or become Insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and not dismissed or stayed within forty-
five (45) days (but no Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent and/or until any
Insolvency Proceeding is dismissed);
8.6
Other Agreements. There is a default in any agreement to which Borrower or any of its Subsidiaries
is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to
accelerate the maturity of any Indebtedness in an amount in excess of One Million Dollars ($1,000,000.00) or that could
reasonably be expected to have a Material Adverse Change; provided, however, that the Event of Default under this
Section 8.6 caused by the occurrence of a breach or default under such other agreement shall be cured or waived for
purposes of this Agreement upon Collateral Agent receiving written notice from the party asserting such breach or
default of such cure or waiver of the breach or default under such other agreement, if at the time of such cure or waiver
under such other agreement (x) Collateral Agent or any Lender has not declared an Event of Default under this
Agreement and/or exercised any rights with respect thereto; (y) any such cure or waiver does not result in an Event of
Default under any other provision of this Agreement or any Loan Document; and (z) in connection with any such cure
or waiver under such other agreement, the terms of any agreement with such third party are not modified or amended in
any manner which could in the good faith business judgment of Collateral Agent be materially less advantageous to
Borrower;
8.7
Judgments. One or more judgments, orders, or decrees for the payment of money in an amount,
individually or in the aggregate, of at least One Million Dollars ($1,000,000.00) (not covered by independent third-party
insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower or any of
its Subsidiaries and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after the entry thereof
(provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order or
decree);
8.8
Misrepresentations. Borrower or any of its Subsidiaries or any Person acting for Borrower or any of
its Subsidiaries makes any representation, warranty, or other statement now or later in this Agreement, any Loan
Document or in any writing delivered to Collateral Agent and/or Lenders or to induce Collateral Agent and/or the
Lenders to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is
incorrect in any material respect when made;
8.9
Subordinated Debt. A default or breach occurs under any agreement between Borrower or any of its
Subsidiaries and any creditor of Borrower or any of its Subsidiaries that signed a subordination, intercreditor, or other
similar agreement with Collateral Agent or the Lenders, or any creditor that has signed such an agreement with
Collateral Agent or the Lenders breaches any terms of such agreement;
8.10
Guaranty. (a) Any Guaranty terminates or ceases for any reason to be in full force and effect; (b) any
Guarantor does not perform any obligation or covenant under any Guaranty; (c) any circumstance described in Sections
8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, or (d) the liquidation, winding up, or termination of
existence of any Guarantor;
8.11
Governmental Approvals. Any Governmental Approval shall have been revoked, rescinded,
suspended, modified in an adverse manner, or not renewed in the ordinary course for a full term and such revocation,
rescission, suspension, modification or non-renewal has resulted in or could reasonably be expected to result in a
Material Adverse Change; or
8.12
Lien Priority. Any Lien created hereunder or by any other Loan Document shall at any time fail to
constitute a valid and perfected (other than with respect to perfection of the security interest on the Shares of any
Foreign Subsidiary to the extent Collateral Agent has not perfected its security interest with respect to such Shares)
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Lien on any of the Collateral purported to be secured thereby, subject to no prior or equal Lien, other than Permitted
Liens which are permitted to have priority in accordance with the terms of this Agreement.
8.13
Delisting. The shares of common stock of Borrower are delisted from The NASDAQ Global Select
Market because of failure to comply with continued listing standards thereof or due to a voluntary delisting which
results in such shares not being listed on any other nationally recognized stock exchange in the United States having
listing standards at least as restrictive as The NASDAQ Global Select Market.
9.
RIGHTS AND REMEDIES
9.1
Rights and Remedies.
(a)
Upon the occurrence and during the continuance of an Event of Default, Collateral Agent
may, and at the written direction of Required Lenders shall, without notice or demand, do any or all of the following:
(i) deliver notice of the Event of Default to Borrower, (ii) by notice to Borrower declare all Obligations immediately
due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations shall be immediately due and
payable without any action by Collateral Agent or the Lenders) or (iii) by notice to Borrower suspend or terminate the
obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Collateral Agent and/or the Lenders (but if an Event of Default
described in Section 8.5 occurs all obligations, if any, of the Lenders to advance money or extend credit for Borrower’s
benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders
shall be immediately terminated without any action by Collateral Agent or the Lenders).
(b)
Without limiting the rights of Collateral Agent and the Lenders set forth in
Section 9.1(a) above, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall
have the right, without notice or demand, to do any or all of the following:
(i)
foreclose upon and/or sell or otherwise liquidate, the Collateral;
(ii)
apply to the Obligations any (a) balances and deposits of Borrower that Collateral
Agent or any Lender holds or controls, or (b) any amount held or controlled by Collateral Agent or any Lender owing to
or for the credit or the account of Borrower; and/or
(iii)
commence and prosecute an Insolvency Proceeding or consent to Borrower
commencing any Insolvency Proceeding.
(c)
Without limiting the rights of Collateral Agent and the Lenders set forth in Sections
9.1(a) and (b) above, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall
have the right, without notice or demand, to do any or all of the following:
(i)
settle or adjust disputes and claims directly with Account Debtors for amounts on
terms and in any order that Collateral Agent considers advisable, notify any Person owing Borrower money of
Collateral Agent’s security interest in such funds, and verify the amount of such account;
(ii)
make any payments and do any acts it considers necessary or reasonable to protect
the Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral if Collateral Agent
requests and make it available in a location as Collateral Agent reasonably designates. Collateral Agent may enter
premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase,
contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses
incurred. Borrower grants Collateral Agent a license to enter and occupy any of its premises, without charge, to
exercise any of Collateral Agent’s rights or remedies;
(iii)
ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or
advertise for sale, the Collateral. Collateral Agent is hereby granted a non-exclusive, royalty-free license or other right
to use, without charge, Borrower’s and each of its Subsidiaries’ labels, patents, copyrights, mask works, rights of use
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of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it
pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection
with Collateral Agent’s exercise of its rights under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights
under all licenses and all franchise agreements inure to Collateral Agent, for the benefit of the Lenders;
(iv)
place a “hold” on any account (other than deposit accounts exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees)
maintained with Collateral Agent or the Lenders and/or deliver a notice of exclusive control, any entitlement order, or
other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any
Collateral;
(v)
demand and receive possession of Borrower’s Books;
(vi)
appoint a receiver to seize, manage and realize any of the Collateral, and such
receiver shall have any right and authority as any competent court will grant or authorize in accordance with any
applicable law, including any power or authority to manage the business of Borrower or any of its Subsidiaries; and
(vii)
subject to clauses 9.1(a) and (b), exercise all rights and remedies available to
Collateral Agent and each Lender under the Loan Documents or at law or equity, including all remedies provided under
the Code (including disposal of the Collateral pursuant to the terms thereof).
Notwithstanding any provision of this Section 9.1 to the contrary, upon the occurrence of any Event of Default,
Collateral Agent shall have the right to exercise any and all remedies referenced in this Section 9.1 without the written
consent of Required Lenders following the occurrence of an Exigent Circumstance. As used in the immediately
preceding sentence, “Exigent Circumstance” means any event or circumstance that, in the reasonable judgment of
Collateral Agent, imminently threatens the ability of Collateral Agent to realize upon all or any material portion of the
Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction or
material waste thereof, or failure of Borrower or any of the other Loan Parties after reasonable demand to maintain or
reinstate adequate casualty insurance coverage, or which, in the judgment of Collateral Agent, could reasonably be
expected to result in a material diminution in value of the Collateral.
9.2
Power of Attorney. Borrower hereby irrevocably appoints Collateral Agent as its lawful attorney-in-
fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s or
any of the other Loan Parties’ name on any checks or other forms of payment or security; (b) sign Borrower’s or any of
the other Loan Parties’ name on any invoice or bill of lading for any Account or drafts against Account Debtors;
(c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms
Collateral Agent determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies;
(e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or
any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the
Collateral into the name of Collateral Agent or a third party as the Code or any applicable law permits. Borrower
hereby appoints Collateral Agent as its lawful attorney-in-fact to sign Borrower’s or any of the other Loan Parties’ name
on any documents necessary to perfect or continue the perfection of Collateral Agent’s security interest in the Collateral
regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity obligations)
have been satisfied in full and Collateral Agent and the Lenders are under no further obligation to make Credit
Extensions hereunder. Collateral Agent’s foregoing appointment as Borrower’s or any of the other Loan Parties’
attorney in fact, and all of Collateral Agent’s rights and powers, coupled with an interest, are irrevocable until all
Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Collateral Agent’s
and the Lenders’ obligation to provide Credit Extensions terminates.
9.3
Protective Payments. If Borrower or any of its Subsidiaries fail to obtain the insurance called for by
Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower or any of its
Subsidiaries is obligated to pay under this Agreement or any other Loan Document, Collateral Agent may obtain such
insurance or make such payment, and all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately
due and payable, bearing interest at the Default Rate, and secured by the Collateral. Collateral Agent will make
reasonable efforts to provide Borrower with notice of Collateral Agent obtaining such insurance or making such
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payment at the time it is obtained or paid or within a reasonable time thereafter. No such payments by Collateral Agent
are deemed an agreement to make similar payments in the future or Collateral Agent’s waiver of any Event of Default.
9.4
Application of Payments and Proceeds. Notwithstanding anything to the contrary contained in this
Agreement, upon the occurrence and during the continuance of an Event of Default, (a) Borrower irrevocably waives
the right to direct the application of any and all payments at any time or times thereafter received by Collateral Agent
from or on behalf of Borrower or any of the other Loan Parties of all or any part of the Obligations, and, as between
Borrower on the one hand and Collateral Agent and Lenders on the other, Collateral Agent shall have the continuing
and exclusive right to apply and to reapply any and all payments received against the Obligations in such manner as
Collateral Agent may deem advisable notwithstanding any previous application by Collateral Agent, and (b) the
proceeds of any sale of, or other realization upon all or any part of the Collateral shall be applied: first, to the Lenders’
Expenses; second, to accrued and unpaid interest on the Obligations (including any interest which, but for the
provisions of the United States Bankruptcy Code, would have accrued on such amounts); third, to the principal amount
of the Obligations outstanding; and fourth, to any other indebtedness or obligations of Borrower owing to Collateral
Agent or any Lender under the Loan Documents. Any balance remaining shall be delivered to Borrower or to whoever
may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying out the
foregoing, (x) amounts received shall be applied in the numerical order provided until exhausted prior to the application
to the next succeeding category, and (y) each of the Persons entitled to receive a payment in any particular category
shall receive an amount equal to its pro rata share of amounts available to be applied pursuant thereto for such category.
Any reference in this Agreement to an allocation between or sharing by the Lenders of any right, interest or obligation
“ratably,” “proportionally” or in similar terms shall refer to Pro Rata Share unless expressly provided otherwise.
Collateral Agent, or if applicable, each Lender, shall promptly remit to the other Lenders such sums as may be
necessary to ensure the ratable repayment of each Lender’s portion of any Term Loan and the ratable distribution of
interest, fees and reimbursements paid or made by Borrower. Notwithstanding the foregoing, a Lender receiving a
scheduled payment shall not be responsible for determining whether the other Lenders also received their scheduled
payment on such date; provided, however, if it is later determined that a Lender received more than its ratable share of
scheduled payments made on any date or dates, then such Lender shall remit to Collateral Agent or other Lenders such
sums as may be necessary to ensure the ratable payment of such scheduled payments, as instructed by Collateral Agent.
If any payment or distribution of any kind or character, whether in cash, properties or securities, shall be received by a
Lender in excess of its ratable share, then the portion of such payment or distribution in excess of such Lender’s ratable
share shall be received by such Lender in trust for and shall be promptly paid over to the other Lender for application to
the payments of amounts due on the other Lenders’ claims. To the extent any payment for the account of Borrower is
required to be returned as a voidable transfer or otherwise, the Lenders shall contribute to one another as is necessary to
ensure that such return of payment is on a pro rata basis. If any Lender shall obtain possession of any Collateral, it shall
hold such Collateral for itself and as agent and bailee for Collateral Agent and other Lenders for purposes of perfecting
Collateral Agent’s security interest therein.
9.5
Liability for Collateral. So long as Collateral Agent and the Lenders comply with reasonable
banking practices regarding the safekeeping of the Collateral in the possession or under the control of Collateral Agent
and the Lenders, Collateral Agent and the Lenders shall not be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of
the Collateral.
9.6
No Waiver; Remedies Cumulative. Failure by Collateral Agent or any Lender, at any time or times,
to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not
waive, affect, or diminish any right of Collateral Agent or any Lender thereafter to demand strict performance and
compliance herewith or therewith. No waiver hereunder shall be effective unless signed by Collateral Agent and the
Required Lenders and then is only effective for the specific instance and purpose for which it is given. The rights and
remedies of Collateral Agent and the Lenders under this Agreement and the other Loan Documents are cumulative.
Collateral Agent and the Lenders have all rights and remedies provided under the Code, any applicable law, by law, or
in equity. The exercise by Collateral Agent or any Lender of one right or remedy is not an election, and Collateral
Agent’s or any Lender’s waiver of any Event of Default is not a continuing waiver. Collateral Agent’s or any Lender’s
delay in exercising any remedy is not a waiver, election, or acquiescence.
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9.7
Demand Waiver. Borrower waives, to the fullest extent permitted by law, demand, notice of default
or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Collateral
Agent or any Lender on which Borrower or any the other Loan Party is liable.
10.
NOTICES
All notices, consents, requests, approvals, demands, or other communication (collectively, “Communication”)
by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been
validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the
U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed
to the party to be notified and sent to the address, facsimile number, or email address indicated below. Any of Collateral
Agent, Lender or Borrower may change its mailing address or facsimile number by giving the other party written notice
thereof in accordance with the terms of this Section 10.
If to Borrower:
SCHOLAR ROCK HOLDING
CORPORATION
301 Binney Street, 3rd Floor
Cambridge, MA 02142
Attn: [***]
Email: [***]
with a copy (which
shall not constitute
notice) to:
GOODWIN PROCTER LLP
520 Broadway, Suite 500
Santa Monica, CA 90401
Attn: [***]
Email: [***]
If to Collateral
Agent:
OXFORD FINANCE LLC
115 South Union Street, Suite 300
Alexandria, Virginia 22314
Attention: [***]
Fax: [***]
Email: [***]
with a copy to:
OXFORD FINANCE CREDIT FUND II
LP
c/o Oxford Finance Advisors, LLC, its
manager
115 South Union Street
Suite 300
Alexandria, VA 22314
Attention: [***]
Fax: [***]
Email: [***]
with a copy to:
OXFORD FINANCE CREDIT FUND III
LP
c/o Oxford Finance Advisors, LLC, its
manager
115 South Union Street
Suite 300
Alexandria, VA 22314
Attention: [***]
Fax: [***]
Email: [***]
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with a copy (which
shall not constitute
notice) to:
DLA PIPER LLP (US)
500 8th Street, NW
Washington, DC 20004
Attn: Eric Eisenberg
Fax: [***]
Email: [***]
11.
CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
New York law governs the Loan Documents without regard to principles of conflicts of law. Borrower, Lenders and
Collateral Agent each submit to the exclusive jurisdiction of the State and Federal courts in the City of New York,
Borough of Manhattan. NOTWITHSTANDING THE FOREGOING, COLLATERAL AGENT AND THE LENDERS
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH COLLATERAL AGENT AND THE
LENDERS (IN ACCORDANCE WITH THE PROVISIONS OF SECTION 9.1) DEEM NECESSARY OR
APPROPRIATE TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE COLLATERAL
AGENT’S AND THE LENDERS’ RIGHTS AGAINST BORROWER OR ITS PROPERTY. Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower
hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court.
Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit
and agrees that service of such summons, complaints, and other process may be made by registered or certified mail
addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10
of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual
receipt thereof or three (3) days after deposit in the U.S. mails, first class, registered or certified mail return receipt
requested, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT,
AND THE LENDERS EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO
THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12.
GENERAL PROVISIONS
12.1
Successors and Assigns.
(a)
This Agreement binds and is for the benefit of the successors and permitted assigns of each
party. Borrower may not transfer, pledge or assign this Agreement or any rights or obligations under it without
Collateral Agent’s and each Lender’s prior written consent (which may be granted or withheld in Collateral Agent’s and
each Lender’s discretion, subject to Section 12.6). The Lenders have the right, without the consent of or notice to
Borrower, to sell, transfer, assign, pledge, negotiate, or grant participation in (any such sale, transfer, assignment,
negotiation, or grant of a participation, a “Lender Transfer”) all or any part of, or any interest in, the Lenders’
obligations, rights, and benefits under this Agreement and the other Loan Documents; provided, however, that any such
Lender Transfer (other than a transfer, pledge, sale or assignment to an Eligible Assignee) of its obligations, rights, and
benefits under this Agreement and the other Loan Documents shall require the prior written consent of the Required
Lenders (such approved assignee, an “Approved Lender”). Borrower and Collateral Agent shall be entitled to
continue to deal solely and directly with such Lender in connection with the interests so assigned until Collateral Agent
shall have received and accepted an effective assignment agreement in form satisfactory to Collateral Agent executed,
delivered and fully completed by the applicable parties thereto, and shall have received such other information
regarding such Eligible Assignee or Approved Lender as Collateral Agent reasonably shall require. Notwithstanding
anything to the contrary contained herein, so long as no Event of Default has occurred and is continuing, no Lender
Transfer (other than a Lender Transfer in connection with (x) assignments by a Lender due to a forced divestiture at the
request of any regulatory agency; or (y) upon the occurrence of a default, event of default or similar occurrence
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with respect to a Lender’s own financing or securitization transactions) shall be permitted, without Borrower’s consent,
to any Person which is an Affiliate or Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund,
each as determined by Collateral Agent.
(b)
Collateral Agent, acting solely for this purpose as a non-fiduciary agent of Borrower (solely
for tax purposes), shall maintain at one of its U.S. offices a copy of each assignment and a register for the recordation of
the name and address of, and the principal amounts (and stated interest) of the obligations owing to, each lender or
assignee pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive
absent manifest error, and the parties shall treat each person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by
Borrower at any reasonable time and from time to time upon reasonable prior notice. Any Lender that sells a
participation shall, acting solely for this purpose as a non-fiduciary agent of Borrower (solely for tax purposes),
maintain a register on which it enters the name and address of each participant and the principal amounts (and stated
interest) of each participant’s interest in the obligations under the Loan Documents (the “Participant Register”). The
entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person
whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement
notwithstanding any notice to the contrary. This requirement to maintain the Register and Participant Register shall be
construed so that such obligations are at all times maintained in “registered form” within the meaning of Sections
163(f), 871(h)(2) and 881(c)(2) of the IRC and any related Treasury Regulations (and any other relevant or successor
provisions of the IRC or such Treasury Regulations).
12.2
Indemnification. Borrower agrees to indemnify, defend and hold Collateral Agent and the Lenders
and their respective directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing
Collateral Agent or the Lenders (each, an “Indemnified Person”) harmless against: (a) all obligations, demands,
claims, and liabilities (collectively, “Claims”) asserted by any other party in connection with; related to; following; or
arising from, out of or under, the transactions contemplated by the Loan Documents; and (b) all losses or Lenders’
Expenses incurred, or paid by Indemnified Person in connection with; related to; following; or arising from, out of or
under, the transactions contemplated by the Loan Documents between Collateral Agent, and/or the Lenders and
Borrower (including reasonable and documented out-of-pocket attorneys’ fees and expenses), except for Claims and/or
losses directly caused by such Indemnified Person’s gross negligence or willful misconduct. Borrower hereby further
indemnifies, defends and holds each Indemnified Person harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including the fees and disbursements of counsel for such Indemnified Person) in connection with any
investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnified
Person shall be designated a party thereto and including any such proceeding initiated by or on behalf of Borrower, and
the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and
any commission, fee or compensation claimed by any broker (other than any broker retained by Collateral Agent or
Lenders) asserting any right to payment for the transactions contemplated hereby which may be imposed on, incurred
by or asserted against such Indemnified Person as a result of or in connection with the transactions contemplated hereby
and the use or intended use of the proceeds of the loan proceeds except for liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements directly caused by such Indemnified
Person’s gross negligence or willful misconduct. This Section 12.2 shall not apply with respect to Taxes other than any
Taxes that represent losses, claims, damages or liability arising from any non-Tax claim.
12.3
Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.
12.4
Severability of Provisions. Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5
Correction of Loan Documents. Collateral Agent and the Lenders may correct patent errors and fill
in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties so long as
Collateral Agent and the Lenders provide Borrower with written notice of such correction and allows Borrower at least
ten (10) days to object to such correction. In the event of such objection, such correction shall not be made except by an
amendment signed by Collateral Agent, the Lenders, and Borrower.
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12.6
Amendments in Writing; Integration. (a) No amendment, modification, termination or waiver of
any provision of this Agreement or any other Loan Document, no approval or consent thereunder, or any consent to any
departure by Borrower or any of its Subsidiaries therefrom, shall in any event be effective unless the same shall be in
writing and signed by Borrower, Collateral Agent and the Required Lenders provided that:
(i)
no such amendment, waiver or other modification that would have the effect of
increasing or reducing a Lender’s Term Loan Commitment or Commitment Percentage shall be effective as to such
Lender without such Lender’s written consent;
(ii)
no such amendment, waiver or modification that would affect the rights and duties
of Collateral Agent shall be effective without Collateral Agent’s written consent or signature;
(iii)
no such amendment, waiver or other modification shall, unless signed by all the
Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to any Term
Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to any
Term Loan (B) postpone the date fixed for, or waive, any payment of principal of any Term Loan or of interest on any
Term Loan (other than default interest) or any fees provided for hereunder (other than late charges or for any
termination of any commitment); (C) change the definition of the term “Required Lenders” or the percentage of
Lenders which shall be required for the Lenders to take any action hereunder; (D) release all or substantially all of any
material portion of the Collateral, authorize Borrower to sell or otherwise dispose of all or substantially all or any
material portion of the Collateral or release any Guarantor of all or any portion of the Obligations or its guaranty
obligations with respect thereto, except, in each case with respect to this clause (D), as otherwise may be expressly
permitted under this Agreement or the other Loan Documents (including in connection with any disposition permitted
hereunder); (E) amend, waive or otherwise modify this Section 12.6 or the definitions of the terms used in this
Section 12.6 insofar as the definitions affect the substance of this Section 12.6; (F) consent to the assignment,
delegation or other transfer by Borrower of any of its rights and obligations under any Loan Document or release
Borrower of its payment obligations under any Loan Document, except, in each case with respect to this clause (F),
pursuant to a merger or consolidation permitted pursuant to this Agreement; (G) amend any of the provisions of
Section 9.4 or amend any of the definitions of Pro Rata Share, Term Loan Commitment, Commitment Percentage or
that provide for the Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral
hereunder; (H) subordinate the Liens granted in favor of Collateral Agent securing the Obligations; or (I) amend any of
the provisions of Section 12.10. It is hereby understood and agreed that all Lenders shall be deemed directly affected by
an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F), (G) and
(H) of the preceding sentence;
(iv)
the provisions of the foregoing clauses (i), (ii) and (iii) are subject to the provisions
of any interlender or agency agreement among the Lenders and Collateral Agent pursuant to which any Lender may
agree to give its consent in connection with any amendment, waiver or modification of the Loan Documents only in the
event of the unanimous agreement of all Lenders.
(b)
Other than as expressly provided for in Section 12.6(a)(i)-(iii), Collateral Agent may, if
requested by the Required Lenders, from time to time designate covenants in this Agreement less restrictive by
notification to a representative of Borrower.
(c)
This Agreement and the Loan Documents represent the entire agreement about this subject
matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations,
warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents
merge into this Agreement and the Loan Documents.
12.7
Counterparts. This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together,
constitute one Agreement.
12.8
Survival. All covenants, representations and warranties made in this Agreement continue in full force
and effect until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity
obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been
satisfied. The obligation of Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, as
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well as the confidentiality provisions in Section 12.9 below, shall survive until the statute of limitations with respect to
such claim or cause of action shall have run.
12.9
Confidentiality. In handling any confidential information of Borrower and its Subsidiaries, the
Lenders and Collateral Agent shall exercise the same degree of care that it exercises for their own proprietary
information, but disclosure of information may be made: (a) subject to the terms and conditions of this Agreement, to
the Lenders’ and Collateral Agent’s Subsidiaries or Affiliates that are subject to confidentiality provisions that are
similar to the provisions of this Section 12.9, or in connection with a Lender’s own financing or securitization
transactions and upon the occurrence of a default, event of default or similar occurrence with respect to such financing
or securitization transaction; (b) to prospective transferees (other than those identified in (a) above) or purchasers of any
interest in the Credit Extensions (provided, however, the Lenders and Collateral Agent shall, except upon the
occurrence and during the continuance of an Event of Default, obtain such prospective transferee’s or purchaser’s
agreement to the terms of this provision or to similar confidentiality terms no less restrictive than those contained
herein); (c) as required by law, regulation, subpoena, or other order; (d) to Lenders’ or Collateral Agent’s regulators or
as otherwise required in connection with an examination or audit; (e) as Collateral Agent reasonably considers
appropriate in exercising remedies under the Loan Documents; and (f) to third party service providers of the Lenders
and/or Collateral Agent so long as such service providers have executed a confidentiality agreement with the Lenders
and Collateral Agent with terms no less restrictive than those contained herein. Confidential information does not
include information that either: (i) is in the public domain or in the Lenders’ and/or Collateral Agent’s possession when
disclosed to the Lenders and/or Collateral Agent, or becomes part of the public domain after disclosure to the Lenders
and/or Collateral Agent (other than due to the fault of the Lenders and/or Collateral Agent in violation of this Section
12.9); or (ii) is disclosed to the Lenders and/or Collateral Agent by a third party, if the Lenders and/or Collateral Agent
does not know that the third party is prohibited from disclosing the information. Collateral Agent and the Lenders may
use confidential information relating to the administration of this Agreement and for the development of client
databases, reporting purposes required by law or by Governmental Authorities, and market analysis. The provisions of
the immediately preceding sentence shall survive the termination of this Agreement. The agreements provided under
this Section 12.9 supersede all prior agreements, understanding, representations, warranties, and negotiations between
the parties about the subject matter of this Section 12.9.
12.10
Right of Set Off. Borrower hereby grants to Collateral Agent and to each Lender, a lien, security
interest and right of set off as security for all Obligations to Collateral Agent and each Lender hereunder, whether now
existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Collateral Agent or the Lenders or any entity under the control of
Collateral Agent or the Lenders (including a Collateral Agent affiliate) or in transit to any of them. At any time after the
occurrence and during the continuance of an Event of Default, without demand or notice, Collateral Agent or the
Lenders may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even
though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL
RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.11
Cooperation of Borrower. If necessary, Borrower agrees to (i) execute any documents (including
new Secured Promissory Notes) reasonably required to effectuate and acknowledge each assignment of a Term Loan
Commitment or Term Loan to an assignee in accordance with Section 12.1(a), (ii) make Borrower’s management
available to meet with Collateral Agent and prospective participants and assignees of Term Loan Commitments or
Credit Extensions (which meetings shall be conducted no more often than twice every twelve months unless an Event of
Default has occurred and is continuing), and (iii) assist Collateral Agent or the Lenders in the preparation of information
relating to the financial affairs of Borrower as any prospective participant or assignee of a Term Loan Commitment or
Term Loan reasonably may request. Subject to the provisions of Section 12.9, Borrower authorizes each Lender to
disclose to any prospective participant or assignee of a Term Loan Commitment, any and all information in such
Lender’s possession concerning Borrower and its financial affairs which has been delivered to such Lender by or on
behalf of Borrower pursuant to this Agreement, or which has been delivered to such Lender by or on behalf of Borrower
in connection with such Lender’s credit evaluation of Borrower prior to entering into this Agreement.
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12.12
Borrower Liability. Either Borrower may, acting singly, request Credit Extensions hereunder. Each
Borrower hereby appoints the other as agent for the other for all purposes hereunder, including with respect to
requesting Credit Extensions hereunder. Each Borrower hereunder shall be jointly and severally obligated to repay all
Credit Extensions made hereunder, regardless of which Borrower actually receives said Credit Extension, as if each
Borrower hereunder directly received all Credit Extensions. Each Borrower waives (a) any suretyship defenses
available to it under the Code or any other applicable law, and (b) any right to require Collateral Agent or any Lender
to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any
other remedy. Collateral Agent and or any Lender may exercise or not exercise any right or remedy it has against any
Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any
Borrower’s liability. Notwithstanding any other provision of this Agreement or other related document, each Borrower
irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating
Borrower to the rights of Collateral Agent and the Lenders under this Agreement) to seek contribution, indemnification
or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or
secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in
connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any
security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection
with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other
arrangement prohibited under this Section shall be null and void. If any payment is made to a Borrower in
contravention of this Section, such Borrower shall hold such payment in trust for Collateral Agent and the Lenders and
such payment shall be promptly delivered to Collateral Agent for application to the Obligations, whether matured or
unmatured.
13.
DEFINITIONS
13.1
Definitions. As used in this Agreement, the following terms have the following meanings:
“1-Month CME Term SOFR” is the 1-month CME Term SOFR reference rate as published by the CME
Term SOFR Administrator on the CME Term SOFR Administrator’s Website.
“Acceptable Intercreditor Agreement” means, with respect to any Permitted Royalty Transaction that is a
synthetic royalty transaction, an intercreditor or other agreement among the Collateral Agent, the applicable synthetic
royalty financer (or agent of such applicable synthetic royalty financer) of such Permitted Royalty Transaction (the
“Applicable Synthetic Royalty Financer”) and Borrower (and/or any Subsidiary of Borrower party thereto) providing
(i) at the sole option of Borrower, a first priority security interest and Lien (or, solely, with respect to clause (B) below, a
second priority interest and Lien subject only to the priority of the security interest and Lien of the Collateral Agent
under the Loan Documents in a manner consistent with such intercreditor or other agreement) granted to the Applicable
Synthetic Royalty Financer in (A) the applicable percentage of (and/or the applicable rights, benefits and/or interests in)
the royalty interest or revenue interest and payment intangibles related to the Applicable Product, (B) any intellectual
property (including, without limitation, any Intellectual Property) solely underlying the Applicable Product, (C) any
proceeds or product of any of the foregoing, and (D) a deposit account of Borrower solely holding royalty proceeds due
to the Applicable Synthetic Royalty Financer in an amount not to exceed the percentage of revenues and royalty
amounts due to the Applicable Synthetic Royalty Financer, (ii) that (A) the governing law thereof is New York and
(B) submission of jurisdiction and venue is the State of New York (or some customary subset thereof) and the appellate
courts thereof, and (iii) for such other provisions that are reasonably satisfactory to the Collateral Agent that are
consistent with clause (i) and clause (ii) above.
“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made,
and includes, without limitation, all accounts receivable and other sums owing to Borrower.
“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may
hereafter be made.
“Acquisition of Borrower” is defined in Section 7.2.
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“Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that
controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.
“Agreement” is defined in the preamble hereof.
“Amortization Date” is April 1, 2029; provided, however, if Borrower achieves the Interest-Only Extension
Milestone, then the Amortization Date with respect to all Term Loans shall automatically be extended to April 1, 2030.
“Annual Projections” is defined in Section 6.2(a).
“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering, including Executive Order
No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the laws comprising or implementing the Bank
Secrecy Act, and the laws administered by OFAC.
“Applicable Product” is defined in the definition of “Permitted Royalty Transaction”.
“Applicable Synthetic Royalty Financer” is defined in the definition of “Acceptable Intercreditor
Agreement”.
“Approved Fund” is any (a) Person, investment company, fund, securitization vehicle or conduit that is (or
will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of
credit in the ordinary course of its business and that is administered or managed by (i) a Lender, (ii) an Affiliate of a
Lender, or (iii) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that
administers or manages a Lender, or (b) any Person (other than a natural person) which temporarily warehouses loans,
or provides financing or securitizations, in each case, for any Lender or any entity described in the preceding clause (a).
“Approved Lender” is defined in Section 12.1(a).
“Basic Rate” is with respect to each Term Loan, the per annum rate of interest (based on a year of three
hundred sixty (360) days) equal to (a) the greater of (i) the 1-Month CME Term SOFR on the last Business Day of the
month that immediately precedes the month in which the interest will accrue and (ii) three percent (3.00%), plus (b) five
and one half of one percent (5.50%). Notwithstanding the foregoing, (i) in no event shall the Basic Rate for any Term
Loan be less than eight and one half of one percent (8.50%), (ii) upon the occurrence of a Benchmark Transition Event,
Collateral Agent may, in good faith and with reference to the margin above such interest rate in this definition, amend
this Agreement to replace the Benchmark with a replacement interest rate and replacement margin above such interest
rate that results in a substantially similar interest rate floor and total rate in effect immediately prior to the effectiveness
of such replacement interest rate and replacement margin, and any such amendment shall become effective at 5:00 p.m.
Eastern time on the third Business Day after Collateral Agent has notified Borrower of such amendment, and (iii) the
Basic Rate for the Term A Loan for the period from the Effective Date through and including February 28, 2025 shall
be 9.81308%. Any determination, decision or election that may be made by Collateral Agent pursuant hereto will be
conclusive and binding absent manifest error and may be made in Collateral Agent’s sole discretion in good faith and
without consent from any other party.
“Benchmark” is, initially, the 1-Month CME Term SOFR; provided, that if a Benchmark Transition Event has
occurred with respect to the 1-Month CME Term SOFR or the then-current Benchmark, then “Benchmark” means the
applicable replacement rate that has replaced the immediately preceding benchmark rate pursuant to the defined term
“Basic Rate”.
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to
the then-current Benchmark:
(a)
a public statement or publication of information by or on behalf of the administrator for such
Benchmark announcing that such Person has ceased or will cease to provide such Benchmark, permanently or
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indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will
continue to provide such Benchmark;
(b)
a public statement or publication of information by the regulatory supervisor for the administrator for
such Benchmark, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for
such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an
entity with similar insolvency or resolution authority over the administrator for such Benchmark, which states that the
administrator for such Benchmark has ceased or will cease to provide such Benchmark permanently or indefinitely,
provided that, at the time of such statement or publication, there is no successor administrator that will continue to
provide such Benchmark; or
(c)
a public statement or publication of information by the regulatory supervisor for the administrator for
such Benchmark announcing that such Benchmark is no longer representative or in compliance with the International
Organization of Securities Commissions Principles for Financial Benchmarks.
“Biologics License Application” means an application for licensure of a biological product submitted to the
FDA under 42 U.S.C. § 262(a) for permission to introduce, or deliver for introduction, a biological product into
interstate commerce.
“Blocked Person” is any Person: (a) listed in the annex to, or is otherwise subject to the provisions of,
Executive Order No. 13224, (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed
in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) a Person with which any
Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or
(e) a Person that is named a “specially designated national” or “blocked person” on the most current list published by
OFAC or other similar list.
“Borrower” is defined in the preamble hereof.
“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records including ledgers, federal,
and state tax returns, records regarding Borrower’s or its Subsidiaries’ assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or any equipment containing such information.
“Business Day” is any day that is not a Saturday, Sunday or a day on which Collateral Agent is closed.
“Cash Equivalents” are (a) marketable direct obligations issued or unconditionally guaranteed by the United
States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition;
(b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either
Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., (c) certificates of deposit maturing no more than
one (1) year after issue provided that the account in which any such certificate of deposit is maintained is subject to a
Control Agreement in favor of Collateral Agent, and (d) money market funds at least ninety-five percent (95.00%) of
the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition. For
the avoidance of doubt, the direct purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities, or
purchasing participations in, or entering into any type of swap or other derivative transaction, or otherwise holding or
engaging in any ownership interest in any type of Auction Rate Security by Borrower or any of its Subsidiaries shall be
conclusively determined by the Lenders as an ineligible Cash Equivalent, and any such transaction shall expressly
violate each other provision of this Agreement governing Permitted Investments. Notwithstanding the foregoing, Cash
Equivalents does not include and Borrower, and each of its Subsidiaries, are prohibited from purchasing, purchasing
participations in, entering into any type of swap or other equivalent derivative transaction, or otherwise holding or
engaging in any ownership interest in any type of debt instrument, including, without limitation, any corporate or
municipal bonds with a long-term nominal maturity for which the interest rate is reset through a Dutch auction and
more commonly referred to as an auction rate security (each, an “Auction Rate Security”).
“Claims” are defined in Section 12.2.
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“CME Term SOFR Administrator” is CME Group Benchmark Administration Limited, as administrator of
the forward-looking term SOFR, or any successor administrator.
“CME Term SOFR Administrator’s Website” is the website of the CME Group Benchmark Administrator
at http://www.cmegroup.com, or any successor source.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the
State of New York; provided, that, to the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles of the Code, the definition of such term contained in
Article 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection, or priority of, or remedies with respect to, Collateral Agent’s Lien on any Collateral is
governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of New York, the term
“Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes
of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions
relating to such provisions.
“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account, or any other bank
account maintained by Borrower or any Subsidiary at any time.
“Collateral Agent” is, Oxford, not in its individual capacity, but solely in its capacity as agent on behalf of and
for the benefit of the Lenders.
“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to time.
“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term
as may hereafter be made.
“Communication” is defined in Section 10.
“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit C.
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person
for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or
indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is
directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all
obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or
other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange
rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of
business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for
which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it
determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any
guarantee or other support arrangement.
“Control Agreement” is any control agreement entered into among the depository institution at which
Borrower or any other Loan Party maintains a Deposit Account or the securities intermediary or commodity
intermediary at which Borrower or such Loan Party maintains a Securities Account or a Commodity Account, Borrower
or such Loan Party, and Collateral Agent pursuant to which Collateral Agent obtains control (within the meaning of the
Code) for the benefit of the Lenders over such Deposit Account, Securities Account, or Commodity Account; provided
that in the case of any Foreign Subsidiary that is a Loan Party, “Control Agreement” shall mean such other appropriate
instrument with respect to such Collateral Account to the extent necessary under applicable law to perfect the Collateral
Agent’s Lien in such Collateral Account.
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“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like
protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or
not the same also constitutes a trade secret.
“Credit Extension” is any Term Loan or any other extension of credit by Collateral Agent or Lenders for
Borrower’s benefit.
“Declined Royalty Transaction” means a proposed Permitted Royalty Transaction that (i) is structured as a
true sale royalty transaction, (ii) satisfies the conditions of clauses (i) through (iv) of the definition of Permitted Royalty
Transaction, and (iii) (A) unless Collateral Agent has previously notified Borrower in writing that Collateral Agent or a
Lender will not agree to the terms of such Permitted Royalty Transaction, does not satisfy the condition of clause (v) of
the definition of Permitted Royalty Transaction as confirmed by Collateral Agent to Borrower in writing within five (5)
Business Days after Borrower requests such confirmation so long as Borrower has provided final transaction documents
with respect to such Permitted Royalty Transaction between Borrower and the acquiror or financer to such Permitted
Royalty Transaction to Collateral Agent, and Borrower certifies to Collateral Agent that such acquiror or financer to
such Permitted Royalty Transaction has considered Collateral Agent’s comments (if any) to such Permitted Royalty
Transaction, and (B) is consummated within thirty (30) days (or such longer period as consented to by Collateral Agent
in its sole discretion) after Borrower’s receipt of such confirmation from Collateral Agent.
“Default Rate” is defined in Section 2.3(b).
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may
hereafter be made.
“Designated Deposit Account” is Borrower’s deposit account, account number ending in 5801, maintained
with SVB, or such other deposit account of Borrower designated as such to the Collateral Agent in writing after the
Effective Date.
“Disbursement Letter” is that certain form attached hereto as Exhibit B.
“Division” means, in reference to any Person which is an entity, the division of such Person into two (2) or
more separate Persons, with the dividing Person either continuing or terminating its existence as part of such division,
including, without limitation, as contemplated under Section 18-217 of the Delaware Limited Liability Company Act
for limited liability companies formed under Delaware law, or any analogous action taken pursuant to any other
applicable law with respect to any corporation, limited liability company, partnership or other entity.
“Dollars,” “dollars” and “$” each mean lawful money of the United States.
“Effective Date” is defined in the preamble of this Agreement.
“Effective Date Accrued Final Payment” is defined in Section 2.5(h).
“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any
commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as
defined in Regulation D under the Securities Act of 1933, as amended) and which extends credit or buys loans as one of
its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance
companies, in each case, which either (A) has a rating of BBB or higher from Standard & Poor’s Rating Group and a
rating of Baa2 or higher from Moody’s Investors Service, Inc. at the date that it becomes a Lender or (B) has total assets
in excess of Five Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through (iv), which, through its
applicable lending office, is capable of lending to Borrower without the imposition of any withholding or similar taxes;
provided that notwithstanding the foregoing, “Eligible Assignee” shall not include, unless an Event of Default has
occurred and is continuing, (i) Borrower or any of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of
Borrower or a vulture hedge fund, each as determined by Collateral Agent. Notwithstanding the foregoing, (x) in
connection with assignments by a Lender due to a forced divestiture at the request of any regulatory agency, the
restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party and (y) in connection
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with a Lender’s own financing or securitization transactions, the restrictions set forth herein shall not apply and Eligible
Assignee shall mean any Person or party providing such financing or formed to undertake such securitization
transaction and any transferee of such Person or party upon the occurrence of a default, event of default or similar
occurrence with respect to such financing or securitization transaction; provided that no such sale, transfer, pledge or
assignment under this clause (y) shall release such Lender from any of its obligations hereunder or substitute any such
Person or party for such Lender as a party hereto until Collateral Agent shall have received and accepted an effective
assignment agreement from such Person or party in form satisfactory to Collateral Agent executed, delivered and fully
completed by the applicable parties thereto, and shall have received such other information regarding such Eligible
Assignee as Collateral Agent reasonably shall require.
“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be
made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.
“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations.
“Excluded Assets” means the assets of Borrower that will no longer remain Collateral upon the consummation
of a Permitted Royalty Transaction, which, for the avoidance of doubt, shall not include Intellectual Property except to
the extent provided in the definition of Acceptable Intercreditor Agreement.
“Event of Default” is defined in Section 8.
“FDA” means the U.S. Food and Drug Administration or any successor thereto.
“Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of
principal plus accrued interest) due on the earliest to occur of (a) the Maturity Date, or (b) the acceleration of any Term
Loan, or (c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d), equal to the original principal amount of
such Term Loan advanced to Borrower multiplied by the Final Payment Percentage, payable to Lenders in accordance
with their respective Pro Rata Shares.
“Final Payment Percentage” is two percent (2.00%).
“First Interest-Only Extension Milestone Fee” is a fee, due and payable to the Lenders in accordance with
their respective Pro Rata Shares, in an aggregate amount equal to Thirty Thousand Dollars ($30,000.00), which was
paid on the Fourth Amendment Effective Date.
“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the laws of the United States or any
territory thereof.
“Foreign Subsidiary Trigger Event” means the occurrence of either of the following:
(a)
as of the end of any fiscal quarter of Borrower that ends after [***], if Net Product Revenue
(as determined in accordance with GAAP) of Borrower and its Subsidiaries generated, sourced and received by such
Persons in the United States of America for the four fiscal quarter period ending as of such date is less than [***], the
Net Product Revenue (as determined in accordance with GAAP) of Borrower and its Subsidiaries generated, sourced
and received by such Persons from countries outside of the United States of America for such four fiscal quarter period
exceed [***] of the worldwide Net Product Revenue (as determined in accordance with GAAP) of Borrower and its
Subsidiaries for such four fiscal quarter period; or
(b)
as of the end of any fiscal quarter of Borrower that ends after [***], if Net Product Revenue
(as determined in accordance with GAAP) of Borrower and its Subsidiaries generated, sourced and received by such
Persons in the United States of America for the four fiscal quarter period ending as of such date is greater than or equal
to [***], the Net Product Revenue (as determined in accordance with GAAP) of Borrower and its Subsidiaries
generated, sourced and received by such Persons from countries outside of the United States of America for such four
fiscal quarter period exceed [***] of the worldwide Net Product Revenue (as determined in accordance with GAAP)
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of Borrower and its Subsidiaries for such four fiscal quarter period.
“Fourth Amendment” means that certain Fourth Amendment to Loan and Security Agreement, dated as of
the Fourth Amendment Effective Date, by and among Borrower, Parent, Oxford as a lender and Collateral Agent, SVB
as a lender and the other Lenders party thereto.
“Fourth Amendment Effective Date” is May 17, 2024.
“Funding Date” is any date on which a Credit Extension is made to or on account of Borrower which shall be
a Business Day.
“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may
be approved by a significant segment of the accounting profession in the United States, which are applicable to the
circumstances as of the date of determination.
“General Intangibles” are all “general intangibles” as defined in the Code in effect on the date hereof with
such additions to such term as may hereafter be made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of authorship and derivative work, whether
published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions,
payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route
lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to
purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort
or otherwise), insurance policies (including without limitation key man, property damage, and business interruption
insurance), payments of insurance and rights to payment of any kind.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit,
certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any
Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any
agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any
self-regulatory organization.
“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent.
“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be
amended, restated, modified or otherwise supplemented.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as
reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.
“Indemnified Person” is defined in Section 12.2.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy
Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“Insolvent” means not Solvent.
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“Intellectual Property” means all of Borrower’s or any Subsidiary’s right, title and interest in and to the
following:
(a)
its Copyrights, Trademarks and Patents;
(b)
any and all trade secrets and trade secret rights, including, without limitation, any rights to
unpatented inventions, know-how, operating manuals;
(c)
any and all source code;
(d)
any and all design rights which may be available to Borrower;
(e)
any and all claims for damages by way of past, present and future infringement of any of the
foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above; and
(f)
all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
“Interest-Only Extension Milestone” is Borrower’s delivery to Collateral Agent of [***], that is equal to or
greater than [***].
“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing
and shipping materials, work in process and finished products, including without limitation such inventory as is
temporarily out of any Person’s custody or possession or in transit and including any returned goods and any documents
of title representing any of the above.
“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other
securities), and any loan, advance, payment or capital contribution to any Person.
“IP Agreement” is any Intellectual Property Security Agreement entered into by and between Borrower and
Collateral Agent, as such may be amended from time to time.
“IP Trigger Event” means the earlier to occur of (a) the outstanding principal balance of the Term Loans
exceeds One Hundred One Million Dollars ($101,000,000.00) and (b) Borrower enters into a binding and enforceable
Permitted Royalty Financing Transaction; provided, however, for the avoidance of doubt, that no IP Trigger Event shall
occur under clause (a) of this definition as a result of any accrual or capitalization of any interest, fees or other amounts
with respect to any Term Loan.
“IRC” means the Internal Revenue Code of 1986, as amended, and Treasury Regulations thereunder.
“Key Person” is each of Borrower’s (i) President and Chief Executive Officer, (ii) Chief Financial Officer, and
(iii) Chief Medical Officer.
“Lender” is any one of the Lenders.
“Lender Transfer” is defined in Section 12.1(a).
“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee that becomes a party to this
Agreement pursuant to Section 12.1(a).
“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees
and expenses, as well as appraisal fees, fees incurred on account of lien searches, inspection fees, and filing fees) for
preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without
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limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred by Collateral
Agent and/or the Lenders in connection with the Loan Documents.
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any
kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
“Loan Documents” are, collectively, this Agreement, the Perfection Certificates, each Compliance Certificate,
each Disbursement Letter, each Guaranty, each IP Agreement, any subordination agreements, any note, or notes or
guaranties executed by Borrower or any other Person, and any other present or future agreement entered into by
Borrower, any Guarantor or any other Person for the benefit of the Lenders and Collateral Agent in connection with this
Agreement; all as amended, restated, or otherwise modified.
“Loan Party” means any Borrower and any Guarantor.
“Market Capitalization” means, as of any date of determination, the product of (a) the number of Parent’s
shares of common stock outstanding on such date of determination and (b) the closing price of one share of Parent’s
common stock as quoted on www.nasdaq.com or, if such page is not available, any other commercially available source
providing quotations of such closing price as reasonably selected by Parent, on such date of determination.
“Material Adverse Change” is (a) a material impairment in the perfection or priority of Collateral Agent’s
Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations or
financial condition of Borrower or Borrower and its Subsidiaries (taken as a whole); or (c) a material impairment of the
prospect of repayment of any portion of the Obligations.
“Maturity Date” is, for each Term Loan, February 1, 2030; provided, however, if Borrower achieves the
Interest-Only Extension Milestone, then the Maturity Date is automatically extended to February 1, 2031.
“MSC Subsidiary” means Scholar Rock Securities Corporation, a Subsidiary of Parent that is a corporation
that qualifies as a Massachusetts securities corporation by meeting the requirements of Chapter 63, Section 38B of the
Massachusetts General Laws.
“Net Product Revenue” means net product revenue (as determined in accordance with GAAP) from the sale
of any products or services of Borrower or its Subsidiaries, including sales-based royalty revenue (regardless of whether
such payments are included as product revenue as determined in accordance with GAAP) but excluding any upfront or
milestone payments under royalty, profit sharing, business development or licensing transactions.
“Obligations” are all of Borrower’s obligations to pay when due any debts, principal, interest, Lenders’
Expenses, the Prepayment Fee (if any), the Second Amendment Accrued Final Payment, the Final Payment, the First
Interest-Only Extension Milestone Fee and other amounts Borrower owes the Lenders now or later, in connection with,
related to, following, or arising from, out of or under, this Agreement or, the other Loan Documents, or otherwise,
including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn
and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest
accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower
assigned to the Lenders and/or Collateral Agent, and the performance of Borrower’s duties under the Loan Documents.
“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.
“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked Persons List maintained by
OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or
other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other
applicable Executive Orders.
“Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary
of State (or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30)
days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if
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such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if
such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current
amendments or modifications thereto.
“Original Closing Date” is October 16, 2020.
“Original Term Loan” is defined in Section 2.2(a)(i) hereof.
“Parent” is defined in the preamble hereof.
“Participant Register” is defined in Section 12.1(b).
“Patents” means all patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Payment Date” is the first (1st) calendar day of each calendar month, commencing on April 1, 2025.
“Perfection Certificate” and “Perfection Certificates” is defined in Section 5.1.
“Permitted Indebtedness” is:
(a)
Borrower’s Indebtedness to the Lenders and Collateral Agent under this Agreement and the
other Loan Documents;
(b)
Indebtedness existing on the Effective Date and disclosed on the Perfection Certificates;
(c)
Subordinated Debt;
(d)
unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e)
Indebtedness consisting of capitalized lease obligations and purchase money Indebtedness, in
each case incurred by Borrower or any of its Subsidiaries to finance the acquisition, repair, improvement or construction
of fixed or capital assets of such person, provided that (i) the aggregate outstanding principal amount of all such
Indebtedness does not exceed Five Hundred Thousand Dollars ($500,000.00) at any time and (ii) the principal amount
of such Indebtedness does not exceed the lower of the cost or fair market value of the property so acquired or built or of
such repairs or improvements financed with such Indebtedness (each measured at the time of such acquisition, repair,
improvement or construction is made);
(f)
Indebtedness incurred as a result of endorsing negotiable instruments received in the
ordinary course of Borrower’s business;
(g)
Indebtedness in respect of letters of credit and similar obligations related to real estate leases
in the ordinary course of business in an aggregate amount not to exceed Two Million Seven Hundred Thousand Dollars
($2,700,000.00) at any time;
(h)
other unsecured Indebtedness in an aggregate amount outstanding at any time not to exceed
Five Hundred Thousand Dollars ($500,000.00);
(i)
Indebtedness incurred in the Permitted Royalty Transaction that is if a synthetic royalty, (i)
subject to an Acceptable Intercreditor Agreement and (ii) solely to the extent structured to have a maturity date, does
not have a scheduled maturity date earlier than ninety-one (91) days after the Maturity Date;
(j)
to the extent constituting Indebtedness, Permitted Investments; and
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(k)
extensions, refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (j) above, provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose materially more burdensome terms upon Borrower, or its Subsidiary, as the case may
be.
“Permitted Investments” are:
(a)
Investments disclosed on the Perfection Certificates and existing on the Effective Date;
(b)
(i) Investments consisting of cash and Cash Equivalents, and (ii) any other Investments
permitted by Borrower’s investment policy, as amended from time to time, provided that such investment policy (and
any such amendment thereto) has been approved in writing by Collateral Agent;
(c)
Investments consisting of the endorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of Borrower’s business;
(d)
Investments consisting of deposit accounts in which Collateral Agent has a perfected security
interest or which are otherwise maintained in compliance with Section 6.6;
(e)
Investments in connection with Transfers permitted by Section 7.1;
(f)
Investments consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors
relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans
or agreements approved by Parent’s Board of Directors; not to exceed One Hundred Thousand Dollars ($100,000.00) in
the aggregate for (i) and (ii) in any fiscal year;
(g)
Investments (including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of business;
(h)
Investments consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this
paragraph (h) shall not apply to Investments of Borrower in any Subsidiary;
(i)
non-cash Investments in joint ventures or strategic alliances in the ordinary course of
Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the
providing of technical support;
(j)
Investments in MSC Subsidiary;
(k)
Investments by (i) Borrower in any Subsidiary which is a Borrower hereunder or a Guarantor
and (ii) any Subsidiary in Borrower or a Guarantor;
(l)
prior to the Foreign Subsidiary Trigger Event and so long as Borrower is in compliance with
Section 6.6(a), Investments (including, for the avoidance of doubt, transfer pricing, cost plus or similar arrangements
with Foreign Subsidiaries in the ordinary course of business to the extent constituting Investments) by Borrower or its
Subsidiaries in Foreign Subsidiaries; and
(m)
to the extent more than one of the Borrowers and any of their Subsidiaries holds the assets
related to any Permitted Royalty Transaction, Investments by such Persons in connection therewith.
“Permitted Licenses” are (A) licenses of over-the-counter software that is commercially available to the
public, (B) non-exclusive and exclusive licenses for the use of the Intellectual Property of Borrower or any of its
Subsidiaries entered into in the ordinary course of business, provided, that, with respect to each such license described
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in clause (B), (i) no Event of Default has occurred or is continuing at the time of such license; (ii) the license constitutes
an arms-length transaction, the terms of which, on their face (in each case, other than non-exclusive licenses from or to
contract manufacturers, clinical research organizations, clinical trial or research sites, service providers and other
entities (A) entered into in the ordinary course of business, (B) the principal purpose of which does not include the
acquisition of licensing rights, but which contain such non-exclusive licenses merely ancillary to, and for the limited
purpose of, facilitating the principal purposes of the agreement and (C) so long as Borrower has complied with all other
applicable terms of the Loan Documents applicable thereto), do not provide for a sale or assignment of any Intellectual
Property and do not restrict the ability of Borrower or any of its Subsidiaries, as applicable, to pledge, grant a security
interest in or lien on, or assign or otherwise Transfer any Intellectual Property; (iii) in the case of any exclusive license,
(x) Borrower delivers ten (10) days’ prior written notice and a brief summary of the terms of the proposed license to
Collateral Agent and the Lenders and delivers copies of the final executed licensing documents in connection with the
exclusive license promptly upon consummation thereof, and (y) any such license could not result in a legal transfer of
title of the licensed property but may be exclusive in respects other than territory and may be exclusive as to territory
only as to discrete geographical areas outside of the United States; and (iv) all upfront payments, royalties, milestone
payments or other proceeds arising from the licensing agreement that are payable to Borrower are paid to a Deposit
Account that is governed by a Control Agreement (except in connection with a Permitted Royalty Transaction that is
not otherwise restricted by any applicable Acceptable Intercreditor Agreement), and (C) any other ancillary license
provided in connection with a Permitted Royalty Transaction structured as a synthetic royalty transaction that is in form
and substance reasonably satisfactory to the Collateral Agent and otherwise satisfies the conditions of clauses (B)(i)
through (iii) hereof (unless otherwise reasonably agreed by the Collateral Agent with respect to clause (B)(ii) in
connection with any negative lien covenant provided in any such synthetic royalty transaction (subject to such covenant
expressly permitted the Collateral Agent’s Liens under the Loan Documents)).
“Permitted Liens” are:
(a)
Liens existing on the Effective Date and disclosed on the Perfection Certificates or arising
under this Agreement and the other Loan Documents;
(b)
Liens for taxes, fees, assessments or other government charges or levies, either (i) not due
and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on its Books,
provided that no notice of any such Lien has been filed or recorded under the IRC;
(c)
liens securing Indebtedness permitted under clause (e) of the definition of “Permitted
Indebtedness,” provided that (i) such liens exist prior to the acquisition of, or attach substantially simultaneous with, or
within twenty (20) days after the, acquisition, lease, repair, improvement or construction of, such property financed or
leased by such Indebtedness and (ii) such Liens do not extend to any property of Borrower other than the property (and
proceeds thereof) acquired, leased or built, or the improvements or repairs, financed by such Indebtedness;
(d)
Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature
arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the
aggregate amount not to exceed One Hundred Thousand Dollars ($100,000.00), and which are not delinquent or remain
payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings
have the effect of preventing the forfeiture or sale of the property subject thereto;
(e)
Liens to secure payment of workers’ compensation, employment insurance, old-age
pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens
imposed by ERISA);
(f)
Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens
described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness may not increase;
(g)
leases or subleases of real property granted in the ordinary course of Borrower’s business (or,
if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive
licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if
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the leases, subleases, licenses and sublicenses do not prohibit granting Collateral Agent or any Lender a security interest
therein;
(h)
banker’s liens, rights of setoff and Liens in favor of financial institutions incurred in the
ordinary course of business arising in connection with Borrower’s deposit accounts or securities accounts held at such
institutions solely to secure payment of fees and similar costs and expenses and provided such accounts are maintained
in compliance with Section 6.6(b) hereof;
(i)
Liens arising from judgments, decrees or attachments in circumstances not constituting an
Event of Default under Section 8.4 or 8.7;
(j)
Liens securing Indebtedness permitted under clause (g) of the definition of “Permitted
Indebtedness”;
(k)
Liens consisting of landlord liens, so long as each such landlord is party to a landlord
agreement in favor of Collateral Agent, in form and substance reasonably satisfactory to Collateral Agent;
(l)
Liens consisting of Permitted Licenses;
(m)
Liens (including priority Liens) provided in connection with a Permitted Royalty
Transaction; provided that no Liens shall be granted with respect to any Intellectual Property of Borrower or its
Subsidiaries except in the case of a Permitted Royalty Transaction structured as a synthetic royalty transaction that is
subject to an Acceptable Intercreditor Agreement; and
(n)
to the extent constituting Liens, the ownership interest of any joint owners in any patents
listed in a Perfection Certificate as being jointly owned or co-owned.
“Permitted Royalty Transaction” means the purchase of (or a financing with respect to) a royalty interest, or
a revenue interest financing of, the Borrower’s rights in Apitegromab in spinal muscular atrophy (the “Applicable
Product”), provided that (i) such transaction constitutes an arms-length transaction (the terms of which, on their face,
do not provide for a sale or collateral assignment of any Intellectual Property other than (A) a second priority Lien and
collateral assignment of Intellectual Property solely underlying the Applicable Product may be provided in connection
with such transaction that is structured as a synthetic royalty transaction to the extent such transaction is subject to an
Acceptable Intercreditor Agreement and (B) any Permitted License, (ii) Borrower receives upfront and unrestricted
(including, not subject to any redemption, clawback, escrow or similar encumbrance or restriction) gross cash payments
of at least One Hundred Fifty Million Dollars ($150,000,000.00), (iii) such transaction encumbers (with respect to a
synthetic royalty transaction) or sells (with respect to a true sale royalty transaction) not more than ten percent (10.00%)
of Borrower’s projected revenues from the Applicable Product, (iv) no Event of Default has occurred and is continuing
at the time of entering such transaction, and (v) the royalty or revenue interest agreement and related material
documents, including the assets that comprise the Excluded Assets, are otherwise in form and substance reasonably
satisfactory to the Collateral Agent (it being understood, for the avoidance of doubt, that an Acceptable Intercreditor
Agreement shall only be required with respect to such transaction that is structured as a synthetic royalty transaction).
“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company,
trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock
company, estate, entity or government agency.
“Post Closing Letter” is that certain Post Closing Letter dated as of the Effective Date by and between
Collateral Agent and Borrower.
“Prepayment Fee” is, with respect to any funded Term Loan subject to prepayment prior to the Maturity Date,
whether by mandatory or voluntary prepayment, acceleration or otherwise, an additional fee payable to the Lenders in
amount equal to:
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(i)
for a prepayment made on or after the Funding Date of such Term Loan through and
including the first anniversary of the Funding Date of such Term Loan, one and one half of one percent (1.50%) of the
principal amount of such Term Loan prepaid; provided, however, (A) if such prepayment is made immediately prior to
and concurrently with an Acquisition of Borrower or an acquisition of all or substantially all of the assets of Borrower
or (B) if such prepayment is made immediately prior to, substantially concurrently with (not to exceed five (5) Business
Days) or concurrently with the consummation of a Declined Royalty Transaction, such Prepayment Fee shall be one
percent (1.00%) of the principal amount of such Term Loan prepaid;
(ii)
for a prepayment made after the date which is after the first anniversary of the
Funding Date of such Term Loan through and including the second anniversary of the Funding Date of such Term Loan,
one percent (1.00%) of the principal amount of such Term Loan prepaid; provided, however, if such prepayment is
made immediately prior to, substantially concurrently with (not to exceed five (5) Business Days) or concurrently with
the consummation of a Declined Royalty Transaction, such Prepayment Fee shall be one half of one percent (0.50%) of
the principal amount of such Term Loan prepaid;
(iii)
for a prepayment made after the date which is after the second anniversary of the
Funding Date of such Term Loan through and including the third anniversary of the Funding Date of such Term Loan,
one half of one percent (0.50%) of the principal amount of such Term Loan prepaid; provided, however, if such
prepayment is made immediately prior to, substantially concurrently with (not to exceed five (5) Business Days) or
concurrently with the consummation of a Declined Royalty Transaction, such Prepayment Fee shall be zero percent
(0.00%) of the principal amount of such Term Loan prepaid; and
(iv)
for a prepayment made after the date which is after the third anniversary of the
Funding of such Term Loan, zero percent (0.00%) of the principal amount of such Term Loan prepaid.
“Prior Agreement” is defined in the preamble hereof.
“Pro Rata Share” is, as of any date of determination, with respect to each Lender, a percentage (expressed as
a decimal, rounded to the ninth decimal place) determined by dividing the outstanding principal amount of Term Loans
held by such Lender by the aggregate outstanding principal amount of all Term Loans.
“Register” is defined in Section 12.1(b).
“Registered Organization” is any “registered organization” as defined in the Code with such additions to such
term as may hereafter be made.
“Required Lenders” means (i) for so long as all of the Persons that are Lenders on the Effective Date (each an
“Original Lender”) have not assigned or transferred any of their interests in their Term Loan, Lenders holding one
hundred percent (100.00%) of the aggregate outstanding principal balance of the Term Loan, or (ii) at any time from
and after any Original Lender has assigned or transferred any interest in its Term Loan, Lenders holding at least sixty
six percent (66.00%) of the aggregate outstanding principal balance of the Term Loan and, in respect of this clause (ii),
(A) each Original Lender that has not assigned or transferred any portion of its Term Loan, (B) each assignee or
transferee of an Original Lender’s interest in the Term Loan, but only to the extent that such assignee or transferee is an
Affiliate or Approved Fund of such Original Lender, and (C) any Person providing financing to any Person described in
clauses (A) and (B) above; provided, however, that this clause (C) shall only apply upon the occurrence of a default,
event of default or similar occurrence with respect to such financing.
“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and
any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such
Person or any of its property is subject.
“Responsible Officer” is any of the President, Chief Executive Officer, Chief Financial Officer or General
Counsel of Borrower acting alone.
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“Scholar Rock Netherlands” means Scholar Rock Netherlands B.V., a private limited company incorporated
under the laws of the Netherlands.
“Second Amendment Effective Date” is November 10, 2022.
“Secured Promissory Note” is defined in Section 2.4.
“Secured Promissory Note Record” is a record maintained by each Lender with respect to the outstanding
Obligations owed by Borrower to Lender and credits made thereto.
“Securities Account” is any “securities account” as defined in the Code with such additions to such term as
may hereafter be made.
“Shares” is one hundred percent (100.00%) of the issued and outstanding capital stock, membership units or
other securities owned or held of record by Borrower or Borrower’s Subsidiary, in any Subsidiary; provided that, in the
event Borrower demonstrates to Collateral Agent’s reasonable satisfaction that a pledge of more than sixty five percent
(65%) of the Shares of such Subsidiary which is a Foreign Subsidiary creates a present and existing adverse tax
consequence to Borrower under the IRC, “Shares” shall mean sixty-five percent (65%) of the issued and outstanding
capital stock, membership units or other securities owned or held of record by Borrower or its Subsidiary in such
Foreign Subsidiary.
“Solvent” is, with respect to any Person: the fair salable value of such Person’s consolidated assets (including
goodwill minus disposition costs) exceeds the fair value of such Person’s liabilities; such Person is not left with
unreasonably small capital after the transactions in this Agreement; and such Person is able to pay its debts (including
trade debts) as they mature.
“Subordinated Debt” is indebtedness for borrowed money incurred by Borrower or any of its Subsidiaries
subordinated to all Indebtedness of Borrower and/or its Subsidiaries to the Lenders (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance reasonably satisfactory to Collateral Agent and the
Lenders entered into between Collateral Agent, Borrower, and/or any of its Subsidiaries, and the other creditor), on
terms reasonably acceptable to Collateral Agent and the Lenders; provided that, notwithstanding anything to the
contrary in this Agreement or any other Loan Document, no Permitted Royalty Transaction (or any obligations or
liabilities with respect thereto) shall be deemed to be Subordinated Debt.
“Subsidiary” is, with respect to any Person, any Person of which more than fifty percent (50.00%) of the
voting stock or other equity interests (in the case of Persons other than corporations) is owned or controlled, directly or
indirectly, by such Person or through one or more intermediaries.
“SVB” is Silicon Valley Bank, a division of First-Citizens Bank & Trust Company.
“Taxes” is defined in Section 2.6.
“Tax Distributions” means for any taxable period in which Borrower is a member of a consolidated,
combined, unitary or similar group for U.S. federal and applicable state and local income Tax purposes, distributions to
the common parent of such consolidated, combined, unitary or similar group to permit such common parent to pay (a)
Taxes then due and owing by such common parent on behalf of such consolidated, combined, unitary or similar group
and (b) franchise Taxes and other similar fees, Taxes (other than income Taxes) imposed on it and expenses required to
maintain the corporate existence such common parent and any intermediate holding companies in the chain of
ownership between Borrower and such common parent.
“Term A-1 Loan” is defined in Section 2.2(a)(i).
“Term A-2 Loan” is defined in Section 2.2(a)(i).
“Term A Loan” is defined in Section 2.2(a)(i).
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“Term B Draw Period” is the period commencing on the Effective Date and ending on the earlier of
(i) December 31, 2025 and (ii) the occurrence of an Event of Default.
“Term B Loan” is defined in Section 2.2(a)(ii).
“Term C Draw Period” is the period commencing on the date of the occurrence of the Term C Milestone and
ending on the earliest of (i) September 30, 2026, (ii) the date that is ninety (90) days after the achievement of the Term
C Milestone and (iii) the occurrence of an Event of Default; provided, however, that the Term C Draw Period shall not
commence if on the date of the occurrence of the Term C Milestone an Event of Default has occurred and is continuing.
“Term C Loan” is defined in Section 2.2(a)(iii).
“Term C Milestone” is Borrower’s delivery to Collateral Agent and Lenders of evidence reasonably
satisfactory to Collateral Agent and the Lenders that Borrower has received a Biologics License Application approval of
Apitegromab in spinal muscular atrophy.
“Term D Draw Period” is the period commencing on the date of the occurrence of the Interest-Only
Extension Milestone and ending on the earliest of (i) December 31, 2027, (ii) the date that is ninety (90) days after the
achievement of the Interest-Only Extension Milestone and (iii) the occurrence of an Event of Default; provided,
however, that the Term D Draw Period shall not commence if on the date of the occurrence of the Interest-Only
Extension Milestone an Event of Default has occurred and is continuing.
“Term D Loan” is defined in Section 2.2(a)(iv).
“Term Loan” is defined in Section 2.2(a)(iv).
“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make a Term Loan, up to the
principal amount shown on Schedule 1.1. “Term Loan Commitments” means the aggregate amount of such
commitments of all Lenders.
“Testing Date” is defined in Section 6.10.
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register
and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.
“Transfer” is defined in Section 7.1.
[Balance of Page Intentionally Left Blank]
1615764111.13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective
Date.
BORROWER:
SCHOLAR ROCK HOLDING CORPORATION
By
Name:
Title:
SCHOLAR ROCK, INC.
By
Name:
Title:
COLLATERAL AGENT AND LENDER:
OXFORD FINANCE LLC
By
Name:
Title:
LENDERS:
OXFORD FINANCE FUNDING XIII, LLC
By: Oxford Finance LLC, as servicer
By
Name:
Title:
OXFORD FINANCE FUNDING IX, LLC
By: Oxford Finance LLC, as servicer
By
Name:
Title:
OXFORD FINANCE FUNDING 2023-1, LLC
By: Oxford Finance LLC, as servicer
By ________________________________________
Name: ____________________________________
Title: _____________________________________
1615764111.13
LENDERS:
OXFORD FINANCE CREDIT FUND II LP
By: Oxford Finance Advisors, LLC, as manager
By ________________________________________
Name: ____________________________________
Title: _____________________________________
OXFORD FINANCE CREDIT FUND III LP
By: Oxford Finance Advisors, LLC, as manager
By ________________________________________
Name: ____________________________________
Title: _____________________________________
1615764111.13
SCHEDULE 1.1
Lenders and Commitments
Term A-1 Loans
Lender
Term Loan Commitment
Commitment Percentage
OXFORD FINANCE FUNDING XIII, LLC
$12,500,000.00
50.00%
OXFORD FINANCE FUNDING IX, LLC
$6,500,000.00
26.00%
OXFORD FINANCE FUNDING 2023-1, LLC
$6,000,000.00
24.00%
TOTAL
$25,000,000.00
100.00%
Term A-2 Loans
Lender
Term Loan Commitment
Commitment Percentage
OXFORD FINANCE LLC
$19,375,000.00
77.50%
OXFORD FINANCE CREDIT FUND II LP
$1,875,000.00
7.50%
OXFORD FINANCE CREDIT FUND III LP
$3,750,000.00
15.00%
TOTAL
$25,000,000.00
100.00%
Term B Loans
Lender
Term Loan Commitment
Commitment Percentage
OXFORD FINANCE LLC
$50,000,000.00
100.00%
TOTAL
$50,000,000.00
100.00%
Term C Loans
Lender
Term Loan Commitment
Commitment Percentage
OXFORD FINANCE LLC
$50,000,000.00
100.00%
TOTAL
$50,000,000.00
100.00%
Term D Loans
Lender
Term Loan Commitment
Commitment Percentage
OXFORD FINANCE LLC
$50,000,000.00
100.00%
TOTAL
$50,000,000.00
100.00%
Aggregate (all Term Loans)
Lender
Term Loan Commitment
Commitment Percentage
OXFORD FINANCE FUNDING XIII, LLC
$12,500,000.00
6.2500%
OXFORD FINANCE FUNDING IX, LLC
$6,500,000.00
3.2500%
OXFORD FINANCE FUNDING 2023-1, LLC
$6,000,000.00
3.0000%
OXFORD FINANCE LLC
$169,375,000.00
84.6875%
OXFORD FINANCE CREDIT FUND II LP
$1,875,000.00
0.9375%
OXFORD FINANCE CREDIT FUND III LP
$3,750,000.00
1.8750%
TOTAL
$200,000,000.00
100.00%
1615764111.13
EXHIBIT A
Description of Collateral
The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to
payment of money, leases, license agreements, franchise agreements, General Intangibles (including Intellectual
Property from and after the date on which the IP Trigger Event occurs), commercial tort claims, documents,
instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts
and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of
credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial
assets, whether now owned or hereafter acquired, wherever located; and
All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the
above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include (a)(i) any Equipment or other property
financed by a third party, provided that such third party’s Liens are Liens of the type described in subsection (c) of the
definition of Permitted Liens if the granting of a Lien in such Equipment or other property financed is prohibited by or
would constitute a default under any agreement or document governing such Equipment or property financed;
provided that the aggregate value of all such Equipment or property financed does not exceed Five Hundred Thousand
Dollars ($500,000.00); provided further that upon the termination, lapsing or expiration of any such prohibition, such
Equipment or other property financed, as applicable, shall automatically be subject to the security interest granted in
favor of Collateral Agent hereunder and become part of the “Collateral”; (ii) any lease, license or contract, in each case
if the granting of a Lien in such lease, license or contract is prohibited by or would constitute a default under the
agreement governing such lease, license or contract (but (A) only to the extent such prohibition is enforceable under
applicable law and (B) other than to the extent that any such term would be rendered ineffective pursuant to Sections
9-406, 9-408 or 9-409 (or any other Section) of Article 9 of the Code); provided that upon the termination, lapsing or
expiration of any such prohibition, such lease, license or contract, as applicable, shall automatically be subject to the
security interest granted in favor of Collateral Agent hereunder and become part of the “Collateral”; and (iii) until the
date on which an IP Trigger Event occurs, any Intellectual Property; provided, however, (A) the Collateral shall
include all Accounts (other than as set forth in clause (b) directly below) and all proceeds of Intellectual Property and
(B) if a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying
Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of
Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the
Intellectual Property to the extent necessary to permit perfection of Collateral Agent’s security interest in such
Accounts and such other property of Borrower that are proceeds of the Intellectual Property; and (b) from and after the
date that any Permitted Royalty Transaction is consummated, the Excluded Assets with respect to such Permitted
Royalty Transaction.
Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and the Lenders,
Borrower has agreed not to encumber any of its Intellectual Property except in connection with any Permitted Royalty
Transaction to the extent permitted by the A&R Loan Agreement (as defined below) and, if applicable, the Acceptable
Intercreditor Agreement with respect to such Permitted Royalty Transaction.
Capitalized terms used herein without definition shall have the meaning set forth in that certain Amended and
Restated Loan and Security Agreement (the “A&R Loan Agreement” to which this Exhibit A is attached.
1615764111.13
EXHIBIT B
Form of Disbursement Letter
[see attached]
1615764111.13
DISBURSEMENT LETTER
February 10, 2025
The undersigned, being the duly elected and acting
of SCHOLAR ROCK HOLDING
CORPORATION, a Delaware corporation (“Parent”), and SCHOLAR ROCK, INC., a Delaware corporation (together
with Parent, individually and collectively, jointly and severally, “Borrower”), with an office located at 301 Binney
Street, 3rd Floor, Cambridge, MA 02142 does hereby certify to OXFORD FINANCE LLC (as collateral agent acting
on behalf of the Lenders (as defined in the Loan Agreement) from time to time party to the Loan Agreement (as
defined below), the “Collateral Agent”) in connection with that certain Amended and Restated Loan and Security
Agreement dated as of February 10, 2025, by and among Borrower, Collateral Agent and the Lenders from time to
time party thereto (the “Loan Agreement”; with other capitalized terms used below having the meanings ascribed
thereto in the Loan Agreement) that:
1.
The representations and warranties made by Borrower in Section 5 of the Loan Agreement and in the
other Loan Documents are true and correct in all material respects as of the date hereof.
2.
No event or condition has occurred and is continuing that would constitute an Event of Default under
the Loan Agreement or any other Loan Document.
3.
Borrower is in compliance with the covenants and requirements contained in Sections 4, 6 and 7 of
the Loan Agreement.
4.
All conditions referred to in Section 3 of the Loan Agreement to the making of the Loan to be made
on or about the date hereof have been satisfied or waived by Collateral Agent.
5.
No Material Adverse Change has occurred.
6.
The undersigned is a Responsible Officer.
[Balance of Page Intentionally Left Blank]
1615764111.13
7.
The proceeds of the Term [A-2][B][C][D] Loan shall be disbursed as follows:
Disbursement from Collateral Agent:
Loan Amount
$_______________
Plus:
Less:
--Interim Interest
($_________)
--Lender’s Legal Fees
($_________)*
Net Proceeds due from Collateral Agent:
$_______________
TOTAL TERM [A-2][B][C][D] LOAN NET
PROCEEDS FROM COLLATERAL AGENT
$_______________
8.
The Term [A-2][B][C][D] Loan shall amortize in accordance with the Amortization Table attached
hereto.
9.
The aggregate net proceeds of the Term Loans shall be transferred to the Designated Deposit
Account as follows:
Account Name:
SCHOLAR ROCK, INC.
Bank Name:
Silicon Valley Bank, a division of First-Citizens Bank
& Trust Company
Bank Address:
3003 Tasman Drive
Santa Clara, California 95054
Beneficiary Address:
301 Binney Street, 3rd Floor, Cambridge, MA 02142
Account Number:
3301055801
ABA Number:
121140399
[Balance of Page Intentionally Left Blank]
* Legal fees and costs are through the Effective Date. Post-closing legal fees and costs, payable after the Effective
Date, to be invoiced and paid post-closing.
1615764111.13
Dated as of the date first set forth above.
BORROWER:
SCHOLAR ROCK HOLDING CORPORATION
By
Name:
Title:
SCHOLAR ROCK, INC.
By
Name:
Title:
COLLATERAL AGENT ON BEHALF OF
LENDERS:
OXFORD FINANCE LLC
By
Name:
Title:
1615764111.13
AMORTIZATION TABLE
(Term [A-2][B][C][D] Loan)
[see attached]
1615764111.13
EXHIBIT C
Compliance Certificate
TO:
OXFORD FINANCE LLC, as Collateral Agent and Lender
OXFORD FINANCE CREDIT FUND II LP, as Lender
OXFORD FINANCE CREDIT FUND III LP, as Lender
FROM:
SCHOLAR ROCK HOLDING CORPORATION and SCHOLAR ROCK, INC.
The undersigned authorized officer (“Officer”) of SCHOLAR ROCK HOLDING CORPORATION (“Parent”) and
SCHOLAR ROCK, INC. (together with Parent, individually and collectively, jointly and severally, “Borrower”),
hereby certifies (in such officer capacity and not in an individual capacity) that in accordance with the terms and
conditions of the Amended and Restated Loan and Security Agreement, dated as of February 10, 2025, by and among
Borrower, Collateral Agent, and the Lenders from time to time party thereto (the “Loan Agreement;” capitalized
terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement),
(a)
Borrower is in compliance for the period ending _______________ with all required covenants
except as noted below;
(b)
There are no Events of Default, except as noted below;
(c)
Except as noted below, all representations and warranties of Borrower stated in the Loan Documents
are true and correct in all material respects on this date and for the period described in (a), above; provided, however,
that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those representations and warranties expressly
referring to a specific date shall be true, accurate and complete in all material respects as of such date.
(d)
Borrower, and each of Borrower’s Subsidiaries, has timely filed all required tax returns and reports,
Borrower, and each of Borrower’s Subsidiaries, has timely paid all foreign, federal, state, and local taxes, assessments,
deposits and contributions owed by Borrower, or Subsidiary, except, in each case, as otherwise permitted pursuant to
the terms of Section 5.8 of the Loan Agreement;
(e)
No Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to
unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Collateral
Agent.
Attached are the required documents, if any, supporting our certification(s). The Officer, on behalf of Borrower,
further certifies that the attached financial statements are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying
letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and subject to
year-end audit adjustments as to the interim financial statements.
Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under
“Complies” column.
Reporting Covenant
Requirement
Actual
Complies
1)
Financial statements
Quarterly within 45 days
Yes
No
N/A
2)
Annual (CPA Audited) statements
Within earlier of (i) 90 days after
FYE and (ii) 5 days of filing with
SEC
Yes
No
N/A
1615764111.13
3)
Annual Financial
Projections/Budget (prepared on a
quarterly basis)
Annually (within 60 days of FYE),
and when revised
Yes
No
N/A
4)
A/R & A/P agings
If applicable
Yes
No
N/A
5)
8-K, 10-K and 10-Q Filings
If applicable, within 5 days of filing
Yes
No
N/A
6)
Compliance Certificate
Quarterly within 45 days
Yes
No
N/A
7)
IP Report
When required
Yes
No
N/A
8)
Total amount of Borrower’s cash
and Cash Equivalents at the last
day of the measurement period
$________
Yes
No
N/A
9)
Total amount of Borrower’s
Subsidiaries’ cash and Cash
Equivalents at the last day of the
measurement period
$________
Yes
No
N/A
Deposit and Securities Accounts
(Please list all accounts; attach separate sheet if additional space needed)
Institution Name
Account Number
New Account?
Account Control Agreement in place?
1)
Yes
No
Yes
No
2)
Yes
No
Yes
No
3)
Yes
No
Yes
No
4)
Yes
No
Yes
No
Financial Covenant (Section 6.10)1
(Please attach a separate sheet with supporting detail)
1)
Was the aggregate amount of Borrower’s unrestricted (other than Permitted Liens) cash,
Cash Equivalents and marketable securities maintained in Collateral Accounts subject to a
Control Agreement in favor of Collateral Agent less than 75.00% of the outstanding
principal balance of the Term Loans at any time during the applicable fiscal quarter?
Yes
No
2)
Was the Market Capitalization less than $800,000,000.00 at any time during the applicable
fiscal quarter?
Yes
No
3)
If you did not answer yes to both Question 1 and Question 2, then the financial covenant for
such Testing Date is waived and you do not need to answer this Question 3 or Question 4.
If you answered yes to both Question 1 and Question 2, the Net Product Revenue of
Borrower (calculated on a trailing six (6) month basis) as of such Testing Date is
$______________ and the Net Product Revenue set forth in Annex A for such Testing Date
is $______________.
4)
If you did not answer yes to both Question 1 and Question 2, then the financial covenant for
such Testing Date is waived and you do not need to answer Question 3 above or this
Question 4. If you answered yes to both Question 1 and Question 2 above, did Borrower
have Net Product Revenue (calculated on a trailing six (6) month basis) as of such Testing
Yes
No
1 To be completed in the Compliance Certificate for the month ending March 31, 2027 and on the last day of the
month of each fiscal quarter thereafter.
1615764111.13
Date of at least the amount set forth in Annex A for such Testing Date and therefore
Borrower is in compliance with Section 6.10?
Other Matters
1)
Have there been any changes in management since the last Compliance Certificate?
Yes
No
2)
Have there been any transfers/sales/disposals/retirement of Collateral or IP prohibited by
the Loan Agreement?
Yes
No
3)
Have there been any new or pending claims or causes of action against Borrower that
involve more than One Million Dollars ($1,000,000.00)?
Yes
No
4)
Have there been any material changes to the capitalization table of Borrower or any
amendments of the Operating Documents of Borrower or any of its Subsidiaries? If yes,
provide copies of any such amendments or changes with this Compliance Certificate.
Yes
No
5)
Have there been any new licenses or agreements pursuant to which Borrower or any
Subsidiary is the licensee as required by Section 5.2(d)?
Yes
No
6)
Has the Foreign Subsidiary Trigger Event occurred?2 Please attach a separate sheet with
supporting detail.
Yes
No
7)
From and after the IP Trigger Event, please provide (a) a summary of any material change
in the composition of the Intellectual Property, and (b) a report of the registered patents,
trademarks, service marks, copyrights, mask works, or any pending applications for any of
the foregoing, whether as owner, licensee or otherwise, by Borrower or any of its
Subsidiaries, and noting any changes from the report provided for the prior fiscal quarter.
Exceptions
Please explain any exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions.”
Attach separate sheet if additional space needed.)
SCHOLAR ROCK HOLDING CORPORATION
By
Name:
Title:
SCHOLAR ROCK, INC.
By
Name:
Title:
Date: ________________________
LENDER USE ONLY
Received by:
Date:
2 To be completed in the Compliance Certificate for the month ending March 31, 2027 and on the last day of the
month of each fiscal quarter thereafter.
1615764111.13
Verified by:
Date:
Compliance Status:
Yes
No
1615764111.13
EXHIBIT D
Form of Secured Promissory Note
[see attached]
1615764111.13
SECURED PROMISSORY NOTE
(Term [A][B][C][D] Loan)
$____________________
Dated: [_________] [__], 20[__]
FOR VALUE RECEIVED, the undersigned, SCHOLAR ROCK HOLDING CORPORATION, a Delaware
corporation (“Parent”) and SCHOLAR ROCK, INC., a Delaware corporation (together with Parent, individually and
collectively, jointly and severally, “Borrower”) with an office located at 301 Binney Street, 3rd Floor, Cambridge, MA
02142 (“Borrower”) HEREBY PROMISES TO PAY [OXFORD FINANCE LLC] [OXFORD FINANCE CREDIT
FUND II LP] [OXFORD FINANCE CREDIT FUND III LP] (“Lender”) the principal amount of [___________]
MILLION DOLLARS ($______________) or such lesser amount as shall equal the outstanding principal balance of
the Term [A][B][C][D] Loan made to Borrower by Lender, plus interest on the aggregate unpaid principal amount of
such Term [A][B][C][D] Loan, at the rates and in accordance with the terms of the Amended and Restated Loan and
Security Agreement dated as of February 10, 2025 by and among Borrower, Lender, Oxford Finance LLC, as
Collateral Agent, and the other Lenders from time to time party thereto (as amended, restated, supplemented or
otherwise modified from time to time, the “Loan Agreement”). If not sooner paid, the entire principal amount and all
accrued and unpaid interest hereunder shall be due and payable on the Maturity Date as set forth in the Loan
Agreement. Any capitalized term not otherwise defined herein shall have the meaning attributed to such term in the
Loan Agreement.
Principal, interest and all other amounts due with respect to the Term [A][B][C][D] Loan, are payable in lawful money
of the United States of America to Lender as set forth in the Loan Agreement and this Secured Promissory Note (this
“Note”). The principal amount of this Note and the interest rate applicable thereto, and all payments made with
respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the grid attached hereto
which is part of this Note.
The Loan Agreement, among other things, (a) provides for the making of a secured Term [A][B][C][D] Loan by
Lender to Borrower, and (b) contains provisions for acceleration of the maturity hereof upon the happening of certain
stated events.
This Note may not be prepaid except as set forth in Section 2.2 (c) and Section 2.2(d) of the Loan Agreement.
This Note and the obligation of Borrower to repay the unpaid principal amount of the Term [A][B][C][D] Loan,
interest on the Term [A][B][C][D] Loan and all other amounts due Lender under the Loan Agreement is secured under
the Loan Agreement.
Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with
the execution, delivery, performance and enforcement of this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable and documented out-of-
pocket attorneys’ fees and costs, incurred by Lender in the enforcement or attempt to enforce any of Borrower’s
obligations hereunder not performed when due.
This Note shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of
New York.
The ownership of an interest in this Note shall be registered on a record of ownership maintained by Lender or its
agent. Notwithstanding anything else in this Note to the contrary, the right to the principal of, and stated interest on,
this Note may be transferred only if the transfer is registered on such record of ownership and the transferee is
identified as the owner of an interest in the obligation. Borrower shall be entitled to treat the registered holder of this
Note (as recorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in this Note on the part of any other person or entity.
[Balance of Page Intentionally Left Blank]
1615764111.13
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto
duly authorized on the date hereof.
BORROWER:
SCHOLAR ROCK HOLDING CORPORATION
By
Name:
Title:
SCHOLAR ROCK, INC.
By
Name:
Title:
1615764111.13
LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL
Date
Principal
Amount
Interest Rate
Scheduled
Payment Amount
Notation By
1615764111.13
CORPORATE BORROWING CERTIFICATE
Borrower:
SCHOLAR ROCK HOLDING CORPORATION
Date: [____________]
Lenders:
OXFORD FINANCE LLC, as Collateral Agent and Lender
OXFORD FINANCE CREDIT FUND II LP, as Lender
OXFORD FINANCE CREDIT FUND III LP, as Lender
I hereby certify solely in my officer capacity and not any individual capacity as follows, as of the date set forth above:
1.
I am the Secretary, Assistant Secretary or other officer of Borrower. My title is as set forth below.
2.
Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State
of Delaware.
3.
Attached hereto as Exhibit A and Exhibit B, respectively, are true, correct and complete copies of
(i) Borrower’s Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in
which Borrower is incorporated as set forth in paragraph 2 above; and (ii) Borrower’s Bylaws. Neither such
Certificate of Incorporation nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented, and
such Articles/Certificate of Incorporation and such Bylaws remain in full force and effect as of the date hereof.
4.
The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held
meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action). Such
resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed,
rescinded, amended or revoked, and the Lenders may rely on them until each Lender receives written notice of
revocation from Borrower.
[Balance of Page Intentionally Left Blank]
1615764111.13
Resolved, that any one of the following officers or employees of Borrower, whose names, titles and
signatures are below, may act on behalf of Borrower:
Name
Title
Signature
Authorized to
Add or Remove
Signatories
_____________________________
_____________________________
□
_____________________________
_____________________________
□
_____________________________
_____________________________
□
□
Resolved Further, that any one of the persons designated above with a checked box beside his or
her name may, from time to time, add or remove any individuals to and from the above list of
persons authorized to act on behalf of Borrower.
Resolved Further, that such individuals may, on behalf of Borrower:
Borrow Money. Borrow money from the Lenders.
Execute Loan Documents. Execute any loan documents any Lender requires.
Grant Security. Grant Collateral Agent a security interest in any of Borrower’s assets.
Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes, or other
indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.
Further Acts. Designate other individuals to request advances, pay fees and costs and execute other
documents or agreements (including documents or agreement that waive Borrower’s right to a jury
trial) they believe to be necessary to effectuate such resolutions.
Resolved Further, that all acts authorized by the above resolutions and any prior acts relating
thereto are ratified.
[Balance of Page Intentionally Left Blank]
1615764111.13
5.
The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to
their names.
By:
Name:
Title: Secretary
*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set
forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.
I, the __________________________ of Borrower, hereby certify as to paragraphs 1 through 5 above, as
[print title]
of the date set forth above.
By:
Name:
Title:
1615764111.13
EXHIBIT A
Certificate of Incorporation (including amendments)
[see attached]
1615764111.13
EXHIBIT B
Bylaws
[see attached]
1615764111.13
CORPORATE BORROWING CERTIFICATE
Borrower:
SCHOLAR ROCK, INC.
Date: [____________]
Lenders:
OXFORD FINANCE LLC, as Collateral Agent and Lender
OXFORD FINANCE CREDIT FUND II LP, as Lender
OXFORD FINANCE CREDIT FUND III LP, as Lender
I hereby certify solely in my officer capacity and not any individual capacity as follows, as of the date set forth above:
1.
I am the Secretary, Assistant Secretary or other officer of Borrower. My title is as set forth below.
2.
Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State
of Delaware.
3.
Attached hereto as Exhibit A and Exhibit B, respectively, are true, correct and complete copies of
(i) Borrower’s Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in
which Borrower is incorporated as set forth in paragraph 2 above; and (ii) Borrower’s Bylaws. Neither such
Certificate of Incorporation nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented, and
such Articles/Certificate of Incorporation and such Bylaws remain in full force and effect as of the date hereof.
4.
The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held
meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action). Such
resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed,
rescinded, amended or revoked, and the Lenders may rely on them until each Lender receives written notice of
revocation from Borrower.
[Balance of Page Intentionally Left Blank]
1615764111.13
Resolved, that any one of the following officers or employees of Borrower, whose names, titles and
signatures are below, may act on behalf of Borrower:
Name
Title
Signature
Authorized to
Add or Remove
Signatories
_____________________________
_____________________________
□
_____________________________
_____________________________
□
_____________________________
_____________________________
□
□
Resolved Further, that any one of the persons designated above with a checked box beside his or
her name may, from time to time, add or remove any individuals to and from the above list of
persons authorized to act on behalf of Borrower.
Resolved Further, that such individuals may, on behalf of Borrower:
Borrow Money. Borrow money from the Lenders.
Execute Loan Documents. Execute any loan documents any Lender requires.
Grant Security. Grant Collateral Agent a security interest in any of Borrower’s assets.
Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes, or other
indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.
Further Acts. Designate other individuals to request advances, pay fees and costs and execute other
documents or agreements (including documents or agreement that waive Borrower’s right to a jury
trial) they believe to be necessary to effectuate such resolutions.
Resolved Further, that all acts authorized by the above resolutions and any prior acts relating
thereto are ratified.
[Balance of Page Intentionally Left Blank]
1615764111.13
5.
The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to
their names.
By:
Name:
Title: Secretary
*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set
forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.
I, the __________________________ of Borrower, hereby certify as to paragraphs 1 through 5 above, as
[print title]
of the date set forth above.
By:
Name:
Title:
1615764111.13
EXHIBIT A
Certificate of Incorporation (including amendments)
[see attached]
1615764111.13
EXHIBIT B
Bylaws
[see attached]
1615764111.13
DEBTOR:
SCHOLAR ROCK HOLDING CORPORATION and SCHOLAR ROCK, INC.
SECURED PARTY:
OXFORD FINANCE LLC, as Collateral Agent
EXHIBIT A TO UCC FINANCING STATEMENT
Description of Collateral
The collateral consists of all of Debtor’s right, title and interest in and to the following personal property (the
“Collateral”):
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to
payment of money, leases, license agreements, franchise agreements, general intangibles (including Intellectual
Property from and after the date on which the IP Trigger Event occurs), commercial tort claims, documents,
instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts,
securities accounts, commodity accounts and any other bank account maintained by Debtor at any time, all certificates
of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and
all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired,
wherever located; and
All Debtor’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above
and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include (a)(i) any equipment or other property
financed by a third party, provided that such third party’s Liens are Liens securing Capital Leases and Purchase Money
Debt if the granting of a Lien in such Equipment or other property financed is prohibited by or would constitute a
default under any agreement or document governing such Equipment or property financed; provided that the aggregate
value of all such Equipment or property financed does not exceed Five Hundred Thousand Dollars ($500,000.00);
provided, further, that (A) such Liens exist prior to the acquisition of, or attach substantially simultaneous with, or
within twenty (20) days after the, acquisition, lease, repair, improvement or construction of, such property financed or
leased by such Indebtedness, (B) such Liens do not extend to any property of Debtor other than the property (and
proceeds thereof) acquired, leased or built, or the improvements or repairs, financed by such Indebtedness, and (C)
upon the termination, lapsing or expiration of any such prohibition, such Equipment or other property financed, as
applicable, shall automatically be subject to the security interest granted in favor of Secured Party hereunder and
become part of the “Collateral”; (ii) any lease, license or contract, in each case if the granting of a Lien in such lease,
license or contract is prohibited by or would constitute a default under the agreement governing such lease, license or
contract (but (A) only to the extent such prohibition is enforceable under applicable law and (B) other than to the
extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-408 or 9-409 (or any other
Section) of Article 9 of the Code); provided that upon the termination, lapsing or expiration of any such prohibition,
such lease, license or contract, as applicable, shall automatically be subject to the security interest granted in favor of
Secured Party hereunder and become part of the “Collateral”; and (iii) until the date on which an IP Trigger Event
occurs, any Intellectual Property; provided, however, (A) the Collateral shall include all Accounts (other than as set
forth in clause (b) directly below) and all proceeds of Intellectual Property and (B) if a judicial authority (including a
U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have
a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral
shall automatically and effective as of the Effective Date include the Intellectual Property to the extent necessary to
permit perfection of Secured Party’s security interest in such Accounts and such other property of Debtor that are
proceeds of the Intellectual Property; and (b) from and after the date that any Permitted Royalty Transaction is
consummated, the Excluded Assets with respect to such Permitted Royalty Transaction.
Pursuant to the terms of a certain negative pledge arrangement under the A&R LSA, Debtor has agreed not to
encumber any of its Intellectual Property except in connection with any Permitted Royalty Transaction to the extent
permitted by the A&R LSA and, if applicable, the Acceptable Intercreditor Agreement with respect to such Permitted
Royalty Transaction.
Capitalized terms used herein without definition shall have the meaning set forth below. Any uncapitalized
1615764111.13
terms used herein that are defined in the Code (as defined below) shall have the meaning set forth in the Code.
“A&R LSA” is that certain Amended and Restated Loan and Security Agreement dated as of February 10, 2025, by
and among Debtor, Secured Party, the other loan parties from time to time party thereto, and the lenders from time to
time party thereto, as modified, amended and/or restated from time to time.
“Acceptable Intercreditor Agreement” means, with respect to any Permitted Royalty Transaction that is a synthetic
royalty transaction, an intercreditor or other agreement among the Secured Party, the applicable synthetic royalty
financer (or agent of such applicable synthetic royalty financer) of such Permitted Royalty Transaction (the
“Applicable Synthetic Royalty Financer”) and Debtor (and/or any subsidiary of Debtor party thereto) providing (i) at
the sole option of Debtor, a first priority security interest and Lien (or, solely, with respect to clause (B) below, a
second priority interest and Lien subject only to the priority of the security interest and Lien of the Secured Party under
the A&R LSA or related loan documents in a manner consistent with such intercreditor or other agreement) granted to
the Applicable Synthetic Royalty Financer in (A) the applicable percentage of (and/or the applicable rights, benefits
and/or interests in) the royalty interest or revenue interest and payment intangibles related to the Applicable Product,
(B) any intellectual property (including, without limitation, any Intellectual Property) solely underlying the Applicable
Product, (C) any proceeds or product of any of the foregoing, and (D) a deposit account of Debtor solely holding
royalty proceeds due to the Applicable Synthetic Royalty Financer in an amount not to exceed the percentage of
revenues and royalty amounts due to the Applicable Synthetic Royalty Financer, (ii) that (A) the governing law thereof
is New York and (B) submission of jurisdiction and venue is the State of New York (or some customary subset thereof)
and the appellate courts thereof, and (iii) for such other provisions that are reasonably satisfactory to the Secured Party
that are consistent with clause (i) and clause (ii) above.
“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and
includes, without limitation, all accounts receivable and other sums owing to Debtor.
“Applicable Product” is Apitegromab in spinal muscular atrophy.
“Applicable Synthetic Royalty Financer” is defined in the definition of “Acceptable Intercreditor Agreement”.
“Capital Leases and Purchase Money Debt” is Indebtedness consisting of capitalized lease obligations and purchase
money Indebtedness, in each case incurred by Debtor or any of its subsidiaries to finance the acquisition, repair,
improvement or construction of fixed or capital assets of such person; provided that (i) the aggregate outstanding
principal amount of all such Indebtedness does not exceed Five Hundred Thousand Dollars ($500,000.00) at any time
and (ii) the principal amount of such Indebtedness does not exceed the lower of the cost or fair market value of the
property so acquired or built or of such repairs or improvements financed with such Indebtedness (each measured at
the time of such acquisition, repair, improvement or construction is made).
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of
New York; provided, that, to the extent that the Code is used to define any term herein and such term is defined
differently in different Articles of the Code, the definition of such term contained in Article 9 shall govern; provided
further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or
priority of, or remedies with respect to, Secured Party’s Lien on any Collateral is governed by the Uniform
Commercial Code in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any
indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly
guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or
indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations
from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates
or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the
Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it
1615764111.13
determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any
guarantee or other support arrangement.
“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in
each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same
also constitutes a trade secret.
“Debtor’s Books” are Debtor’s books and records including ledgers, federal, and state tax returns, records regarding
Debtor’s assets or liabilities, the collateral under the A&R LSA or any related loan documents, business operations or
financial condition, and all computer programs or storage or any equipment containing such information.
“Division” means, in reference to any Person which is an entity, the division of such Person into two or more separate
Persons, with the dividing Person either continuing or terminating its existence as part of such division, including,
without limitation, as contemplated under Section 18-217 of the Delaware Limited Liability Company Act for limited
liability companies formed under Delaware law, or any analogous action taken pursuant to any other applicable law
with respect to any corporation, limited liability company, partnership or other entity.
“Effective Date” is February 10, 2025
“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made,
and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any
interest in any of the foregoing.
“Excluded Assets” means the assets of Debtor that will no longer remain Collateral upon the consummation of a
Permitted Royalty Transaction, which, for the avoidance of doubt, shall not include Intellectual Property except to the
extent provided in the definition of Acceptable Intercreditor Agreement.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as
reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.
“Intellectual Property” means all of Debtor’s right, title and interest in and to the following:
(a)
its Copyrights, Trademarks and Patents;
(b)
any and all trade secrets and trade secret rights, including, without limitation, any rights to
unpatented inventions, know-how, operating manuals;
(c)
any and all source code;
(d)
any and all design rights which may be available to Debtor;
(e)
any and all claims for damages by way of past, present and future infringement of any of
the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of
the Intellectual Property rights identified above; and
(f)
all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as
may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without limitation such inventory as is
temporarily out of any Person’s custody or possession or in transit and including any returned goods and any
documents of title representing any of the above.
“IP Trigger Event” means the earlier to occur of (a) the outstanding principal balance of the term loans made by the
lenders pursuant to the A&R LSA exceeds One Hundred One Million Dollars ($101,000,000.00) and (b) Debtor enters
1615764111.13
into a binding and enforceable Permitted Royalty Financing Transaction; provided, however, for the avoidance of
doubt, that no IP Trigger Event shall occur under clause (a) of this definition as a result of any accrual or capitalization
of any interest, fees or other amounts with respect to any term loan made by the lenders pursuant to the A&R LSA.
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any kind,
whether voluntarily incurred or arising by operation of law or otherwise against any property.
“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust,
unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock
company, estate, entity or government agency.
“Patents” means all patents, patent applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Permitted Licenses” are (A) licenses of over-the-counter software that is commercially available to the public, (B)
non-exclusive and exclusive licenses for the use of the Intellectual Property of Debtor or any of its subsidiaries
entered into in the ordinary course of business, provided, that, with respect to each such license described in clause
(B), (i) no event of default under the A&R LSA has occurred or is continuing at the time of such license; (ii) the
license constitutes an arms-length transaction, the terms of which, on their face (in each case, other than non-exclusive
licenses from or to contract manufacturers, clinical research organizations, clinical trial or research sites, service
providers and other entities (A) entered into in the ordinary course of business, (B) the principal purpose of which does
not include the acquisition of licensing rights, but which contain such non-exclusive licenses merely ancillary to, and
for the limited purpose of, facilitating the principal purposes of the agreement and (C) so long as Debtor has complied
with all other applicable terms of the A&R LSA and other related loan documents applicable thereto), do not provide
for a sale or assignment of any Intellectual Property and do not restrict the ability of Debtor or any of its subsidiaries,
as applicable, to pledge, grant a security interest in or lien on, or assign or otherwise Transfer any Intellectual Property;
(iii) in the case of any exclusive license, (x) Debtor delivers ten (10) days’ prior written notice and a brief summary of
the terms of the proposed license to Secured Party and the lenders under the A&R LSA and delivers copies of the final
executed licensing documents in connection with the exclusive license promptly upon consummation thereof, and (y)
any such license could not result in a legal transfer of title of the licensed property but may be exclusive in respects
other than territory and may be exclusive as to territory only as to discrete geographical areas outside of the United
States; and (iv) all upfront payments, royalties, milestone payments or other proceeds arising from the licensing
agreement that are payable to Debtor are paid to a deposit account that is governed by a deposit account control
agreement in favor of Secured Party (except in connection with a Permitted Royalty Transaction that is not otherwise
restricted by any applicable Acceptable Intercreditor Agreement), and (C) any other ancillary license provided in
connection with a Permitted Royalty Transaction structured as a synthetic royalty transaction that is in form and
substance reasonably satisfactory to Secured Party and otherwise satisfies the conditions of clauses (B)(i) through (iii)
hereof (unless otherwise reasonably agreed by the Secured Party with respect to clause (B)(ii) in connection with any
negative lien covenant provided in any such synthetic royalty transaction (subject to such covenant expressly permitted
the Secured Party’s Liens under the A&R LSA and related loan documents)).
“Permitted Royalty Transaction” means the purchase of (or a financing with respect to) a royalty interest, or a
revenue interest financing of, Debtor’s rights in the Applicable Product, provided that (i) such transaction constitutes
an arms-length transaction (the terms of which, on their face, do not provide for a sale or collateral assignment of any
Intellectual Property other than (A) a second priority Lien and collateral assignment of Intellectual Property solely
underlying the Applicable Product may be provided in connection with such transaction that is structured as a synthetic
royalty transaction to the extent such transaction is subject to an Acceptable Intercreditor Agreement and (B) any
Permitted License, (ii) Debtor receives upfront and unrestricted (including, not subject to any redemption, clawback,
escrow or similar encumbrance or restriction) gross cash payments of at least One Hundred Fifty Million Dollars
($150,000,000.00), (iii) such transaction encumbers (with respect to a synthetic royalty transaction) or sells (with
respect to a true sale royalty transaction) not more than ten percent (10.00%) of Debtor’s projected revenues from the
Applicable Product, (iv) no event of default under the A&R LSA has occurred and is continuing at the time of entering
such transaction, and (v) the royalty or revenue interest agreement and related material documents, including the assets
that comprise the Excluded Assets, are otherwise in form and substance reasonably satisfactory to Secured Party (it
being understood, for the avoidance of doubt, that an Acceptable Intercreditor Agreement shall only be required with
respect to such transaction that is structured as a synthetic royalty transaction).
1615764111.13
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and
registrations of the same and like protections, and the entire goodwill of the business of Debtor connected with and
symbolized by such trademarks.
“Transfer” means to convey, sell, lease, transfer, assign, or otherwise dispose of (including, without limitation,
pursuant to a Division).
1615764111.13
ANNEX A
Net Product Revenue Covenant
[***]
1
Exhibit 10.27
SCHOLAR ROCK HOLDING CORPORATION
AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR
COMPENSATION POLICY
The purpose of this Amended and Restated Non-Employee Director Compensation Policy of
Scholar Rock Holding 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 or its subsidiaries. In furtherance of the purpose stated
above, all non-employee directors shall be paid compensation for services provided to the
Company as set forth below:
Cash Retainers
Annual Retainer for Board Membership: $45,000 for general availability and participation in
meetings and conference calls of our Board of Directors, to be paid quarterly in arrears, pro-
rated based on the number of actual days served by the director during such calendar quarter.
Additional Annual Retainer for Non-Executive Chair of the Board: $115,000 Additional
Retainers for Committee Membership:
Audit Committee Chair:
$20,000
Audit Committee member:
$10,000
Compensation Committee Chair:
$15,000
Compensation Committee member:
$7,500
Nominating and Corporate Governance Committee Chair:
$10,000
Nominating and Corporate Governance Committee member:
$5,000
Science, Innovation and Technology Committee Chair:
$15,000
Science, Innovation and Technology Committee member:
$7,500
Note: Chair and committee member retainers are in addition to retainers for members of
the Board of Directors.
Equity Retainers
Initial Award: An initial, one-time equity award (the “Initial Award”) of (i) an option to purchase
36,000 shares of the Company’s common stock and (ii) 27,000 restricted stock units (or, if less,
the number of aggregate shares underlying the Initial Award with a Value that does not exceed
$800,000), to each new non-employee director upon his or her election to the Board
2
of Directors, which option and restricted stock units shall vest monthly over three years,
provided, however, that all vesting shall cease if the director resigns from the Board of
3
Directors or otherwise ceases to serve as a director of the Company. If the Initial Award is in the
form of a stock option, such stock option shall have a per share exercise price equal to the Fair
Market Value (as defined in the Company’s 2018 Stock Option and Incentive Plan, as may be
amended from time to time) of the Company’s common stock on the date of grant.
Annual Award: On or after each date of the Company’s Annual Meeting of Stockholders (the
“Annual Meeting”), each continuing non-employee member of the Board of Directors other than
a director receiving an Initial Award less than three (3) months prior to such Annual Meeting,
will receive an annual equity award (the “Annual Award”) as follows:
(i)
for any non-employee director who has served as a member of the Board of Directors for
at least nine (9) months, (i) an option to purchase 18,000 shares of the Company’s
common stock and (ii) 13,500 restricted stock units (or, if less, the number of aggregate
shares underlying the Annual Award with a Value that does not exceed $400,000); and
(ii)
for any non-employee director who has served as a member of the Board of Directors for
less than nine (9) months but at least three (3) months, (i) an option to purchase that
number of shares of the Company’s common stock equal to the number of full months
served by such non-employee director as of such Annual Meeting divided by 12 (the
“Applicable Fraction”) and multiplied by 18,000 and (ii) restricted stock units equal to
the Applicable Fraction multiplied by 13,500 (or, if less, the number of aggregate shares
underlying the Annual Award with a Value that does not exceed the product of the
Applicable Fraction multiplied by $400,000),
such option and restricted stock units shall vest on the earlier of the first anniversary following
the date of grant or the next scheduled Annual Meeting; provided, however, that all vesting shall
cease if the director resigns from the Board of Directors or otherwise ceases to serve as a
director, unless the Board of Directors determines that the circumstances warrant continuation of
vesting. If the Annual Award is in the form of a stock option, such stock option shall have a per
share exercise price equal to the Fair Market Value (as defined in the Company’s 2018 Stock
Option and Incentive Plan) of the Company’s common stock on the date of grant.
Value: For purposes of this Policy, “Value” means the grant date fair value of the option (i.e.,
Black-Scholes Value) determined in accordance with the reasonable assumptions and
methodologies employed by the Company for calculating the fair value of options under
Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 718.
Expenses
The Company will reimburse all reasonable out-of-pocket expenses incurred by non-
employee directors in attending meetings of the Board or any Committee.
Amended and Restated version, adopted June 16, 2020, as amended on March 16, 2021, May 26,
2022, June 21, 2023 and April 9, 2024.
Exhibit 19
SCHOLAR ROCK HOLDING CORPORATION
STATEMENT OF COMPANY POLICY ON INSIDER
TRADING AND DISCLOSURE
This Insider Trading Policy (the “Insider Trading Policy”) is designed to prevent insider trading or
the appearance of impropriety, to satisfy Scholar Rock Holding Corporation and its subsidiaries (collectively,
the “Company”) obligation to reasonably supervise the activities of Company personnel, and to help
Company personnel avoid the severe consequences associated with violations of insider trading laws.
It is your obligation to understand and comply with this Insider Trading Policy. Please contact
the General Counsel at legal@scholarrock.com, if you have any questions regarding the policy.
PART I. OVERVIEW
To Whom does this Insider Trading Policy Apply?
This Insider Trading Policy is applicable to the Company’s directors, officers, and employees and
designated consultants and contractors and applies to any and all transactions by such persons and their
affiliates (as defined below) in the Company’s securities, including its common stock, options to purchase
common stock, any other type of securities that the Company may issue (such as preferred stock, convertible
debentures, warrants, exchange-traded options or other derivative securities), and any derivative securities
that provide the economic equivalent of ownership of any of the Company’s securities or an opportunity,
direct or indirect, to profit from any change in the value of the Company’s securities.
In addition, all directors, all officers and all employees and certain designated consultants and
contractors also must comply with the Trading Procedures set forth in Part II of this Insider Trading Policy
(the “Trading Procedures”) (collectively, and solely for the purposes of this Insider Trading Policy, these
persons are referred to as “Insiders”). Generally, the Trading Procedures establish trading windows outside of
which the persons covered by the Trading Procedures will be restricted from trading in the Company’s
securities and also require the pre- clearance of all transactions in the Company’s securities by such persons.
You will be notified if you are required to comply with the Company’s Trading Procedures.
This Insider Trading Policy, including, if applicable, the Trading Procedures contained herein, also
applies to the following persons (collectively, these persons and entities are referred to as “Affiliated
Persons”):
●
your spouse, child, parent, significant other or other family member, in each case, living in
the same household;
●
all trusts, family partnerships and other types of entities formed for your benefit of the Insider
or for the benefit of a member of your family over which you have the ability to influence or
direct investment decisions concerning securities;
●
all persons who execute trades on your behalf; and
●
all investment funds, trusts, retirement plans, partnerships, corporations and other types of
entities over which you have the ability to influence or direct investment decisions
concerning securities; provided, however, that the Trading Procedures shall not apply to any
such entity that engages in the investment of securities in the ordinary course of its business
(e.g., an investment fund or partnership) if such entity has established its own insider trading
controls and procedures in compliance with applicable securities laws and an Insider has
included such entity on that Insider’s signed acknowledgment in the attached form.
You are responsible for ensuring compliance with this Insider Trading Policy, including the Trading
Procedures contained herein, by all of your Affiliated Persons.
In the event that you leave the Company for any reason, this Insider Trading Policy, including, if
applicable, the Trading Procedures contained herein, will continue to apply to you and your Affiliated
Persons until the first trading day after any material nonpublic information known to you has become
public or is no longer material.
What is Prohibited by this Insider Trading Policy?
It is generally illegal for you to trade in the securities of the Company, whether for your account or
for the account of another, while in the possession of material, nonpublic information about the Company. It
is also generally illegal for you to disclose material, nonpublic information about the Company to others
who may trade on the basis of that information. These illegal activities are commonly referred to as
“insider trading.”
Prohibited Activities
When you know or are in possession of material, nonpublic information about the Company, whether
positive or negative, you are prohibited from the following activities:
●
trading (whether for your account of for the account of another) in the Company’s securities,
which includes common stock, options to purchase common stock, any other type of
securities that the Company may issue (such as preferred stock, convertible debentures,
warrants, exchange-traded options or other derivative securities), and any derivative
securities that provide the economic equivalent of ownership of any of the Company’s
securities or an opportunity, direct or indirect, to profit from any change in the value of the
Company’s securities, except for trades made in compliance with the affirmative defense of
Rule 10b5-1 under the Exchange Act, such as when trades are made pursuant to a written
plan that was adopted, or trading instructions that were given, before you knew or had
possession of such material, nonpublic information and certain other conditions are satisfied;
●
having others trade for you in the Company’s securities;
●
giving trading advice of any kind about the Company; and
●
disclosing such material, nonpublic information about the Company, whether positive or
negative, to anyone else (commonly known as “tipping”).
This Insider Trading Policy does not apply to an exercise of an employee stock option when payment
of the exercise price is made in cash. The policy does apply, however, to the use of outstanding Company
securities to constitute part or all of the exercise price of an option, any sale of stock as part of a broker-
assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed
to pay the exercise price of an option.
These prohibitions continue whenever and for as long as you know or are in possession of material,
nonpublic information. Remember, anyone scrutinizing your transactions will be doing so after the fact, with
the benefit of hindsight. As a practical matter, before engaging in any transaction, you should carefully
consider how enforcement authorities and others might view the transaction in hindsight.
Definition of Material, Nonpublic Information
This Insider Trading Policy prohibits you from trading in the Company’s securities if you are in
possession of information about the Company that is both “material” and “nonpublic.” If you have a question
whether certain information you are aware of is material or has been made public, you are encouraged to
consult with the General Counsel.
What is “Material” Information?
Information about the Company is “material” if it could reasonably be expected to affect the
investment or voting decisions of a stockholder or investor, or if the disclosure of the information could
reasonably be expected to significantly alter the total mix of information in the marketplace about the
Company. In simple terms, material information is any type of information that could reasonably be expected
to affect the market price of the Company’s securities. Both positive and negative information may be
material. While it is not possible to identify all information that would be deemed “material,” the following
items are types of information that should be considered carefully to determine whether they are material:
●
developments regarding any programs in clinical development or subject to regulatory
approval, including recent regulatory interaction and/or data that have been recently
generated from ongoing or recently completed clinical trials;
●
developments regarding the intellectual property and/or freedom to operate for any of the
current programs or product candidates under development;
●
projections of future earnings or losses, or other earnings guidance;
●
earnings or revenue that are inconsistent with the consensus expectations of the investment
community;
●
potential restatements of the Company’s financial statements, changes in auditors or auditor
notification that the Company may no longer rely on an auditor’s audit report;
●
pending or proposed corporate mergers, acquisitions, tender offers, joint ventures or
dispositions of significant assets;
●
changes in management or the Board of Directors;
●
significant actual or threatened litigation or governmental investigations or major
developments in such matters;
●
a cybersecurity incident;
●
significant developments regarding products, customers, suppliers, orders, contracts or
financing sources (e.g., the acquisition or loss of a contract);
●
changes in dividend policy, declarations of stock splits, or public or private sales of additional
securities;
●
potential defaults under the Company’s credit agreements or indentures, or the existence of
material liquidity deficiencies; and
●
bankruptcies or receiverships.
By including the list above, the Company does not mean to imply that each of these items above is
per se material. The information and events on this list still require determinations as to their materiality
(although some determinations will be reached more easily than others). For example, some new products or
contracts may clearly be material to an issuer; yet that does not mean that all product developments or
contracts will be material. This demonstrates, in our view, why no “bright-line” standard or list of items can
adequately address the range of situations that may arise. Furthermore, the Company cannot create an
exclusive list of events and information that have a higher probability of being considered material.
The Securities and Exchange Commission (the “SEC”) has stated that there is no fixed quantitative
threshold amount for determining materiality, and that even very small quantitative changes can be
qualitatively material if they would result in a movement in the price of the Company’s securities.
What is “Nonpublic” Information?
Material information is “nonpublic” if it has not been disseminated in a manner making it available to
investors generally. To show that information is public, it is necessary to point to some fact that establishes
that the information has become publicly available, such as the filing of a report with the SEC, the
distribution of a press release through a widely disseminated news or wire service, or by other means that
are reasonably designed to provide broad public access. Before a person who possesses material, nonpublic
information can trade, there also must be adequate time for the market as a whole to absorb the information
that has been disclosed. For the purposes of this Insider Trading Policy, information will be considered
public after the close of trading on the first full trading day following the Company’s public release of the
information.
For example, if the Company announces material nonpublic information of which you are aware
before trading begins on a Tuesday, the first time you can buy or sell Company securities is the opening of
the market on Wednesday. However, if the Company announces this material information after trading
begins on that Tuesday, the first time that you can buy or sell Company securities is the opening of the
market on Thursday.
What are the Penalties for Insider Trading and Noncompliance with this Insider Trading Policy?
Both the SEC and the national securities exchanges, through the Financial Industry Regulatory
Authority (“FINRA”), investigate and are very effective at detecting insider trading. The SEC, together with
the U.S. Attorneys, pursue insider trading violations vigorously. For instance, cases have been successfully
prosecuted against trading by employees in foreign accounts, trading by family members and friends, and
trading involving only a small number of shares.
The penalties for violating insider trading or tipping rules can be severe and include:
●
disgorgement of the profit gained or loss avoided by the trading;
●
payment of the loss suffered by the persons who, contemporaneously with the purchase or
sale of securities that are subject of such violation, have purchased or sold, as applicable,
securities of the same class;
●
payment of criminal penalties of up to $5,000,000;
●
payment of civil penalties of up to three times the profit made or loss avoided; and
●
imprisonment for up to 20 years.
The Company and/or the supervisors of the person engaged in insider trading may also be required to
pay civil penalties of up to the greater of $1,275,000 or three times the profit made or loss avoided, as well as
criminal penalties of up to $25,000,000, and could under certain circumstances be subject to private lawsuits.
Violation of this Insider Trading Policy or any federal or state insider trading laws may subject the
person violating such policy or laws to disciplinary action by the Company up to and including termination.
The Company reserves the right to determine, in its own discretion and on the basis of the information
available to it, whether this Insider Trading Policy has been violated. The Company may determine that
specific conduct violates this Insider Trading Policy, whether or not the conduct also violates the law. It is
not necessary for the Company to await the filing or conclusion of a civil or criminal action against the
alleged violator before taking disciplinary action.
How Do You Report a Violation of this Insider Trading Policy?
If you have a question about this Insider Trading Policy, including whether certain information you
are aware of is material or has been made public, you are encouraged to consult with the General Counsel.
In addition, if you violate this Insider Trading Policy or any federal or state laws governing insider trading,
or know of any such violation by any director, officer or employee of the Company, you must report the
violation immediately to the General Counsel.
PART II. TRADING PROCEDURES
Special Trading Restrictions Applicable to Insiders
In addition to the restrictions on trading in Company securities set forth above, Insiders and their
Affiliated Persons are subject to the following special trading restrictions:
1.
No Trading Except During Trading Windows.
Subject to limited exceptions described herein, Insiders may trade in Company securities only
during certain trading windows established by the Company from time to time in its sole discretion, and
then only after obtaining pre-clearance from the General Counsel in accordance with the procedures set
forth below.
The General Counsel shall advise insiders upon the Company’s decision to establish a trading window,
including the dates upon which the window will open and close. Insiders may be allowed to trade outside of
a trading window only (a) pursuant to a pre-approved Rule 10b5-1 Plan as described below or (b) in
accordance with the procedure for waivers as described below.
2.
Prohibited Transactions
●
No Short Sales. No Insider may at any time sell any securities of the Company that are not
owned by such Insider at the time of the sale (a “short sale”).
●
No Purchases or Sales of Derivative Securities or Hedging Transactions. No Insider may
buy or sell puts, calls, other derivative securities of the Company or any derivative
securities that provide the economic equivalent of ownership of any of the Company’s
securities or an opportunity, direct or indirect, to profit from any change in the value of the
Company’s securities or engage in any other hedging transaction with respect to the
Company’s securities, at any time.
●
No Company Securities Subject to Margin Calls. No Insider may use the Company’s
securities as collateral in a margin account.
●
No Pledges. No Insider may pledge Company securities as collateral for a loan (or modify
an existing pledge).
3.
Distributions, Gifts and Other Transfers for No Consideration are Subject to Same Restrictions as All
Other Securities Trades.
No Insider may give or make any other transfer of Company securities without consideration (e.g., a
partnership distribution or gift) during a period when the Insider is not permitted to trade.
Pre-Clearance Procedures
No Insider may trade in Company securities unless the trade has been approved by the Compliance
Officer in accordance with the procedures set forth below. The General Counsel will review and either
approve or prohibit all proposed trades by Insiders in accordance with the procedures set forth below. The
General Counsel may consult with the Company’s other officers and/or outside legal counsel and will receive
approval for his/her own trades from the Chief Financial Officer.
Procedures. No Insider may trade in Company securities until:
●
The Insider has notified the General Counsel of the amount and nature of the proposed
trade(s) using the Stock Transaction Request form attached to this Insider Trading Policy.
In order to provide adequate time for the preparation of any required reports under
Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), a
Stock Transaction Request form should, if practicable, be received by the General
Counsel at least two (2) business days prior to the intended trade date;
●
The Insider has certified to the General Counsel in writing prior to the proposed trade(s)
that the Insider is not in possession of material, nonpublic information concerning the
Company;
●
The Insider has informed the General Counsel, using the Stock Transaction Request
form attached hereto, whether, to the Insider’s best knowledge, (a) the Insider has (or is
deemed to have) engaged in any opposite way transactions within the previous six
months that were not exempt from Section 16(b) of the Exchange Act and (b) if the
transaction involves a sale by an “affiliate” of the Company or of “restricted securities”
(as such terms are defined under Rule 144 under the Securities Act of 1933, as amended
(“Rule 144”)), whether the transaction meets all of the applicable conditions of Rule 144;
and
●
The General Counsel or his or her designee has approved the trade(s) and has certified
such approval in writing. Such certification may be made via digitally-signed electronic
mail.
The General Counsel does not assume the responsibility for, and approval from the General Counsel
does not protect the Insider from, the consequences of prohibited insider trading.
Additional Information. Insiders shall provide to the General Counsel any documentation
reasonably requested by him or her in furtherance of the foregoing procedures. Any failure to provide such
requested information will be grounds for denial of approval by the General Counsel.
No Obligation to Approve Trades. The existence of the foregoing approval procedures does not in
any way obligate the General Counsel to approve any trade requested by an Insider. The General Counsel
may reject any trading request at his or her sole discretion.
From time to time, an event may occur that is material to the Company and is known by only a few
directors or executives. Insiders may not trade in Company securities if they are notified by the General
Counsel that a proposed trade has been cleared because of the existence of a material, nonpublic
development. Even if that particular Insider is not aware of the material, nonpublic development involving
the Company, if any Insider engages in a trade before a material, nonpublic development is disclosed to the
public or resolved, the Insider and the Company might be exposed to a charge of insider trading that could be
costly and difficult to refute even if the Insider was unaware of the development. So long as the event
remains material and nonpublic, the General Counsel may determine not to approve any transactions in the
Company’s securities. The General Counsel will subsequently notify the Insider once the material, nonpublic
development is disclosed to the public or resolved. If an Insider requests clearance to trade in the Company’s
securities during the pendency of such an event, the General Counsel may reject the trading request without
disclosing the reason.
Completion of Trades. After receiving written clearance to engage in a trade signed by the General
Counsel, an Insider must complete the proposed trade within two (2) business days or make a new trading
request.
Post-Trade Reporting. Any transactions in the Company’s securities by an Insider (including
transactions effected pursuant to a Rule 10b5-1 Plan) must be reported to the General Counsel by completing
the “Confirmation of Transaction” section of the Stock Transaction Request form attached to this Insider
Trading Policy on the same day in which such a transaction occurs. Each report an Insider makes to the
General Counsel should include the date of the transaction, quantity of shares, price and broker-dealer
through which the transaction was effected. This reporting requirement may be satisfied by sending (or
having such Insider’s broker send) duplicate confirmations of trades to the General Counsel if such
information is received by the General Counsel on or before the required date. Compliance by directors and
executive officers with this provision is imperative given the requirement of Section 16 of the Exchange Act
that these persons generally must report changes in ownership of Company securities within two (2) business
days. The sanctions for noncompliance with this reporting deadline include mandatory disclosure in the
Company’s proxy statement for the next annual meeting of stockholders, as well as possible civil or criminal
sanctions for chronic or egregious violators.
Exemptions
Pre-Approved Rule 10b5-1 Plan. Transactions effected pursuant to a Rule 10b5-1 Plan (as defined
below) will not be subject to the Company’s trading windows, retirement plan blackout periods or pre-
clearance procedures, and Insiders are not required to complete a Stock Transaction Request form for such
transactions. Rule 10b5-1 of the Exchange Act provides an affirmative defense from insider trading liability
under the federal securities laws for trading plans, arrangements or instructions that meet certain
requirements. A trading plan, arrangement or instruction that meets the requirements of Rule 10b5-1 (a “Rule
10b5-1 Plan”) enables Insiders to establish arrangements to trade in Company securities outside of the
Company’s trading windows, even when in possession of material, nonpublic information.
If an Insider intends to trade pursuant to a Rule 10b5-1 Plan, such plan, arrangement or instruction
must:
●
satisfy the requirements of Rule 10b5-1;
●
be documented in writing;
●
be established during a trading window when such Insider does not possess material,
nonpublic information; and
●
be pre-approved by the General Counsel.
Any deviation from, or alteration to, the specifications of an approved Rule 10b5-1 Plan (including,
without limitation, the amount, price or timing of a purchase or sale) must be reported immediately to the
General Counsel. Any transaction pursuant to a Rule 10b5-1 Plan must be timely reported following the
transaction in accordance with the procedures set forth above.
The General Counsel may refuse to approve a Rule 10b5-1 Plan as he or she deems appropriate
including, without limitation, if he or she determines that such plan does not satisfy the requirements of Rule
10b5-1.
Any modification of an Insider’s prior Rule 10b5-1 Plan requires pre-approval by the General
Counsel. A modification must occur during a trading window and while such Insider is not aware of material,
nonpublic information.
Employee Benefit Plans
1.
Exercise of Stock Options. The trading prohibitions and restrictions set forth in the Trading
Procedures do not apply to the exercise of an option to purchase securities of the Company
when payment of the exercise price is made in cash. However, the exercise of an option to
purchase securities of the Company is subject to the current reporting requirements of
Section 16 of the Exchange Act and, therefore, Insiders must comply with the post-trade
reporting requirement described in Section C above for any such transaction. In addition, the
securities acquired upon the exercise of an option to purchase Company securities are subject
to all of the requirements of this Insider Trading Policy, including the Trading Procedures
contained herein. Moreover, the Trading Procedures apply to the use of outstanding
Company securities to constitute part or all of the exercise price of an option, any net option
exercise, any exercise of a stock appreciation right, share withholding, any sale of stock as
part of a broker- assisted cashless exercise of an option, or any other market sale for the
purpose of generating the cash needed to pay the exercise price of an option.
2.
Tax Withholding on Restricted Stock/Units. The trading prohibitions and restrictions set
forth in the Trading Procedures do not apply to the withholding by the Company of shares of
stock upon vesting of restricted stock or upon settlement of restricted stock units to satisfy
applicable tax withholding requirements if (a) such withholding is required by the applicable
plan or award agreement or (b) the election to exercise such tax withholding right was made
by the Insider in compliance with the Trading Procedures.
3.
Employee Stock Purchase Plan. The trading prohibitions and restrictions set forth in the
Trading Procedures do not apply to periodic wage withholding contributions by the Company
or employees of the Company which are used to purchase the Company’s securities pursuant
to the employees’ advance instructions under the Company’s 2018 Employee Stock Purchase
Plan. However, no Insider may: (a) elect to participate in the plan or alter his or her
instructions regarding the level of withholding or purchase by the Insider of Company
securities under such plan; or (b) make cash contributions to such plan (other than through
periodic wage withholding) without complying with the Trading Procedures. Any sale of
securities acquired under such plan is subject to the prohibitions and restrictions of the
Trading Procedures.
WAIVERS
A waiver of any provision of this Insider Trading Policy, or the Trading Procedures contained
herein, in a specific instance may be authorized in writing by the General Counsel, his or her designee or
the Audit Committee of the Board of Directors, and to the extent authorized in writing by the General
Counsel or his or her designee, any such waiver shall be reported to the Company’s Audit Committee of the
Board of Directors.
ACKNOWLEDGMENT
This Insider Trading Policy will be delivered to all current Insiders and to all directors, officers,
employees, and designated consultants and contractors at the start of their employment or relationship with
the Company. Upon first receiving a copy of this Insider Trading Policy, as amended from time to time,
each individual must acknowledge that he or she has received a copy and agrees to comply with the terms
of this Insider Trading Policy, and, if applicable, the Trading Procedures contained herein.
This acknowledgment will constitute consent for the Company to impose sanctions for violation of
the Insider Trading Policy, including the Trading Procedures, and to issue any necessary stop-transfer orders
to the Company’s transfer agent to ensure compliance.
All directors, officers and employees and designated consultants and contractors will be required
upon the Company’s request to re-acknowledge and agree to comply with the Insider Trading Policy
(including any amendments or modifications). For such purpose, an individual will be deemed to have
acknowledged and agreed to comply with the Insider Trading Policy when copies of such items have been
delivered by regular or electronic mail (or other delivery option used by the Company) by the General
Counsel or his or her designee.
Question regarding this Insider Trading Policy are encouraged and may be directed to the General
Counsel.
Adopted May 8, 2018, subject to effectiveness of the Company’s Registration Statement on Form S-1.
Updated on March 12, 2021, June 15, 2021, and January 31, 2024.
AUTHORIZED APPROVAL
Signature of Compliance Officer (or designee)
Date
CONFIRMATION OF TRANSACTION
I hereby confirm that the transaction(s) requested above was (were) executed as follows:
☐
Purchase of shares:
*Number of shares:
Price per share:
Date and approximate time of purchase:
☐
Sale of shares:
*Number of shares:
Price per share:
Date and approximate time of sale:
Insider’s Signature
Date
S T O C K T R A N S A C T I O N R E Q U E S T
Pursuant to Scholar Rock Holding Corporation’s Statement of Company Policy on Insider Trading and Disclosure (the “Trading Procedures”), I hereby notify
Scholar Rock Holding Corporation (the “Company”) of my intent to trade the securities of the Company as indicated below:
REQUESTER INFORMATION
Insider’s Name:
INTENT TO PURCHASE
Number of shares:
Intended trade date:
Means of acquiring shares:
☐
Acquisition through employee benefit plan (please specify):
☐
Purchase through a broker on the open market
☐
Other (please specify):
INTENT TO SELL
Number of shares:
Intended trade date:
Means of selling shares:
☐
Sale through employee benefit plan (please specify):
☐
Sale through a broker on the open market
☐
Other (please specify):
CERTIFICATION
I hereby certify that (1) I am not in possession of any material, nonpublic information concerning the Company, as defined in the Company’s Statement of
Company Policy on Insider Trading and Disclosure, (2) to the best of my knowledge, the proposed trade(s) listed above does not violate the trading
restrictions of Section 16 of the Securities Exchange Act of 1934, as amended, or Rule 144 under the Securities Act of 1933, as amended, and (3) I am not
purchasing any securities of the Company on margin in contravention of the Company’s Trading Procedures. I understand that, if I trade while possessing
such information or in violation of such trading restrictions, I may be subject to severe civil and/or criminal penalties, and may be subject to discipline by
the Company including termination.
Insider’s Signature
Date
Exhibit 21.1
SUBSIDIARIES OF SCHOLAR ROCK HOLDING CORPORATION
Subsidiary
Jurisdiction
Scholar Rock, Inc.
Delaware
Scholar Rock Netherlands B.V.
The Netherlands
Scholar Rock Securities Corporation
Massachusetts
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-3 Nos. 333-254057, 333-249715, 333-231920, 333-268329, and
333-282530) of Scholar Rock Holding Corporation,
(2) Registration Statement (Form S-8 Nos. 333-263349, 333-238082 and 333-256065) pertaining to the
2018 Stock Option and Incentive Plan and 2018 Employee Stock Purchase Plan, of Scholar Rock
Holding Corporation,
(3) Registration Statement (Form S-8 No. 333-225192) pertaining to the 2017 Stock Option and
Incentive Plan, 2018 Stock Option and Incentive Plan, and 2018 Employee Stock Purchase Plan, of
Scholar Rock Holding Corporation,
(4) Registration Statement (Form S-8 Nos. 333-266658, 333-268327, and 333-283120) pertaining to
the 2022 Inducement Equity Plan, of Scholar Rock Holding Corporation, and
(5) Registration Statement (Form S-8 No. 333-270318 and 333-278049) pertaining to the 2018 Stock
Option and Incentive Plan, 2018 Employee Stock Purchase Plan, and 2022 Inducement Equity Plan,
of Scholar Rock Holding Corporation
of our report dated February 27, 2025, with respect to the consolidated financial statements of Scholar Rock
Holding Corporation, included in this Annual Report (Form 10-K) of Scholar Rock Holding Corporation for
the year ended December 31, 2024.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 27, 2025
Exhibit 31.1
Certifications
I, Jay T. Backstrom, certify that:
1. I have reviewed this Annual Report on Form 10-K of Scholar Rock Holding Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 27, 2025
/s/ Jay T. Backstrom
Jay T. Backstrom
President and Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
Certifications
I, Edward H. Myles, certify that:
1. I have reviewed this Annual Report on Form 10-K of Scholar Rock Holding Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 27, 2025
/s/ Edward H. Myles
Edward H. Myles
Chief Operating Officer & Chief Financial Officer
(Principal Financial and Accounting 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 Scholar Rock Holding Corporation (the
“Company”) for the year ended December 31, 2024 as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to his or her knowledge, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
This certification is being provided pursuant to 18 U.S.C. 1350 and is not to be deemed a part of the Report,
nor is it to be deemed to be “filed” for any purpose whatsoever.
Date: February 27, 2025
/s/ Jay T. Backstrom
Jay T. Backstrom
President and Chief Executive Officer
Date: February 27, 2025
/s/ Edward H. Myles
Edward H. Myles
Chief Operating Officer & Chief Financial Officer
[Signature Page to Scholar Rock Holding Corporation Board Consent]
EXHIBIT 97
SCHOLAR ROCK HOLDING CORPORATION
COMPENSATION RECOVERY POLICY
Adopted as of November 28, 2023
Scholar Rock Holding Corporation, a Delaware corporation (the “Company”), has adopted a
Compensation Recovery Policy (this “Policy”) as described below.
1.
Overview
The Policy sets forth the circumstances and procedures under which the Company shall recover
Erroneously Awarded Compensation from Covered Persons (as defined below) in accordance with
rules issued by the United States Securities and Exchange Commission (the “SEC”) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Nasdaq Stock
Market.
2.
Compensation Recovery Requirement
In the event the Company is required to prepare a Financial Restatement, the Company shall
recover reasonably promptly all Erroneously Awarded Compensation with respect to such
Financial Restatement.
3.
Definitions
a.
“Applicable Recovery Period” means the three completed fiscal years immediately
preceding the Restatement Date for a Financial Restatement. In addition, in the event
the Company has changed its fiscal year: (i) any transition period of less than nine
months occurring within or immediately following such three completed fiscal years
shall also be part of such Applicable Recovery Period and (ii) any transition period of
nine to 12 months will be deemed to be a completed fiscal year.
b. “Applicable Rules” means any rules or regulations adopted by the Exchange pursuant
to Rule 10D-1 under the Exchange Act and any applicable rules or regulations adopted
by the SEC pursuant to Section 10D of the Exchange Act.
c.
“Board” means the Board of Directors of the Company.
d. “Committee” means the Compensation Committee of the Board or, in the absence of
such committee, a majority of independent directors serving on the Board.
e.
“Covered Person” means any Executive Officer. A person’s status as a Covered Person
with respect to Erroneously Awarded Compensation shall be determined as of the time
of receipt of such Erroneously Awarded Compensation regardless of the person’s
current role or status with the Company (e.g., if a person began service as an Executive
Officer after the beginning of an Applicable Recovery Period, that person would not be
considered a Covered Person with respect to Erroneously Awarded Compensation
received before the person began service as an Executive Officer, but would be
considered a Covered Person with respect to Erroneously Awarded Compensation
received after the person began service as an Executive Officer where such person
served as an Executive Officer at any time during the performance period for such
Erroneously Awarded Compensation).
f.
“Effective Date” means December 1, 2023.
g. “Erroneously Awarded Compensation” means the amount of any Incentive-Based
Compensation received by a Covered Person on or after the Effective Date and during
the Applicable Recovery Period that exceeds the amount that otherwise would have
been received by the Covered Person had such compensation been determined based on
the restated amounts in a Financial Restatement, computed without regard to any taxes
paid. Calculation of Erroneously Awarded Compensation with respect to Incentive-
Based Compensation based on stock price or total shareholder return, where the amount
of Erroneously Awarded Compensation is not subject to mathematical recalculation
directly from the information in a Financial Restatement, shall be based on a reasonable
estimate of the effect of the Financial Restatement on the stock price or total
shareholder return upon which the Incentive-Based Compensation was received, and
the Company shall maintain documentation of the determination of such reasonable
estimate and provide such documentation to the Exchange in accordance with the
Applicable Rules. Incentive-Based Compensation is deemed received, earned or vested
when the Financial Reporting Measure is attained, not when the actual payment, grant
or vesting occurs.
h. “Exchange” means the Nasdaq Stock Market LLC.
i.
“Executive Officer” means any person who served the Company in any of the
following roles at any time during the performance period applicable to Incentive-
Based Compensation and received Incentive-Based Compensation after beginning
service in any such role (regardless of whether such Incentive-Based Compensation
was received during or after such person’s service in such role): the president, principal
financial officer, principal accounting officer (or if there is no such accounting officer,
the controller), any vice president in charge of a principal business unit, division or
function (such as sales, administration or finance), any other officer who performs a
policy making function or any other person who performs similar policy making
functions for the Company. Executive officers of parents or subsidiaries of the
Company may be deemed executive officers of the Company if they perform such
policy making functions for the Company.
j.
“Financial Reporting Measures” mean measures that are determined and presented in
accordance with the accounting principles used in preparing the Company’s financial
statements, any measures that are derived wholly or in part from such measures
(including, for example, a non-GAAP financial measure), and stock price and total
shareholder return.
k. “Financial Restatement” means a restatement of previously issued financial statements
of the Company due to the material noncompliance of the Company with any financial
reporting requirement under the securities laws, including any required restatement to
correct an error in previously-issued financial statements that is material to the
previously-issued financial statements or that would result in a material misstatement if
the error were corrected in the current period or left uncorrected in the current period.
l.
“Incentive-Based Compensation” means any compensation provided, directly or
indirectly, by the Company or any of its subsidiaries that is granted, earned or vested
based, in whole or in part, upon the attainment of a Financial Reporting Measure.
m. “Restatement Date” means, with respect to a Financial Restatement, the earlier to occur
of: (i) the date the Board concludes, or reasonably should have concluded, that the
Company is required to prepare the Financial Restatement or (ii) the date a court,
regulator or other legally authorized body directs the Company to prepare the Financial
Restatement.
4.
Exception to Compensation Recovery Requirement
The Company may elect not to recover Erroneously Awarded Compensation pursuant to this
Policy if the Committee determines that recovery would be impracticable, and one or more of the
following conditions, together with any further requirements set forth in the Applicable Rules, are
met: (i) the direct expense paid to a third party, including outside legal counsel, to assist in
enforcing this Policy would exceed the amount to be recovered, and the Company has made a
reasonable attempt to recover such Erroneously Awarded Compensation; or (ii) recovery would
likely cause an otherwise tax-qualified retirement plan to fail to be so qualified under applicable
regulations.
5.
Tax Considerations
To the extent that, pursuant to this Policy, the Company is entitled to recover any Erroneously
Awarded Compensation that is received by a Covered Person, the gross amount received (i.e., the
amount the Covered Person received, or was entitled to receive, before any deductions for tax
withholding or other payments) shall be returned by the Covered Person.
6.
Method of Compensation Recovery
The Committee shall determine, in its sole discretion, the method for recovering Erroneously
Awarded Compensation hereunder, which may include, without limitation, any one or more of the
following:
a.
requiring reimbursement of cash Incentive-Based Compensation previously paid;
b. seeking recovery of any gain realized on the vesting, exercise, settlement, sale,
transfer or other disposition of any equity-based awards;
c.
cancelling or rescinding some or all outstanding vested or unvested equity-based
awards;
d. adjusting or withholding from unpaid compensation or other set-off;
e.
cancelling or offsetting against planned future grants of equity-based awards; and/or
f.
any other method permitted by applicable law or contract.
Notwithstanding the foregoing, a Covered Person will be deemed to have satisfied such person’s
obligation to return Erroneously Awarded Compensation to the Company if such Erroneously
Awarded Compensation is returned in the exact same form in which it was received; provided that
equity withheld to satisfy tax obligations will be deemed to have been received in cash in an
amount equal to the tax withholding payment made.
7.
Policy Interpretation
This Policy shall be interpreted in a manner that is consistent with the Applicable Rules and any
other applicable law. The Committee shall take into consideration any applicable interpretations
and guidance of the SEC in interpreting this Policy, including, for example, in determining whether
a financial restatement qualifies as a Financial Restatement hereunder. To the extent the Applicable
Rules require recovery of Incentive-Based Compensation in additional circumstances besides those
specified above, nothing in this Policy shall be deemed to limit or restrict the right or obligation of
the Company to recover Incentive-Based Compensation to the fullest extent required by the
Applicable Rules.
8.
Policy Administration
This Policy shall be administered by the Committee; provided, however, that the Board shall have
exclusive authority to authorize the Company to prepare a Financial Restatement. In doing so, the
Board may rely on a recommendation of the Audit Committee of the Board. The Committee shall
have such powers and authorities related to the administration of this Policy as are consistent with
the governing documents of the Company and applicable law. The Committee shall have full
power and authority to take, or direct the taking of, all actions and to make all determinations
required or provided for under this Policy and shall have full power and authority to take, or direct
the taking of, all such other actions and make all such other determinations not inconsistent with
the specific terms and provisions of this Policy that the Committee deems to be necessary or
appropriate to the administration of this Policy. The interpretation and construction by the
Committee of any provision of this Policy and all determinations made by the Committee under
this policy shall be final, binding and conclusive.
9.
Compensation Recovery Repayments not Subject to Indemnification
Notwithstanding anything to the contrary set forth in any agreement with, or the organizational
documents of, the Company or any of its subsidiaries, Covered Persons are not entitled to
indemnification for Erroneously Awarded Compensation or for any losses arising out of or in any
way related to Erroneously Awarded Compensation recovered under this Policy.
Management Team
Jay Backstrom, MD, MPH
President & Chief Executive Officer
Junlin Ho, JD
General Counsel & Corporate Secretary
Jing Marantz, MD, PhD, MBA
Chief Medical Officer
Caryn Parlavecchio
Chief Human Resources Officer
Mo Qatanani, PhD
Chief Scientific Officer
Tracey Sacco
Chief Commercial Officer
Beth Shafer, PhD
Chief Business Officer
Lisa Wyman
Chief Technical and Quality Officer
Board of Directors
David Hallal
Chairman of the Board of Directors, Scholar Rock®
Chairman and Chief Executive Officer of ElevateBio, LLC
Srini Akkaraju, MD, PhD
Founder and Managing Partner, Samsara BioCapital
Jay Backstrom, MD, MPH
President & Chief Executive Officer, Scholar Rock®
Richard Brudnick
Chief Business Officer, Prime Medicine, Inc.
Kristina Burow
Managing Director, ARCH Venture Partners
Jeffrey S. Flier, MD
Higginson Professor of Physiology and Medicine &
Harvard University Distinguished Service Professor;
Former Dean of Harvard Medical School
Michael Gilman, PhD
Chief Executive Officer, Arrakis Therapeutics, Inc.
Katie Peng
Chief Commercial Officer, Denali Therapeutics, Inc.
Joshua Reed
Akshay Vaishnaw MD, PhD
Venture Partner, Atlas Ventures
Annual Meeting of Stockholders
The Annual Meeting of Stockholders will be held by
virtual meeting at 12:00 PM, EDT on May 22, 2025,
and can be accessed from the following website:
https://www.virutualshareholdermeeting.com/SRRK2025.
You may attend the meeting via the Internet by logging in
with your 16-digit control number.
Independent Auditors
Ernst & Young LLP
Investor Inquiries
ir@scholarrock.com
Stock Listing
NASDAQ: SRRK
Transfer Agent
Computershare Trust Company, N.A.
P.O. Box 43006
Providence, Rhode Island 02940
(800) 736-3001
SEC Form 10-K
A copy of our Form 10-K filed with the Securities and Exchange
Commission (SEC) is available free of charge on the SEC’s
website at www.sec.gov or from the company’s investor relations
department by emailing ir@scholarrock.com or sending a written
request to Scholar Rock’s investor relations department at:
Investor Relations
Scholar Rock, Inc.
301 Binney Street, 3rd Floor
Cambridge, MA 02142
(857) 259.3860
www.scholarrock.com
info@scholarrock.com
301 Binney Street, 3rd Floor
Cambridge, MA 02142