UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number: 001-37708
Syndax Pharmaceuticals, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
2834
(Primary Standard Industrial
Classification Code Number)
32-0162505
(I.R.S. Employer
Identification Number)
35 Gatehouse Drive, Building D, Floor 3
Waltham, Massachusetts 02451
(781) 419-1400
(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
Common Stock
Trading Symbol(s)
SNDX
Name of each exchange on which registered
The Nasdaq Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities 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 the filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated
filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Non-accelerated Filer
Emerging growth company
☒
☐
☐
Accelerated Filer
Smaller Reporting 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 accounting standards provided pursuant to Section
13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒
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. ☒
As of June 30, 2021, 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 $833.4
million, based on the closing price of the registrant’s common stock on June 30, 2021. Shares of the registrant’s common stock held by each officer and director 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 25, 2022, there were 55,012,245 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2022 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, 2021, are incorporated by reference into Part III of this Annual Report on Form 10-K.
Auditor Firm Id:
#34
Auditor Name:
Deloitte & Touche LLP
Auditor Location:
New York, New York
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
TABLE OF CONTENTS
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART III
Item 15.
Item 16.
Exhibit and Financial Statement Schedules
Form 10-K Summary
PART IV
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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 Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements”
for purposes of this Annual Report on Form 10-K. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,”
“could,” “estimate,” “expects,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative or plural of those terms, and
similar expressions.
Forward-looking statements include, but are not limited to, statements about:
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the impact of the ongoing COVID-19 pandemic and its effects on our operations, research and development and clinical trials and potential
disruption in the operations and business of third-party manufacturers, contract research organizations, or CROs, other service providers, and
collaborators with whom we conduct business;
our estimates regarding our expenses, future revenues, anticipated capital requirements and our needs for additional financing;
the timing of the progress and receipt of data from the pivotal Phase 2 cohorts of the AUGMENT-101 trial of SNDX-5613 in patients with
relapsed/refractory, or R/R, acute leukemias;
the timing of the progress and receipt of data from the AUGMENT-102 trial of SNDX-5613 in combination with chemotherapy in patients with
R/R mutant nucleophosmin, NPM1, or mixed lineage leukemia rearranged, MLLr, acute leukemias, as well as the combination trials as part of
the Leukemia & Lymphoma Society’s Beat® AML Master Clinical Trial and as part of the Australian Leukemia and Lymphoma Group
(ALLG) INTERCEPT Master Clinical Trial;
the timing of the progress and receipt of data from the pivotal Phase 2 trial, AGAVE-201, of axatilimab in chronic Graft Versus Host Disease,
or cGVHD;
our ability to replicate results in future clinical trials;
our expectations regarding the potential safety, efficacy or clinical utility of our product candidates as well as the potential use of our product
candidates to treat various cancer indications and fibrotic diseases;
our ability to obtain and maintain regulatory approval for our product candidates and the timing or likelihood of regulatory filings and
approvals for such candidates;
our ability to maintain our licenses with Bayer Pharma AG, Eddingpharm Investment Company Limited, UCB Biopharma Sprl, and Vitae
Pharmaceuticals, Inc., a subsidiary of Allergan plc, which was acquired by AbbVie Inc.;
the success of our collaboration with Incyte Corporation, or Incyte, to further develop and commercialize axatilimab;
the potential milestone and royalty payments under certain of our license agreements;
the implementation of our strategic plans for our business and development of our product candidates;
the scope of protection we establish and maintain for intellectual property rights covering our product candidates and our technology;
the market adoption of our product candidates by physicians and patients;
developments relating to our competitors and our industry; and
political, social and economic instability, natural disasters or public health crisis, including but not limited to the COVID-19 pandemic, in
countries where we or our collaborators do business.
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Factors that may cause actual results to differ materially from current expectations include, among other things, those set forth in Part I, Item 1A, “Risk
Factors,” below and for the reasons described elsewhere in this Annual Report on Form 10-K. Any forward-looking statement in this Annual Report on Form
10-K reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions. Given these uncertainties, you
should not rely on these forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking
statements are reasonable, our information may be incomplete or limited and we cannot guarantee future results. Except as required by law, we assume no
obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This Annual Report on Form 10-K also contains estimates, projections and other information concerning our industry, our business and the markets for
certain drugs and consumer products, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain
medical conditions. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual
events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these
industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general
publications, government data and similar sources and we have not independently verified the data from third party sources. In some cases, we do not expressly
refer to the sources from which these data are derived.
In this Annual Report on Form 10-K, unless otherwise stated or as the context otherwise requires, references to “Syndax,” “the Company,” “we,” “us,”
“our” and similar references refer to Syndax Pharmaceuticals, Inc. and its wholly owned subsidiaries. This Annual Report on Form 10-K also contains
references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to, including logos,
artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that their respective
owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names or
trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
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Item 1. BUSINESS
Our Company
PART I
We are a clinical-stage biopharmaceutical company developing an innovative pipeline of cancer therapies. Our two lead product candidates are SNDX-
5613 and SNDX-6352, or axatilimab. We are developing SNDX-5613, targeting the binding interaction of menin with the mixed lineage leukemia 1, or MLL1,
protein for the treatment of MLL-rearranged, or MLLr, acute leukemias and nucleophosmin 1, or NPM1, mutant acute myeloid leukemia, or AML, as well as
axatilimab, a monoclonal antibody that blocks the colony stimulating factor 1, or CSF-1 receptor. We have deprioritized the development of entinostat, our
once-weekly, oral, small molecule, Class I HDAC inhibitor, to focus resources on advancing our existing pipeline and expanding it with new assets. We plan to
continue to leverage the technical and business expertise of our management team and scientific collaborators to license, acquire and develop additional
therapeutics to expand our pipeline.
Our Strategy
Our clinical-stage pipeline includes SNDX-5613, a highly selective inhibitor of the menin–MLL binding interaction, axatilimab, a monoclonal
antibody that blocks the CSF-1 receptor, and entinostat, a Class I HDAC inhibitor.
We are developing SNDX-5613 in acute leukemias and axatilimab for use in cGVHD and potentially other fibrotic-macrophage driven diseases as
single agents and in combination with approved drugs. We have deprioritized the development of entinostat but may opportunistically explore potential disease
areas where entinostat could play an important therapeutic role. Key elements of our strategy include:
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Develop SNDX-5613 for the treatment of genetically defined leukemias. We believe that SNDX-5613 has the potential to treat at least two
genetically defined acute leukemias: (i) MLLr and (ii) NPM1 AML. Our Phase 1/2 open-label AUGMENT-101 trial is ongoing. We are
completing the Phase 1 portion of the trial and have initiated the pivotal Phase 2 portion of the trial with patients to be enrolled in three
indication-specific expansion cohorts to determine the efficacy, short- and long-term safety, and tolerability of SNDX-5613 in MLLr ALL,
MLLr AML and NPM1c AML. We are also concurrently expanding into the frontline and maintenance setts with three new trials.
Develop axatilimab as a monotherapy in cGVHD. We are conducting the pivotal AGAVE-201 trial for the treatment of patients with cGVHD
and are exploring the use of axatilimab to treat other fibrotic diseases where monocyte-derived macrophages have been shown to play a role.
Leverage the technical and business expertise of our management team and scientific collaborators to license, acquire and develop additional
cancer therapies to expand our pipeline. We have exclusive rights to axatilimab and SNDX-5613. We are continuing to leverage the collective
talent within our organization and network of advisors to guide our pipeline expansion and development plans.
1
Our Pipeline
SNDX-5613
Our first clinical-stage product candidate, SNDX-5613, is a potent, orally active inhibitor of the high affinity interaction site on menin with the protein
MLL1. This specific interaction is a key driver for two genetically defined acute leukemias: (i) MLLr and (ii) NPM1c AML. Both diseases have a poor
prognosis. In preclinical testing, SNDX-5613 has demonstrated benefit in leukemic models of disease. Initial clinical evidence with SNDX-5613 also supports
the hypothesis that disruption of the menin-MLL interaction can lead to responses in acute leukemias.
We are developing SNDX-5613 as a targeted therapy to potentially treat two genetically defined acute leukemias: (i) a genetically defined subset of
acute leukemias with chromosomal rearrangements in the mixed lineage leukemia gene, known as MLLr; and (ii) AML, with a somatic mutation in the
nucleophosmin 1, or NPM1, gene, also known as NPM1c. Our near-term focus is to rapidly establish proof-of-concept that SNDX-5613 is a targeted therapy
that can potentially provide meaningful clinical benefit to adult and pediatric leukemia patients having relapsed or refractory MLLr or NPM1c acute leukemias.
Our investigational new drug, or IND, application for SNDX-5613 took effect with the U.S. Food and Drug Administration, or FDA, in the second quarter of
2019 and we commenced AUGMENT-101, a clinical trial consisting initially of a Phase 1 dose escalation portion to determine the maximum tolerated dose, or
MTD, and recommended Phase 2 dose of SNDX-5613 in patients with acute leukemia. We are conducting the trial at multiple centers in the United States. We
are completing the Phase 1 portion of the trial and have initiated the pivotal Phase 2 portion of the trial with patients to be enrolled in three
2
indication-specific expansion cohorts to determine the efficacy, short- and long-term safety, and tolerability of SNDX-5613 in MLLr ALL, MLLr AML and
NPM1c AML.
In September 2021, we participated in a meeting with the FDA to discuss the results of the Phase 1 portion of our AUGMENT-101 trial. At the
meeting, the FDA agreed with our recommended Phase 2 dose and confirmed that we may initiate the Phase 2 registration-directed cohorts of AUGMENT-101.
Additionally, the FDA agreed with our proposed statistical design and endpoints for each of the three Phase 2 expansion cohorts.
Additionally, we announced that we will initiate a frontline trial of SNDX-5613 in combination with venetoclax and azacytidine in newly diagnosed
AML patients unable to tolerate induction chemotherapy. The trial will be conducted as part of the Leukemia & Lymphoma Society’s Beat AML Master
Clinical Trial, and SNDX-5613 is the first menin inhibitor to be included in the Beat AML Master Clinical Trial. We also announced that we will initiate a trial
to assess the anti-leukemic efficacy of SNDX-5613 in MLLr or NPM1 patients with measurable residual disease progression following anti-leukemic treatment.
This trial will be conducted as part of the Australian Leukemia and Lymphoma Group INTERCEPT Master Clinical Trial, a collaborative clinical trial
investigating novel therapies to target early relapse and clonal evolution as pre-emptive therapy in AML. SNDX-5613 is the first menin inhibitor to be included
in the INTERCEPT AML Master Clinical Trial. Lastly, we announced that we will initiate a new trial to assess the safety, tolerability, and preliminary anti-
leukemic efficacy of SNDX-5613 in combination with chemotherapy in patients with relapsed or refractory MLLr or mNPM1 acute leukemias. We expect that
the Phase 1b trial, which we refer to as AUGMENT-102, will enroll up to 27 patients.
In December 2021, we presented positive date from the Phase 1 portion of our AUGMENT-101 trial in heavily pretreated patients with MLLr or
NPM1c mutations in an oral presentation during the American Society of Hematology (ASH) Virtual Annual Meeting. The following table summarizes select
efficacy and safety data that has been presented by us throughout 2021.
* Overall Response Rate = CR + CRh + CRp + CRi + MLFS
In the data that we presented at ASH, SNDX-5613 was well tolerated, with no discontinuations due to treatment-related adverse events observed. The
only dose limiting toxicity observed was Grade 3 QT prolongation, which occurred in 7% (n=3/43) of patients treated at the four doses that met the study’s pre-
defined recommended Phase 2 dose criteria.
In January 2020, the FDA granted SNDX-5613 Orphan Drug Designation, or ODD, for the treatment of adult and pediatric AML and in June 2021, the
FDA granted Fast Track Designation to SNDX-5613 for the treatment of adult and pediatric patients with relapsed or refractory acute leukemias harboring a
MLLr or NPM1 mutation. In December 2021, we announced that the European Commission granted ODD to SNDX-5613 for the treatment of AML.
SNDX-5613
Rationale for Targeting MLLr
3
MLLr leukemias arise by rare, spontaneous translocations at the MLL1 locus (11q23). It is estimated that approximately 10% of AML and ALL harbor this
MLL-re-arrangement with a worldwide incidence of approximately 5,000 to 7,000 cases per year. These translocations generate oncogenic fusion proteins with
more than 90 different MLL fusions currently known. All MLL fusion proteins bind with high affinity to the chromatin associated protein menin through a
conserved N-terminal sequence. This specific interaction with menin enables an aberrant transcription program that drives leukemic transformation. In pre-
clinical animal models, small molecule inhibitors of the menin-MLL interaction have demonstrated deep and durable single agent treatment effects in multiple
leukemic xenografts harboring MLL fusions. Inhibiting the menin-MLL1 interaction represents a novel targeted strategy for the treatment of MLLr leukemias.
Today, the first choice therapy for both MLLr AML and MLLr ALL still relies heavily on intensive chemotherapy, if a patient can tolerate such treatment.
Despite these patients being routinely diagnosed, there are currently no targeted therapies approved to treat patients with MLLr acute leukemias. Currently there
are several other clinical-stage menin-inhibitors in development for the treatment of MLLr AML and MLLr ALL.
Rationale for Targeting Nucleophosmin 1 Mutant AML
NPM1 is among the most frequently mutated genes in AML, found in approximately 30% of AML cases for an incidence of approximately 20,000
cases per year. Mutations in NPM1 lead to the aberrant cytoplasmic localization of the mutants, termed NPM1c. Loss of NPM1c from the nucleus leads to
suppression of differentiation and enables a leukemic transcription program that relies critically on the menin-MLL1 complex to drive and maintain the
program. As a result, NPM1c harboring cells are sensitive to menin-MLL interaction inhibitors. In NPM1c cells, inhibition of the menin-MLL interaction
suppresses the leukemic transcription program, causing growth arrest, terminal differentiation and cell death. In animal models, small molecule inhibitors of the
menin-MLL interaction have demonstrated deep and durable single agent treatment effects in multiple NPM1c xenografts. Based on these findings, blocking
the menin-MLL1 interaction represents a novel targeted strategy for the treatment of NPM1c AML.
Like MLLr, NPM1 is readily diagnosed as part of the standard AML patient work-up today, and yet there are no approved targeted therapies approved
to treat patients with a NPM1 mutant AML. There are several additional clinical stage agents currently advancing as potential treatments for NPM1 mutant
AML.
Axatilimab
We are also developing axatilimab a monoclonal antibody targeting the colony stimulating factor-1 receptor, or CSF-1R, a cell surface protein thought
to control the survival and function of monocytes and macrophages. Axatilimab binds with high affinity to CSF-1R and blocks the binding of the two known
CSF-1R ligands CSF-1 and IL-34. CSF-1R is expressed on the surface of specific immune cells known as macrophages and their precursor cells known as
monocytes. CSF-1R signaling on these cells has been demonstrated in preclinical studies conducted in animal models of skin and lung chronic graft versus host
disease, or cGVHD, to be the key regulatory pathway involved in the expansion and infiltration of the macrophages that mediate fibrosis and the cGVHD
disease process. Blocking CSF-1R activity with an experimental CSF-1R antibody in these studies was shown to prevent and treat the symptoms of cGVHD.
We believe that by inhibiting CSF-1R activation on monocytes and macrophages, axatilimab has the potential to be used to treat cGVHD as well as other
fibrotic diseases where monocyte-derived macrophages have been shown to play a significant role.
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Our near-term focus is to rapidly establish that axatilimab can provide meaningful clinical benefit in patients with advanced cGVHD where prior
therapies are no longer effective and to establish proof-of-concept of using axatilimab to treat other fibrotic diseases where monocyte-derived macrophages
have been shown to play a role.
We announced that following our end of Phase 1 meeting with the FDA, we have aligned on a regulatory path for axatilimab for the treatment of
cGVHD. We commenced a pivotal Phase 2 trial, AGAVE-201, to assess the safety and efficacy of different doses and schedules of axatilimab for the treatment
of patients with cGVHD. The primary endpoint is the objective response rate based on the 2014 NIH consensus criteria for GVHD with key secondary
endpoints including duration of response and improvement in modified Lee Symptom Scale score. We anticipate releasing topline data in 2023. We completed
enrollment of the Phase 1/2 trial evaluating axatilimab for the treatment of patients with cGVHD in the second quarter of 2021.
In December 2021, we presented positive data from the Phase 1/2 trial of axatilimab in patients with recurrent or refractory chronic cGVHD despite two
or more prior lines of therapy in an oral presentation during the American Society of Hematology at ASH. During the presentation, and in a press release that
we issued on the presentation date, we shared that as of October 22, 2021 (data cutoff) a total of 40 patients were treated in the SNDX-6352-503 trial, who
received a median of four prior systemic therapies. There were 31 evaluable patients treated at 1mg/kg every 2 weeks or 3mg/kg every 4 weeks, the doses that
we are testing in the ongoing AGAVE-201 global pivotal study. Of the evaluable patients, responses were observed in 68% (n=21/31) of patients, with a best
ORR (complete response (CR) plus partial response) of 72% (n=18/25) at 1mg/kg every two weeks and 50% (n=3/6) at 3mg/kg every four weeks. Responses
observed across a range of organ systems with difficult to treat manifestations such as lung (n=5/15), skin (n=3/28), and joints and fascia (n=16/24). Fifty-three
percent of patients (n=16/30) reported clinically meaningful improvement as measured by at least a 7-point decrease in Lee Symptom Scale score. As of data
cutoff 43% (n=17/40) of patients remained on treatment.
In the data that we presented at ASH, axatilimab was well-tolerated with a favorable safety profile. The most common observed adverse events were
consistent with on-target effects on liver enzyme pharmacology. There was no incidence of cytomegalovirus or other viral reactivation and no apparent
increases in risk for infection. Enrollment remains ongoing in the global pivotal Phase 2 AGAVE-201 trial of axatilimab in patients with cGVHD, with topline
data expected in 2023.
In March and April of 2021, we announced that the FDA granted Orphan Drug Designation to axatilimab for the treatment of patients with cGVHD
and idiopathic pulmonary fibrosis, or IPF. In addition to the ongoing AGAVE-201 trial, we and Incyte expect to initiate additional trials of axatilimab in patients
with cGVHD in 2022, including a Phase 2 trial in combination with a JAK inhibitor in patients with steroid-refractory cGVHD. Beyond cGVHD, we plan to
commence a Phase 2 proof-of-concept trial of axatilimab in the first half of 2022 in patients with IPF.
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Axatilimab in GVHD
cGVHD, an immune response of the donor-derived hematopoietic cells against recipient tissues, is a serious, potentially life-threatening complication
of allogeneic hematopoietic stem cell transplantation, or HSCT, that can last for years. cGVHD is estimated to develop in approximately 40% of transplant
recipients and affects approximately 14,000 patients in the United States. cGVHD typically manifests across multiple organ systems, with the skin and mucosa
being commonly involved, and is characterized by the development of fibrotic tissue
The first line of therapy for cGVHD is typically corticosteroids, though approximately 50% of patients may require treatment with additional systemic
therapies, such as extracorporeal photopheresis, cytostatic agents such as mycophenolate moftetil, methotrexate, and immunmodulators such as rituximab, IL-2.
Imbruvica® (ibrutinib), a BTK inhibitor, was the first FDA-approved therapy for cGVHD and is indicated for use after one or more lines of therapy. Imbruvica
received approval based on Phase 1/2 clinical trial data that showed a 68% overall response rate, with 48% of responses lasting 20 weeks or longer and reduced
dependence on steroids for most patients. While approved agents have shown a benefit in improving symptoms of this disease, none have demonstrated an
improvement in long-term outcomes and a significant unmet medical need still remains for this patient population. Additionally, all currently approved agents
are believed to exert their effect through T- and B-cells, with minimal impact on macrophages. By inhibiting the work of monocyte-derived macrophages,
Axatilimab, provides a differentiated way to treat cGVHD, which we expect is ultimately expected to have a more pronounced impact on the fibrotic process.
We also believe that shifting CSF-1R inhibition earlier in the treatment phase of cGVHD, to minimize formation of fibrotic tissue, could have a meaningful
long-term impact on the disease process itself.
Entinostat
Entinostat is our oral, small molecule product candidate that has direct effects on both cancer cells and immune regulatory cells, potentially enhancing the
body’s immune response to tumors. In May 2020, we reported final results of E2112, the Phase 3 clinical trial conducted by ECOG-ACRIN Cancer Research
Group and sponsored by the National Cancer Institute, that evaluated the investigational compound entinostat plus exemestane in patients with advanced
hormone receptor positive, human epidermal growth factor receptor 2 negative (HR+, HER2-) breast cancer. The trial did not achieve the primary endpoint of
demonstrating a statistically significant overall survival benefit over hormone therapy alone.
We have deprioritized the development of entinostat, but may opportunistically explore potential disease areas where entinostat could play an important
therapeutic role.
Collaborations
Incyte Collaboration and License Agreement
In September 2021, we entered into a collaboration and license agreement, or the Incyte Agreement, with Incyte for the development and
commercialization of axatilimab. Additionally, in September 2021 the Company entered into a share purchase agreement with Incyte, or Incyte Share Purchase
Agreement. Collectively referred to as the Incyte Agreements. Under the terms of the Incyte Agreement, Incyte received exclusive commercialization rights
outside of the United States, and we and Incyte will, subject to the exercise of our co-promotion option, have co-commercialization rights in the United States,
with respect to axatilimab. Incyte is responsible for leading commercialization strategy and booking all revenue from worldwide sales of axatilimab, subject to
its royalty payment obligations set forth below. The parties will share equally the profits and losses from the co-commercialization efforts. We and Incyte are
co-developing axatilimab and sharing development costs associated with global and U.S.-specific clinical trials, with Incyte responsible for 55% of such costs
and we are responsible for 45% of such costs. Each company is responsible for funding any independent development activities. All development costs related
to the collaboration are subject to a joint development plan. A joint development committee between us and Incyte will govern future development of
axatilimab.
In addition, we and Incyte entered into a Letter Agreement memorializing how the parties would work together in the event that the government
intervened in the proposed collaboration and the parties are forced to terminate and unwind the collaboration. Pursuant to the Letter Agreement, the parties
agreed, in part, (i) to permit Incyte to terminate the Incyte Agreement through September 2022 if, prior to March 23, 2022, either party for the
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first time receives a formal request from either the Federal Trade Commission or the Department of Justice, Antitrust Division, regarding the Incyte Agreement,
which we refer to as the Termination Right, and (ii) to provide the parties with a mechanism to settle any gain or loss related to Incyte’s equity investment in the
Company solely in the event that Incyte exercises its Termination Right. If Incyte exercises its Termination Right, (x) we will refund to Incyte the $117 million
upfront license fee and any payments made by Incyte for royalties, milestones and development costs and any other amounts paid by Incyte to us under the
Incyte Agreement, and (y) we will waive any remaining lock-up restrictions and Incyte may sell may the shares of our common stock that it purchased in
connection with its equity investment pursuant to the Incyte Agreement. Following a sale of its shares, Incyte will remit to us any gain that it received, or,
alternatively, we will repay Incyte for any loss that it incurred in each case in connection with the sale of the shares. The Termination Right expires if the parties
do not receive a formal request before March 23, 2022. To date, the parties have not received any formal request from either the Federal Trade Commission or
the Department of Justice, Antitrust Division.
Upon signing the Letter Agreement in December 2021 both the Incyte Agreement and Incyte Share Purchase Agreement became effective. As a result, we
received an upfront fee of $117 million and we issued 1,421,523 shares of common stock for an aggregate purchase price of $35 million, or $24.62 per share.
We are eligible to receive up to $230 million in commercialization milestones as well as tiered royalties ranging in the mid-teens on sales outside of the United
States.
NCI and Investigator Collaborations
Collaborative Research and Development Agreement with the NCI related to Entinostat
Our collaboration with the NCI is governed by a CRADA between us and the NCI. The CRADA was originally signed by Mitsui Pharmaceuticals,
Inc., or Mitsui, and was then assigned to Schering AG following Schering AG’s acquisition of Mitsui. In 2007, Schering AG, then known as Bayer Schering
Pharma AG, agreed to assign the CRADA to us in connection with the execution of a license, development and commercialization agreement, or the Bayer
license agreement, with Bayer.
Under the CRADA, as amended, the NCI sponsors clinical studies on entinostat using researchers at the NCI as well as NCI-funded researchers at other
institutions, including ECOG-ACRIN and JHU. In return, we receive access to the data generated in these clinical studies, and we are obligated to supply the
clinical trial sites with sufficient quantities of entinostat. Additionally, we are required to make an annual payment to a particular NCI laboratory to help support
certain research studies related to this and other clinical trial. We have no other payment obligations under the CRADA.
We own any intellectual property generated in the course of the collaboration with the NCI, or Collaboration IP, to the extent that Collaboration IP is
generated by our employees. We also have an exclusive option to obtain an exclusive or non-exclusive commercialization license under Collaboration IP
generated by the NCI. With respect to any Collaboration IP that is owned by or licensed to us, we have agreed to grant the United States government a non-
exclusive license to practice or have practiced this Collaboration IP throughout the world by or on behalf of the government for research or other government
purposes.
Either party may terminate the CRADA either by mutual consent or unilaterally upon advance written notice to the other party. Absent such early
termination, the CRADA will expire on May 21, 2023. As we have in the past, we expect to renew the CRADA at that time.
Collaborative Research and Development Agreement with the NCI related to Axatilimab and Entinostat
In September 2016, we entered into an additional collaboration with the NCI related to both entinostat and axatilimab. Under the CRADA, the NCI
sponsors preclinical and clinical studies on entinostat and axatilimab using researchers at the NCI as well as NCI-funded researchers at other institutions. In
return, we receive access to the data generated in these preclinical and clinical studies and we are obligated to supply the laboratories and clinical trial sites with
sufficient quantities of entinostat and axatilimab. Additionally, we are required to make an annual payment to a particular NCI laboratory to help support certain
research studies related to this and other preclinical and clinical trials. We have no other payment obligations under the CRADA.
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We own all intellectual property generated during the collaboration with the NCI, or Axatilimab Collaboration IP, to the extent that Axatilimab
Collaboration IP is generated by our employees. We also have an exclusive option to obtain an exclusive or non-exclusive commercialization license under
Axatilimab Collaboration IP generated by the NCI. With respect to any Axatilimab Collaboration IP that is owned by or licensed to us, we have agreed to grant
the U.S. government a non-exclusive license to practice or have practiced this Axatilimab Collaboration IP throughout the world by or on behalf of the
government for research or other government purposes.
License Agreements
Vitae Pharmaceuticals, Inc.
We have a license agreement with Vitae Pharmaceuticals, Inc., a subsidiary of AbbVie plc, or the AbbVie License Agreement, under which Vitae
granted us an exclusive, sublicenseable, worldwide license to, preclinical, orally-available, small molecule inhibitors of the interaction of menin with the MLL
protein, or the Menin Assets. We are solely responsible for the development and commercialization of the Menin Assets.
Subject to the achievement of certain milestone events, we may be required to pay Vitae up to an aggregate of $99 million in one-time development
and regulatory milestone payments over the term of the AbbVie License Agreement. In the event that we or any of its affiliates or sublicensees commercializes
the Menin Assets, we will also be obligated to pay Vitae low single to low double-digit royalties on sales, subject to reduction in certain circumstances, as well
as up to an aggregate of $70.0 million in potential one-time, sales-based milestone payments based on achievement of certain annual sales thresholds. Under
certain circumstances, we may be required to share a percentage of non-royalty income from sublicensees, subject to certain deductions, with Vitae. In June
2019, we achieved certain development and regulatory milestones resulting in a $4.0 million payment, which was paid with interest in May 2020. In January
2022, we dosed the first patient in our pivotal phase 2 study, consequently completing our phase 1 study. Completion of the phase 1 study requires us to pay
AbbVie a $2.0 million development milestone. We anticipate paying this milestone in the first quarter of 2022.
Each party may terminate the AbbVie License Agreement for the other party’s uncured material breach or insolvency; and we may terminate the
AbbVie License Agreement at will at any time upon advance written notice to Vitae. Vitae may terminate the AbbVie License Agreement if we or any of its
affiliates or sublicensees institutes a legal challenge to the validity, enforceability, or patentability of the licensed patent rights. Unless terminated earlier in
accordance with its terms, the AbbVie License Agreement will continue on a country-by-country and product-by-product basis until the later of: (i) the
expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and
(iii) 10 years from the date of the first commercial sale of the product in such country.
UCB
We have a license agreement with UCB, or the UCB license agreement, under which UCB granted us a worldwide, sublicenseable, exclusive license to
UCB6352, which the Company refers to as axatilimab. The UCB license agreement permits us to use axatilimab or other licensed products for all human uses,
including treatment, prevention and diagnostic uses, in all indications, diseases, conditions or disorders, and we are obligated to use commercially reasonable
efforts to develop, obtain regulatory approval and commercialize a certain licensed product. We are solely responsible for the development and
commercialization of axatilimab.
Subject to the achievement of certain milestone events, we may be required to pay UCB up to $119.5 million in one-time development and regulatory
milestone payments over the term of the UCB license agreement. In the event that we or any of our affiliates or sublicensees commercializes axatilimab, we
will also be obligated to pay UCB low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $250.0
million in potential one-time, sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, we may be
required to share a percentage of non-royalty income from sublicensees, subject to certain deductions, with UCB. During the year ended December 31, 2020
and 2021, we were required to pay $2.0 million and $4.0 million, respectively, due to the achievement of certain development and regulatory milestones. As of
December 31, 2021, $2.0 million is recorded as an accrued expense.
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Each party may terminate the UCB license agreement for the other party’s uncured material breach or insolvency; and we may terminate the UCB
license agreement at will at any time upon advance written notice to UCB. UCB may terminate the UCB license agreement if we or any of our affiliates or
sublicensees institutes a legal challenge to the validity, enforceability, or patentability of the licensed patent rights. Unless terminated earlier in accordance with
its terms, the UCB license agreement will continue on a country-by-country and product-by-product basis until the later of: (i) the expiration of all of the
licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date
of the first commercial sale of the product in such country.
Bayer Pharma AG
We have a license agreement with Bayer Pharma AG, or Bayer, pursuant to which we obtained a worldwide, exclusive license to develop and
commercialize entinostat and any other products containing the same active ingredient. The Bayer license agreement, as amended, permits us to use entinostat
or other licensed products for the treatment of any human disease, and we are obligated to use commercially reasonable efforts to develop, manufacture and
commercialize licensed products for all commercially reasonable indications. Initially, Bayer manufactured and supplied our requirements of entinostat, but
effective May 2012, manufacturing rights and responsibility for entinostat was transferred to us, by mutual agreement of the parties.
We are obligated to pay up to approximately $50.0 million in the aggregate upon obtaining certain milestones in the development and marketing
approval of entinostat, assuming that we pursue at least two different indications for entinostat or any other licensed product. We are also obligated to pay Bayer
up to $100.0 million in aggregate sales milestones, and a tiered single-digit royalty on net sales by us, our affiliates and sublicensees of entinostat and any other
licensed products under the Bayer license agreement. We are obligated to pay Bayer these royalties on a country-by-country basis for the life of the relevant
licensed patents covering such product or 15 years after the first commercial sale of such product in such country, whichever is longer. We cannot determine the
date on which our royalty payment obligations to Bayer would expire because no commercial sales of entinostat have occurred and the last-to-expire relevant
patent covering entinostat in a given country may change in the future.
The Bayer license agreement will remain in effect until the expiration of our royalty obligations under the agreement in all countries. Upon expiration
of the agreement our licenses become fully paid-up and irrevocable. Either party may terminate the Bayer license agreement in its entirety or with respect to
certain countries in the event of an uncured material breach by the other party. Either party may terminate the Bayer license agreement if voluntary or
involuntary bankruptcy proceedings are instituted against the other party, if the other party makes an assignment for the benefit of creditors, or upon the
occurrence of other specific events relating to the insolvency or dissolution of the other party. Bayer may terminate the Bayer license agreement if we seek to
revoke or challenge the validity of any patent licensed to us by Bayer under the Bayer license agreement or if we procure or assist a third party to take any such
action.
Eddingpharm International Company Limited
We have a license, development and commercialization agreement with Eddingpharm International Company Limited, or Eddingpharm, under which
we granted Eddingpharm an exclusive license under our intellectual property rights to develop and commercialize entinostat in China and certain other Asian
countries. This license includes a sublicense under the rights we received under the Bayer license agreement. If we acquire or develop any other anti-cancer
drug that, like entinostat, is a selective inhibitor of Class I HDAC, such drug will be included in this license as well. Eddingpharm is manufacturing entinostat
during the term of the agreement or through termination of the agreement for our breach. During the term of the agreement, subject to certain exceptions, each
party is prohibited from commercializing in China and certain other Asian countries any other selective inhibitor of Class I HDACs for the same indication as
entinostat, with all forms of cancer being treated as the same indication.
We are eligible to receive up to $10.0 million in development and regulatory milestone payments as well as royalty payments based on revenue targets.
Royalty payment obligations will be payable in each country in the Eddingpharm territory until the later to occur of (i) the date that all valid claims of the last
effective license patent in such country expires or is abandoned, withheld or otherwise invalidated and (ii) 15 years from the date of first commercial sale of
entinostat in such country. Any payments owed to Bayer as a result of Eddingpharm’s
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development of entinostat in the Eddingpharm territory will be made by us out of the payments we receive from Eddingpharm.
The agreement with Eddingpharm will expire with respect to each country in the Eddingpharm territory upon the expiration of all royalty payment
obligations in such country. In addition, we may terminate the agreement in its entirety upon written notice to Eddingpharm if Eddingpharm or any affiliate
commences any action or proceeding that challenges the validity, enforceability or scope of any licensed patent in the Eddingpharm territory. Eddingpharm may
terminate the agreement in its entirety for convenience at any time upon advance notice to us. Either party may terminate the agreement for the other party’s
uncured material breach, or bankruptcy or related actions or proceedings. If we commit an uncured material breach of certain provisions of the agreement,
Eddingpharm may, instead of terminating the agreement, elect to continue the agreement in full force and effect except certain payments to us will be reduced.
Sales and Marketing
Given our stage of development, we have not yet established a commercial organization or distribution capabilities. We intend to build a commercial
infrastructure to support sales of our product candidates in the United States. Our targeted sales force will focus on a well-defined group of medical oncologists,
primarily in the non-hospital and academic settings, who are responsible for the care and treatment of cancer patients. We expect to manage sales, marketing
and distribution through internal resources and third-party relationships. While we may commit significant financial and management resources to commercial
activities, we would also consider collaborating with one or more pharmaceutical companies to enhance our commercial capabilities. Outside the United States,
we plan to rely on our current partners and may seek additional pharmaceutical partners for sales and marketing activities.
Manufacturing
We do not own or operate manufacturing facilities for the production of axatilimab, SNDX-5613 or entinostat, and we do not have plans to develop our
own manufacturing operations in the foreseeable future. We currently rely on third-party contract manufacturers for all of our required raw materials, active
pharmaceutical ingredients and finished product for our preclinical research and clinical trials. We do not have any current contractual relationship for the
manufacture of commercial supplies. If axatilimab, SNDX-5613 or entinostat is approved by any regulatory agency, we intend to enter into agreements with a
third-party contract manufacturer and one or more backup manufacturers for the commercial production of such product. Development and commercial
quantities of any products that we develop will need to be manufactured in facilities, and by processes, that comply with the requirements of the FDA and the
regulatory agencies of other jurisdictions in which we are seeking approval.
Intellectual Property
Patents and Property Rights
Through licensed intellectual property and our owned intellectual property, we seek patent protection in the United States and internationally for our
product candidates, their methods of use and processes for their manufacture, as well as for other technologies, where appropriate. Our policy is to actively seek
to protect our proprietary position by, among other things, filing patent applications in the United States and abroad claiming our proprietary technologies that
are important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities
to develop and maintain our proprietary position.
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We cannot be sure that patents will be granted with respect to any of our owned or licensed pending patent applications or with respect to any patent
applications filed by us or our licensors in the future, nor can we be sure that any of our existing owned or licensed patents or any patents that may be granted to
us or to our licensors in the future will protect our technology. Our success will depend significantly on our ability to obtain and maintain patent and other
proprietary protection for the technologies that we consider important to our business, defend our patents, preserve the confidentiality of our trade secrets,
operate our business without infringing the patents and proprietary rights of third parties, and prevent third parties from infringing our proprietary rights.
Axatilimab Patent Portfolio
We in-licensed from UCB a patent portfolio directed to axatilimab. As of December 31, 2021, the axatilimab composition-of-matter patent portfolio
included two granted U.S. patents, seven allowed non-U.S. applications, fourteen granted non-U.S. patents, including a granted EP patent which has been
validated in 37 countries, and 19 non-U.S. pending patent applications. The in-licensed granted patents covering axatilimab, and any non-U.S. pending
applications should they issue, will expire in August 2034 or later should patent term extension be granted.
Our in-licensed patent portfolio also includes pending U.S. and non-U.S. patent applications directed to methods for the treatment and/or prophylaxis
of fibrotic disease by administration of an inhibitor of CSF-1R activity, methods for the treatment and/or prophylaxis of inflammatory bowel disease, or IBD,
by administration of an inhibitor of CSF-1R activity, and liquid pharmaceutical compositions of anti-CSF-1R antibodies. If these pending applications were to
issue as one or more patents, these patents would expire between November 2024 and February 2036 or later should patent term extension be granted. Further,
the in-licensed portfolio includes three non-U.S. patents directed to methods of treating solid tumors by administration of an inhibitor of CSF-1R activity. The
three patents expired in October 2020.
Our owned axatilimab patent portfolio includes one pending U.S. patent application and six non-U.S. patent application directed to combinations of
entinostat and axatilimab. If any one of these applications were to issue as one or more patents, these patents would expire in May 2038 or later should patent
term extension be granted. Our owned axatilimab patent portfolio also consists of one pending international patent application under the Patent Cooperation
Treaty, or PCT, directed to the treatment regimens and methods of using axatilimab. If this PCT application were to issue as one or more patents, these patents
would expire in December 2040 or later should patent term extension be granted.
Menin Asset Patent Portfolio
We in-licensed from Vitae Pharmaceuticals, Inc., a subsidiary of AbbVie plc, a patent portfolio directed to a series of selective preclinical inhibitors
targeting the binding interaction of menin with MLL-r. As of December 31, 2021, the in-licensed portfolio includes two granted U.S. patents, U.S. Patent Nos.
10,683,302 and 10,899,758, six granted non-U.S patents, including a granted European patent, which was validated in 30 member states, two pending U.S.
applications and 28 non-U.S. pending patent applications covering composition of matter and methods of treating, e.g., MLL. The granted patents based on the
in-licensed applications is expected to expire June 2037 or later should patent term extension be granted. If the in-licensed application were to issue as one or
more patents, these patents would expire between June 2037 and September 2037.
Our owned menin patent portfolio consists of one pending international patent application under the Patent Cooperation Treaty, or PCT, directed to
combinations of a menin inhibitor and a CYP3A inhibitor for the treatment of various cancers. Our owned menin patent portfolio also consists of two U.S.
provisional applications directed to menin inhibitors and combinations with various other compounds. If any applications arising from the PCT or provisional
applications were to issue as one or more patents, these patents would expire between April 2041 and May 2042 or later should patent term extension be
granted.
Entinostat Patent Portfolio
We strive to protect entinostat with multiple layers of patents. As of December 31, 2021, our portfolio included four owned pending U.S. non-
provisional patent applications, one owned granted U.S. patent, U.S. Patent No. 10,226,472, which expires in August 2032 or later should patent term extension
be granted, one allowed U.S. non-provisional patent application directed to methods of treating a patient with combinations of entinostat and
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pembrolizumab, eight granted non-U.S. patents (including one Canadian patent jointly owned with The Regents of the University of Colorado, which will
expire in April 2029), and 49 owned non-U.S. pending patent applications. Also, we have filed national phase applications in the Eurasia Regional Patent
Office, Ukraine and Georgia based on our owned PCT application directed to treatment of selected breast cancer patients with a combination of entinostat and
exemestane. We have assigned our rights to the application we filed in the Eurasia Regional Patent Office to Domain Russia Investments Limited, or DRI. We
have also assigned our rights to the applications we filed in Ukraine and Georgia to NovaMedica LLC, or NovaMedica. Our owned entinostat patent portfolio
includes pending U.S. and ex-U.S. patent applications directed to methods of treating cancer patients by administration of entinostat and exemestane, methods
of treating cancer patients by administration of entinostat in combination with an HER2 inhibitor, treatments with entinostat combined with anti PD-1 or anti
PD-L1 antibodies, entinostat and CSF-1 or CSF-1R combination therapies (also discussed above in the Axatilimab Patent Portfolio) and patient selection for
combination therapy comprising entinostat and a second therapeutic agent. If our owned pending U.S. applications and non-U.S. filings were to issue as one or
more patents, these patents would expire between August 2032 and May 2039.
The patent portfolio we licensed from Bayer contains a number of issued U.S. and foreign patents as well as patent applications pending outside the
United States. A number of the patents and patent applications we licensed from Bayer are directed to entinostat while other patents and patent applications are
directed to compounds other than entinostat. As of December 31, 2019, the portfolio we licensed from Bayer included seven issued U.S. patents, 62 granted
non-U.S. patents and 17 patent applications pending in non-U.S. patent offices. For example, the portfolio we licensed from Bayer includes reissue U.S. Patent
RE39,754, which covers a genus of benzamide compounds including entinostat or SNDX-275. RE39,754 is a composition of matter patent having an initial
term which expired in September 2017.
The portfolio we licensed from Bayer also includes U.S. Patent 7,973,166, or the ’166 patent, which covers a crystalline polymorph of entinostat which
is referred to as crystalline polymorph B, the crystalline polymorph used in the clinical development of entinostat. Many compounds can exist in different
crystalline forms. A compound which in the solid state may exhibit multiple different crystalline forms is called polymorphic, and each crystalline form of the
same chemical compound is termed a polymorph. A new crystalline form of a compound may arise, for example, due to a change in the chemical process or the
introduction of an impurity. Such new crystalline forms may be patented. By comparison, the U.S. Patent RE39,754, which expired in September 2017, covers
the chemical entity of entinostat and any crystalline or non-crystalline form of entinostat. On March 7, 2014, our licensor Bayer applied for reissue of the ‘166
patent. The reissue application sought to add three additional inventors to the ‘166 patent. The reissue was granted as RE45,499 on April 28, 2015, at which
time the original ‘166 patent was surrendered. The reissue patent has the same force and effect as the original ‘166 patent and the same August 2029 expiration
date.
Of the unexpired foreign-granted patents we licensed from Bayer, there are 33 granted foreign counterparts of the ‘166 patent (now RE45,499) that
cover crystalline polymorph B, including the European patent and Eurasian patent. The granted European patent comprises 37 national countries that have all
been validated, and the granted Eurasian patent comprises nine countries that have all been validated. Likewise, there are 3 pending foreign counterparts of the
‘166 crystalline polymorph B patent. Other patents and patent applications in the licensed Bayer portfolio are expired and cover methods of treatment by
administration of entinostat. For example, U.S. Patent 7,317,028, which expired in October 2017, covers methods of treating selected cancers by administration
of entinostat; U.S. Patent 7,687,525, which also expired in September 2017, covers methods of treating autoimmune disease by administration of entinostat;
U.S. Patent 6,320,078, which expired in July 2019, covers methods of manufacturing entinostat; U.S. Patent No. 8,026,239, which expired in September 2017,
covers methods of treating certain malignant tumors by administration of a compound within a subgenus of benzamide compounds including entinostat; U.S.
Patent RE40,703, which expired in September 2017, covers a subgenus of benzamide compounds that does not include entinostat; and U.S. Patent 6,794,392,
which expired in September 2017, covers a subgenus of benzamide compounds that does not include entinostat.
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Patent Term
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 date of filing the earliest non-provisional application or PCT application.
In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the
USPTO in granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier-filed patent. The term of a patent that covers an approved
drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the development and
regulatory review process. To obtain a patent extension in the United States, the term of the relevant patent must not have expired before the extension
application, the patent cannot have been extended previously under this law, an application for extension must be submitted, the product must be subject to
regulatory review prior to its commercialization, and the permission for the commercial marketing or use of the product after such regulatory review period is
the first permitted commercial marketing or use of the product. If our future products contain active ingredients which have not been previously approved, we
may be eligible for a patent term extension in the United States. In the United States, we expect to seek extension of patent terms under the Drug Price
Competition and Patent Term Restoration Act of 1984, which permits a patent term extension of up to five years beyond the expiration of the patent for patent
claims covering a new chemical entity. If patent extensions are available to us outside of the United States, we would expect to file for a patent term extension
in applicable jurisdictions.
Confidential Information and Inventions Assignment Agreements
We require our employees and consultants to execute confidentiality agreements upon the commencement of employment, consulting or collaborative
relationships with us. These agreements provide that all confidential information developed or made known during the course of the relationship with us be kept
confidential and not disclosed to third parties except in specific circumstances.
In the case of employees, the agreements provide that all inventions resulting from work performed for us, utilizing our property or relating to our
business and conceived or completed by the individual during employment shall be our exclusive property to the extent permitted by applicable law. Our
consulting and service agreements also provide for assignment to us of any intellectual property resulting from services performed for us.
Government Regulation and Product Approval
United States Government Regulation
In the United States, the FDA regulates drugs and biologics under the Federal Food, Drug, and Cosmetic Act, or FDCA, the Public Health Service Act,
and related regulations. Drugs and biologics are also subject to other federal, state and local statutes and regulations. The FDA and comparable regulatory
agencies in state and local jurisdictions impose substantial requirements upon, among other things, the testing, development, manufacture, quality control,
safety, purity, potency, labeling, storage, distribution, record keeping and reporting, approval, import and export, advertising and promotion, and postmarket
surveillance of drugs and biologics.
Biopharmaceutical Product Development Process
The process required by the FDA before biopharmaceutical products may be marketed in the United States generally involves the following:
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completion of extensive preclinical laboratory tests and animal studies in accordance with applicable regulations, including the FDA’s good
laboratory practice, or GLP regulations;
submission of an IND application which must become effective before clinical trials may begin;
performance of adequate and well-controlled human clinical trials in accordance with applicable regulations, including the FDA’s current good
clinical practice, or GCP, regulations to establish the safety and efficacy of the proposed drug for its intended use or uses;
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submission to the FDA of an NDA for a new drug product or a Biologics License Application, or BLA, for biologics;
a determination by the FDA within 60 days of its receipt of an NDA or BLA to accept the application for filing and review;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the drug or biologic is produced to assess
compliance with the FDA’s current Good Manufacturing Practices, or cGMP, regulations to assure that the facilities, methods and controls are
adequate to preserve the product’s identity, strength, quality and purity;
potential FDA audit of the preclinical and/or clinical trial sites that generated the data in support of an NDA or BLA; and
FDA review and approval of an NDA or BLA prior to any commercial marketing or sale of the biopharmaceutical product in the United States.
Before testing any compounds with potential therapeutic value in humans, the product candidate enters the preclinical testing stage. Preclinical tests
include laboratory evaluations of product chemistry and formulation, as well as animal studies to assess the potential safety, toxicity profile and activity of the
product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs.
Prior to commencing the first clinical trial in humans, an IND must be submitted to the FDA, and the IND must become effective. A sponsor must
submit preclinical testing results to the FDA as part of the IND and the FDA must evaluate whether there is an adequate basis for testing the drug in humans.
The IND automatically becomes effective 30 days after receipt by the FDA unless the FDA within the 30-day time period raises concerns or questions about the
submitted data or the conduct of the proposed clinical trial and places the IND on clinical hold. In such case, the IND application sponsor must resolve any
outstanding concerns with the FDA before the clinical trial may begin. A separate submission to the existing IND application must be made for each successive
clinical trial to be conducted during product development. Further, an independent Institutional Review Board, or IRB, for each site proposing to conduct the
clinical trial must review and approve the protocol and informed consent for any clinical trial before it commences at that site. Informed consent must also be
obtained from each study subject. Regulatory authorities, an IRB, a data safety monitoring board or the trial sponsor may suspend or terminate a clinical trial at
any time on various grounds, including a finding that the participants are being exposed to an unacceptable health risk.
Human clinical trials are typically conducted in three sequential phases that may overlap:
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Phase 1—The drug is initially given to healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism,
distribution and excretion, the side effects associated with increasing doses, and if possible, to gain early evidence on effectiveness.
Phase 2—The drug is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the
efficacy of the product for specific targeted diseases or conditions and to determine dosage tolerance, optimal dosage and dosing schedule.
Phase 3—Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety at geographically dispersed clinical trial sites.
These clinical trials are intended to establish the overall benefit-risk ratio of the product and to provide an adequate basis for product approval
by the FDA.
Post-approval studies, or Phase 4 clinical trials, may be conducted after initial marketing approval. These studies may be required by the FDA as a
condition of approval and are used to gain additional experience from the treatment of patients in the intended therapeutic indication. The FDA also has express
statutory authority to require post-market clinical studies to address safety issues.
Some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data monitoring board
or committee. This group provides recommendations for whether or not a trial may move forward at designated checkpoints based on access to certain data
from the study. A sponsor may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.
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Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry
and physical characteristics of the product candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with
cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, must
include developed methods for testing the identity, strength, quality and purity of the finished product. Additionally, appropriate packaging must be selected and
tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
FDA Review and Approval Processes
In order to obtain approval to market a biopharmaceutical product in the United States, a marketing application must be submitted to the FDA that
provides data establishing to the FDA’s satisfaction the safety and effectiveness of the investigational drug for the proposed indication. Each NDA or BLA
submission requires a substantial user fee payment unless a waiver or exemption applies. The application includes all relevant data available from pertinent
nonclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the
product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to test
the safety and effectiveness of a use of a product, or from a number of alternative sources, including studies initiated by investigators.
The FDA will initially review an NDA or BLA for completeness before it accepts it for filing. The FDA has 60 days from its receipt of an application
to determine whether the application will be accepted for filing based on the agency’s threshold determination that the application is sufficiently complete to
permit substantive review. If it is not, the FDA may refuse to file the application and request additional information, in which case the application must be
resubmitted with the supplemental information, and review of the application is delayed. After an NDA or BLA submission is accepted for filing, the FDA
reviews the application to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is
being manufactured in accordance with cGMP to assure and preserve the product’s identity, strength, quality and purity. The FDA may refer applications for
novel drug products or drug products that 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, if so, under what conditions. The FDA is not
bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Upon the filing of an NDA or BLA, the FDA may grant a priority review designation to a product, which sets the target date for FDA action on the
application at 6 months, rather than the standard 10 months. Priority review is given for drug that treats a serious condition and, if approved, would provide a
significant improvement in safety or effectiveness. Priority review designation does not change the scientific or medical standard for approval or the quality of
evidence necessary to support approval.
Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured. 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. Additionally, before approving an NDA or BLA, the FDA may inspect one or more clinical sites to assure
compliance with GCP.
After the FDA completes its initial review of an NDA or BLA, it will communicate to the sponsor that the product is approved, or it will issue a
complete response letter to communicate that the application will not be approved in its current form and inform the sponsor of changes that must be made or
additional clinical, nonclinical or manufacturing data that must be received before the application can be approved.
Even if a product candidate receives regulatory approval, the approval may be limited to specific disease states, patient populations and dosages, or
might contain significant limitations on use in the form of warnings, precautions or contraindications, or in the form of onerous risk management plans,
restrictions on distribution, or post-marketing study requirements. For example, the FDA may require Phase 4 testing, which involves clinical trials designed to
further assess a drug’s safety and effectiveness and may require testing and surveillance programs to
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monitor the safety of approved products that have been commercialized. The FDA may also determine that a risk evaluation and mitigation strategy, or REMS,
is necessary to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of an NDA must submit a proposed REMS, and the FDA
will not approve an NDA without an approved REMS, if required.
Expedited Review Programs
Among other programs, the FDA may expedite the review of a product candidate designated as a breakthrough therapy, which is intended, alone or in
combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug
may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed
early in clinical development. A sponsor may request the FDA to designate a drug as a breakthrough therapy at the time of, or any time after, the submission of
an IND application for the drug. If the FDA designates a drug as a breakthrough therapy, it must take actions appropriate to expedite the development and
review of the application, which may include holding meetings with the sponsor and the review team throughout the development of the drug; providing timely
advice to, and interactive communication with, the sponsor regarding the development of the drug to ensure that the development program to gather the
nonclinical and clinical data necessary for approval is as efficient as practicable; involving senior managers and experienced review staff, as appropriate, in a
collaborative, cross-disciplinary review; assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development
program and to serve as a scientific liaison between the review team and the sponsor; and taking steps to ensure that the design of the clinical trials is as
efficient as practicable, when scientifically appropriate, such as by minimizing the number of patients exposed to a potentially less efficacious treatment. The
FDA may rescind a breakthrough therapy designation in the future if further clinical development later shows that the criteria for designation are no longer met.
Breakthrough therapy designation does not change the standards for approval but may expedite the development or review process.
Post-Approval Requirements
If and when approved, any products manufactured or distributed by us or on our behalf will be subject to continuing regulation by the FDA, including
requirements for record-keeping, reporting of adverse experiences and submitting annual reports.
Biopharmaceutical manufacturers are required to register their facilities with the FDA and certain state agencies, and are subject to periodic
unannounced inspections by the FDA and certain state agencies for compliance with cGMPs, which impose certain quality processes, manufacturing controls
and documentation requirements upon us and our third-party manufacturers in order to ensure that the product is safe, has the identity and strength, and meets
the quality and purity characteristics that it purports to have. The FDA and certain states also impose requirements on manufacturers and distributors to
establish the pedigree of product in the chain of distribution, including technology capable of tracking and tracing product as it moves through the distribution
chain. We cannot be certain that we or our present or future suppliers will be able to comply with the cGMP and other FDA regulatory requirements. If our
present or future suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, fail to approve any application, shut down
manufacturing operations or withdraw approval of an application, or we may recall the product from distribution. Noncompliance with cGMP or other
requirements can result in issuance of warning letters, civil and criminal penalties, seizures and injunctive action.
The FDA closely regulates the labeling, marketing and promotion of drugs and biologics. While doctors are free to prescribe any drug approved by the
FDA for any use based on the doctor’s independent medical judgement, a company can only make claims relating to safety and efficacy of a drug that are
consistent with FDA approval, and the company is allowed to actively market a drug only for the particular use and treatment approved by the FDA. In
addition, any claims we make for our products in advertising or promotion must be appropriately balanced with important safety information and otherwise be
adequately substantiated. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising, injunctions and
potential civil and criminal penalties. Government regulators recently have increased their scrutiny of the promotion and marketing of drugs.
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Coverage and Reimbursement
In both domestic and foreign markets, sales of any products for which we may receive regulatory approval will depend in part upon the availability of
coverage and adequate reimbursement to healthcare providers from third-party payors. Such third-party payors include government health programs, such as
Medicare and Medicaid, as well as managed care organizations, private health insurers and other organizations. Coverage decisions may depend upon clinical
and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are available. Assuming coverage is
granted, the reimbursement rates paid for covered products might not be adequate. Even if favorable coverage status and adequate reimbursement rates are
attained, less favorable coverage policies and reimbursement rates may be implemented in the future. The marketability of any products for which we may
receive regulatory approval for commercial sale may suffer if the government and other third-party payors fail to provide coverage and adequate reimbursement
to allow us to sell such products on a competitive and profitable basis. For example, under these circumstances, physicians may limit how much or under what
circumstances they will prescribe or administer such products, and patients may decline to purchase them. This, in turn, could affect our ability to successfully
commercialize our products and impact our profitability, results of operations, financial condition, and future success.
In the United States, the European Union and other potentially significant markets for our product candidates, government authorities and third-party
payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies.
Such pressure, along with the increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls
in the European Union, will likely put additional downward pressure on product pricing, reimbursement and usage, which may adversely affect our future
product sales and results of operations. These pressures can arise from rules and practices of managed care groups, judicial decisions, governmental laws and
regulations related to government healthcare programs, healthcare reform, and pharmaceutical coverage and reimbursement policies.
The market for any product candidates for which we may receive regulatory approval will depend significantly on the degree to which these products
are listed on third-party payors’ drug formularies or lists of medications for which third-party payors provide coverage and reimbursement to the extent
products for which we may receive regulatory approval are covered under a pharmacy benefit or are otherwise subject to a formulary. The industry competition
to be included on such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a
particular branded drug on their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is
available. In addition, because each third-party payor individually approves coverage and reimbursement levels, obtaining coverage and adequate
reimbursement is a time-consuming and costly process. Further, one payor’s determination to provide coverage for a drug product does not assure that other
payors will also provide coverage for the drug product. We may be required to provide scientific and clinical support for the use of any product to each third-
party payor separately with no assurance that approval would be obtained, and we may need to conduct expensive pharmacoeconomic studies in order to
demonstrate the cost-effectiveness of our products. We cannot be certain that our product candidates will be considered cost-effective. This process could delay
the market acceptance of any product candidates for which we may receive approval and could have a negative effect on our future revenues and operating
results.
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Federal and State Fraud and Abuse and Data Privacy and Security Laws and Regulations
In addition to FDA restrictions on marketing of pharmaceutical products, federal and state laws restrict business practices in the pharmaceutical
industry. These laws include anti-kickback and false claims laws and regulations as well as data privacy and security laws and regulations. The laws that will
affect our operations include, but are not limited to:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving,
offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in
return for the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as
the Medicare and Medicaid programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the
one hand, and prescribers, purchasers and formulary managers on the other. The Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act, collectively, the Affordable Care Act, amended the intent requirement of the federal Anti-
Kickback Statute so that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to
have committed a violation;
federal civil and criminal false claims laws, including, without limitation, the False Claims Act, and civil monetary penalty laws which
prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval
from Medicare, Medicaid or other government payors that are false or fraudulent or making a false statement to avoid, decrease or conceal an
obligation to pay money to the federal government. The Affordable Care Act provides, and recent government cases against pharmaceutical
manufacturers support, the view that federal Anti-Kickback Statute violations and certain marketing practices, including off-label promotion,
may implicate the False Claims Act;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that
prohibit a person from knowingly and willfully executing a scheme or making false or fraudulent statements to defraud any healthcare benefit
program, regardless of the payor (e.g., public or private);
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing
regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health
information without appropriate authorization by entities subject to the rule, such as health plans, healthcare clearinghouses and certain
healthcare providers, known as covered entities, and their respective business associates, individuals or entities that perform certain services on
behalf of a covered entity that involves the use or disclosure of individually identifiable health information, and their covered subcontractors;
the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for
which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually
to the Centers for Medicare & Medicaid Services, or CMS, information related to: (i) payments or other “transfers of value” made to
physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician
assistants and nurse practitioners), and teaching hospitals; and (ii) ownership and investment interests held by physicians and their immediate
family members;
state law equivalents of each of the above federal laws, state laws that require manufacturers to report information related to payments and
other transfers of value to physicians and other healthcare providers or marketing expenditures, state laws that require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated
by the federal government or to adopt compliance programs as prescribed by state laws and regulations, or that otherwise restrict payments that
may be made to healthcare providers, state laws that require manufactures to report pricing information regarding certain drugs, state and local
laws that require the registration of pharmaceutical sales representatives, and state laws that govern the privacy and security of health
information, which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
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We may also be subject to federal and state laws that govern the privacy and security of other personal information, including federal and state
consumer protection laws, state data security laws, and data breach notification laws. A data breach affecting sensitive personal information, including health
information, could result in significant legal and financial exposure and reputational damages.
Because of the breadth of these laws and the narrowness of available statutory and regulatory exemptions, it is possible that some of our business
activities could be subject to challenge, investigation or legal action under one or more of such laws. If our operations are found to be in violation of any of the
federal and state laws described above or any other governmental regulations that apply to us, we may be subject to significant civil, criminal, and
administrative penalties, including, without limitation, damages, fines, imprisonment, disgorgement, exclusion from participation in government healthcare
programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations
of non-compliance with these laws, and the curtailment or restructuring of our operations.
To the extent that any of our product candidates receive approval and are sold in a foreign country, we may be subject to similar foreign laws and
regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, international
data protection laws (including the General Data Protection Directive ((EU) 2016/679) on the protection of individuals with regard to the processing of personal
data and on the free movement of such data as well as EU member state implementing legislation), and implementation of corporate compliance programs and
reporting of payments or transfers of value to healthcare professionals.
Healthcare Reform
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the
healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to
profitably sell any product candidates for which we obtain marketing approval. Among policy makers and payors in the United States and elsewhere, there is
significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and expanding access. In
the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. In
March 2010, then President Obama signed into law the Affordable Care Act, which substantially changed the way healthcare will be financed by both
governmental and private insurers, and significantly impacts the pharmaceutical industry. Among the provisions of the Affordable Care Act of importance to
our business, including, without limitation, our ability to commercialize, and the prices we may obtain for, any of our product candidates that are approved for
sale, are the following:
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an annual, nondeductible fee payable by any entity that manufactures or imports specified branded prescription drugs and biologic agents;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
expansion of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback Statute, new government
investigative powers and enhanced penalties for noncompliance;
a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of- sale discounts off
negotiated prices;
extension of manufacturers’ Medicaid rebate liability;
expansion of eligibility criteria for Medicaid programs;
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
new requirements to report financial arrangements with physicians and teaching hospitals;
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a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research,
along with funding for such research.
There have been executive, judicial and Congressional challenges to certain aspects of the Affordable Care Act. For example, the Tax Cuts and Jobs
Act of 2017, or Tax Act, included a provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable
Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual
mandate”. In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the Affordable Care Act’s mandated “Cadillac”
tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax. On June 17,
2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety because the
“individual mandate” was repealed by Congress. Thus, the Affordable Care Act will remain in effect in its current form. Prior to the U.S. Supreme Court ruling,
on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage
through the Affordable Care Act marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies
and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work
requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the Affordable Care Act. It is
possible that the PPACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and the healthcare reform
measures of the Biden administration will impact the Affordable Care Act.
Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically,
there have been several recent U.S. Congressional inquiries, Presidential executive orders, and proposed and enacted federal and state legislation designed to,
among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of
drugs under Medicare, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration used several
means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July
24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement
several of the administration’s proposals. As a result, the FDA released a final rule and guidance in September 2020, providing pathways for states to build and
submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health & Human Services, or HHS, finalized a
regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Medicare Part D, either directly or
through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden administration
from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected at the point-of-
sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have
also been delayed until January 1, 2023. On December 27, 2021, CMS issued a final rule that rescinded an interim final rule implementing the Trump
administration’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price
paid in other economically advanced countries. In July 2021, the Biden administration released an executive order, “Promoting Competition in the American
Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, the U.S. Department of Health
and Human Services, or HHS, released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a
variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. No
legislation or administrative actions have been finalized to implement these principles. Congress is also considering additional health reform measures. At the
state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing,
including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures,
and, in some cases, designed to encourage importation from other countries and bulk
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purchasing. It is also possible that additional governmental action will be taken in response to the COVID-19 pandemic.
The full impact on our business of the Affordable Care Act and other new laws is uncertain but may result in additional reductions in Medicare and
other healthcare funding. Nor is it clear whether other legislative changes will be adopted, if any, or how such changes would affect the demand for our
products once commercialized.
Regulations Outside of the United States
In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and
distribution of our product candidates to the extent we choose to sell any products outside of the United States. Whether or not we obtain FDA approval for a
product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or
marketing of the product in those countries. The approval process varies from country to country and the time may be longer or shorter than that required for
FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. As
in the United States, post-approval regulatory requirements, such as those regarding product manufacture, marketing, or distribution would apply to any product
that is approved outside the United States.
Other Regulations
We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances. We may incur significant costs to comply with
such laws and regulations now or in the future.
Employees and Human Capital Resources
As of February 25, 2022, we had 59 full-time employees. Of the full-time employees, 41 were primarily engaged in research and development
activities and 15 have an M.D. or Ph.D. degree. None of our employees are represented by labor unions or covered by collective bargaining agreements. We
consider our relationship with our employees to be good.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and
additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors
through the granting of equity-based compensation awards and cash-based compensation awards, in order to increase stockholder value and the success of our
company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
Compensation and Benefits
We consider a number of measures and objectives in managing our human capital assets, including, among others, employee engagement,
development, and training, talent acquisition and retention, employee safety and wellness, diversity and inclusion, and compensation and pay equity. We
provide our employees with salaries and bonuses intended to be competitive for our industry, opportunities for equity ownership, development programs that
enable continued learning and growth and a robust benefits package to promote well-being across all aspects of their lives, including health care, retirement
planning and paid time off. In addition, we have conducted employee surveys to gauge employee engagement and identify areas of future focus for our human
capital practices and benefits offerings.
Diversity, Equity and Inclusion (DEI)
We believe that a diverse workforce is critical to our success and we are fundamentally committed to creating and maintaining a work environment in
which employees are treated fairly, with dignity, decency, respect and in accordance with all applicable laws. We understand that varied perspectives lead to the
best ideas and outcomes. We believe that by creating a workplace where every individual can feel welcome and valued, we will be better able
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to achieve our corporate objectives. All employees must adhere to a code of business conduct and ethics and our employee handbook, which combined, define
standards for appropriate behavior and are annually trained to help prevent, identify, report, and stop any type of discrimination and harassment. Our
recruitment, hiring, development, training, compensation, and advancement is based on qualifications, performance, skills, and experience without regard to
gender, race, or ethnicity.
Corporate and Other Information
We were incorporated in Delaware in 2005. In 2011, we established a wholly owned subsidiary in the United Kingdom, in 2014 we established a
wholly owned U.S. subsidiary, and in 2021, we established a wholly owned subsidiary in the Netherlands. There have been no material activities for these
entities to date. We currently operate in one segment.
Our principal executive offices are located at 35 Gatehouse Drive, Building D, Floor 3, Waltham, Massachusetts 02451 and our telephone number is
(781) 419-1400. Our corporate website address is www.syndax.com. Information contained on or accessible through our website is not a part of this Annual
Report on Form 10-K, and the inclusion of our website address in this Annual Report on Form 10-K is an inactive textual reference only.
We file electronically with the SEC, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make available on our website at www.syndax.com, under
“Investors,” free of charge, copies of these reports as soon as reasonably practicable after filing or furnishing these reports with the SEC.
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Item 1A. Risk Factors
This Annual Report on Form 10-K contains forward-looking information based on our current expectations. Because our business is subject to many
risks and our actual results may differ materially from any forward-looking statements made by or on behalf of us, this section includes a discussion of
important factors that could affect our business, operating results, financial condition and the trading price of our common stock. You should carefully consider
these risk factors, together with all of the other information included in this Annual Report on Form 10-K as well as our other publicly available filings with the
Securities and Exchange Commission.
Summary of Selected Risks
Our business is subject to numerous risks and uncertainties, of which you should be aware before making a decision to invest in our securities. These
risks and uncertainties include, among others, the following:
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The ongoing COVID-19 pandemic could adversely impact our business, including our clinical trials.
We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization
of any of our product candidates.
We are currently developing several product candidates. If we are unable to successfully complete clinical development of, obtain regulatory
approval for and commercialize our product candidates, our business prospects will be significantly harmed.
SNDX-5613 has undergone limited clinical testing and we may fail to show that the drug is well tolerated and provides sufficient clinical
benefit for patients.
Axatilimab has undergone limited clinical testing and we may fail to show that this drug is well tolerated and provides a sufficient clinical
benefit for patients.
Interim top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data
become available and are subject to audit and verification procedures that could result in material changes in the final data.
Our dependency upon our collaboration with Incyte to further develop and commercialize axatilimab.
If we are or our collaborators are unable to enroll patients in clinical trials, these clinical trials may not be completed on a timely basis or at all.
The regulatory approval processes of the FDA and foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable.
Our inability to obtain regulatory approval for our product candidates could harm our business.
We rely on third-party suppliers to manufacture and distribute our clinical drug supplies for our product candidates, we intend to rely on third
parties for commercial manufacturing and distribution of our product candidates and we expect to rely on third parties for manufacturing and
distribution of preclinical, clinical and commercial supplies of any future product candidates.
Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit
the commercial scope of their approved use, or result in significant negative consequences following any marketing approval.
We have incurred net losses since our inception, except 2021, and anticipate that we will continue to incur net losses for the foreseeable future.
We currently have no source of product revenue and may never achieve or maintain profitability.
We will require additional capital to finance our planned operations, which may not be available to us on acceptable terms, or at all. As a result,
we may not complete the development and commercialization of, or obtain regulatory approval for our existing product candidates or develop
new product candidates.
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If we are unable to obtain or protect intellectual property rights, we may not be able to compete effectively in our market.
We may not be able to protect our intellectual property rights throughout the world.
The market price of our stock may be volatile and you could lose all or part of your investment.
We may sell additional equity or debt securities or enter into other arrangements to fund our operations, which may result in dilution to our
stockholders and impose restrictions or limitations on our business.
Risks Related to Our Business and Industry
The ongoing COVID-19 pandemic could adversely impact our business, including our clinical trials.
The ongoing COVID-19 pandemic has resulted in travel and other restrictions in order to reduce the spread of the disease, including state and local
orders across the United States and other countries worldwide, which, among other things, direct individuals to shelter at their places of residence, direct
businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, and order cessation of
non-essential travel. In response to these public health directives and orders, we have implemented work-from-home policies for our employees. The effects of
executive orders may disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity
of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in
our operations could negatively impact our business, operating results and financial condition.
While the COVID-19 pandemic has not yet had a material impact on our business operations, quarantines and various government orders related to the
pandemic, including its variants, may adversely impact our business operations and the business operations of our contract research organizations conducting
our clinical trials and our third-party manufacturing facilities in the United States and other countries. In particular, if the pandemic continues to persist for an
extended period of time and continues to impact essential distribution systems such as FedEx and postal delivery or if it results in facility closures facility
closures for cleaning and/or insufficient staff, these ongoing constraints associated with the pandemic could cause disruptions to our supply chain and
operations, including associated delays in the manufacturing and supply of our products, which would adversely impact our ability to continue our clinical trial
operations.
In addition, our clinical trials may be affected by the COVID-19 pandemic. For example, we have experienced delays in clinical site initiation and
patient enrollment due to prioritization of hospital resources toward the COVID-19 pandemic. Patients may not be able to comply with clinical trial protocols if
quarantines impede patient movement or interrupt healthcare services. Similarly, our ability to recruit and retain patients and principal investigators and site
staff who, as healthcare providers, may have heightened exposure to COVID-19, could be limited, which in turn could adversely impact our clinical trial
operations. As a result, we may face delays in meeting our anticipated timelines for our ongoing and planned clinical trials.
The spread of COVID-19, including its variants, has caused a broad impact globally and may materially affect us economically. While the full extent of
the economic impact brought by, and the duration of, the pandemic may be difficult to assess or predict, it has resulted in uncertainty in macroeconomic
conditions and result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our
liquidity. In addition, a recession or market correction resulting from the pandemic could materially affect our business and the value of our common stock.
COVID-19 continues to evolve rapidly, and multiple variants of the virus that cause COVID-19 are circulating globally. The extent to which the
COVID-19 pandemic impacts our business, our clinical development and regulatory efforts will depend on future developments that are highly uncertain and
cannot be predicted with confidence, such as the duration of the outbreak, travel restrictions, quarantines, social distancing requirements, business closures in
the United States and other countries, the rollout of mass vaccinations for COVID-19 and the effectiveness of other actions taken in the United States and other
countries to contain and treat the disease. While vaccines have been approved and are being deployed, the timing of achieving widespread vaccination remains
uncertain, and the vaccines may be less effective against new variants, potentially leading to the reimpositions of restrictions in an effort to mitigate risks to
public health, especially as more infectious variants of the virus emerge for a prolonged period of time, further delaying the return of the global economy to pre-
pandemic levels.
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Accordingly, we do not yet know the full extent of potential delays or impacts on our business, our clinical and regulatory activities, healthcare systems or the
global economy as a whole. However, these impacts could adversely affect our business, financial condition, results of operations and growth prospects.
In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of
heightening many of the other risks and uncertainties described in this “Risk Factors” section.
We are currently developing several product candidates. If we are unable to successfully complete clinical development of, obtain regulatory approval for
and commercialize our product candidates, our business prospects will be significantly harmed.
Our financial success will depend substantially on our ability to effectively and profitably commercialize our product candidates. In order to
commercialize our product candidates, we will be required to obtain regulatory approvals by establishing that each of them is sufficiently safe and effective.
The clinical and commercial success of our product candidates will depend on a number of factors, including the following:
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direct and indirect effects of the ongoing COVID-19 pandemic on various aspects and stages of the clinical development process, including the
impact to expected site initiation, enrollment and participation in our clinical trials;
significant reprioritization and diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19
pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
timely completion of the pivotal Phase 2 cohorts of the AUGMENT-101 trial of SNDX-5613 in patients with relapsed/refractory acute
leukemias;
timely completion of the pivotal Phase 2 trial, AGAVE-201, of axatilimab in patients with chronic Graft Versus Host Disease, or cGVHD;
timely completion of any future clinical trials of SNDX-5613 and axatilimab;
interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing
protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19
pandemic;
whether we are required by the FDA or foreign regulatory authorities to conduct additional clinical trials;
the prevalence and severity of adverse drug reactions in any of our clinical trials;
the ability to demonstrate safety and efficacy of our product candidates for their proposed indications and the timely receipt of necessary
marketing approvals from the FDA and foreign regulatory authorities;
successfully meeting the endpoints in the clinical trials of our product candidates;
achieving and maintaining compliance with all applicable regulatory requirements;
the potential use of our product candidates to treat various cancer indications and fibrotic diseases;
the availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and competing treatments;
the effectiveness of our own or our potential strategic collaborators’ marketing, sales and distribution strategy and operations in the United
States and abroad;
the ability of our third-party contract manufacturers to produce trial supplies and to develop, validate and maintain a commercially viable
manufacturing process that is compliant with cGMP;
our ability to successfully commercialize our product candidates in the United States and abroad, whether alone or in collaboration with others;
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our ability to enforce our intellectual property rights in and to our product candidates.
If we fail to obtain regulatory approval for our product candidates, we will not be able to generate product sales, which will have a material adverse
effect on our business and our prospects.
SNDX-5613 has undergone limited clinical testing and we may fail to show that the drug is well tolerated and provides sufficient clinical benefit for
patients.
Research suggests that certain acute leukemias, such as mixed lineage leukemia-rearranged, or MLLr, leukemias and nucleophosmin 1, or NPM1,
mutant acute myeloid leukemia, or AML, are driven by the interaction of menin, a nuclear protein involved in transcription, with the N-terminus of MLL1
protein, a histone methyl transferase. In NPM1 mutant AML the interaction with menin occurs via the wild type MLL1 protein, and in MLLr acute leukemias,
the interaction occurs via a mutant form of MLL1, a fusion protein known as MLLr. MLLr results from a rare, spontaneous fusion between the N-terminus of
the mixed lineage leukemia protein-1, or MLL1, and a host of signaling molecules and nuclear transcription factors. This fusion produces an aberrant
transcription program that drives leukemic transformation. In pre-clinical animal models, small molecule inhibitors of the menin-MLLr interaction, such as
SNDX-5613, which bind to, and block the interaction of menin with either MLLr or MLL1, have demonstrated deep and durable single agent treatment effects
in multiple leukemic xenograft models harboring MLL fusions or NPM1 mutations. Our strategy for developing SNDX-5613 is to conduct a Phase 1/2 clinical
trial in relapsed/refractory patients with MLLr and NPM1 mutant acute leukemias and determine if the observed clinical efficacy supports further development.
The Phase 1 portion of the trial is assessing the safety, tolerability and pharmacokinetics of SNDX-5613, and seeks to establish a recommended Phase 2 dose. It
is open label, and we have released and may in the future release results from time to time that reflect small numbers of patients which may not be accurately
predictive of safety or efficacy results later in the trial or in subsequent trials. The Phase 2 portion is evaluating the efficacy of SNDX-5613 across three
expansion cohorts enrolling pediatric and adult patients with MLLr acute lymphoblastic leukemia, or ALL, MLLr acute myeloid leukemia, or AML, and NPM1
mutant AML. While we believe that we have established sufficient efficacy to warrant continued development in these indications, we have not yet sufficiently
demonstrated a favorable risk-benefit of SNDX-5613 in patients.
Axatilimab has undergone limited clinical testing and we may fail to show that this drug is well tolerated and provides a clinical benefit for patients.
Preclinical studies suggest that CSF-1/CSF-1R signaling may be the key regulatory pathway involved in the expansion and infiltration of donor
derived macrophages that mediate the disease processes involved in cGVHD and other fibrotic or inflammatory diseases. Nonclinical studies and analysis of
patient samples indicates that the cGVHD inflammatory disease process is a result of a complex interaction between host and donor immune cells including B
cells, and regulatory T cells with M2 differentiated macrophages in target tissue appearing to represent the common distal mediator of fibrosis. Therefore, we
hypothesize that a CSF-1R signal inhibitor such as axatilimab may play a meaningful role as a monotherapy agent in the treatment of cGVHD. Our approach is
to conduct a Phase 1/2 clinical trial with axatilimab in subjects with active cGVHD who have failed at least two prior lines of therapy. Following our end of
Phase 1 meeting with the FDA, we have aligned on a regulatory path for axatilimab for the treatment of cGVHD and commenced a pivotal Phase 2 trial,
AGAVE-201, to assess the safety and efficacy of different doses and schedules of axatilimab for the treatment of patients with cGVHD. While we believe that
we have established sufficient efficacy to warrant continued development in this indication, we have not yet sufficiently demonstrated a favorable risk-benefit
of axatilimab in patients.
Interim top-line and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become
available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish interim top-line or preliminary data from our clinical trials. For example, in April and December 2021, we
announced interim data from our Phase 1/2 clinical trial of SNDX-5613. Interim data from clinical trials that we may complete are subject to the risk that one or
more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or top-line data also
remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously
published. Preliminary or top-line data may include, for example, data regarding a small percentage of the patients enrolled in a clinical trial, and such
preliminary data should not be viewed as an indication, belief or guarantee that other patients enrolled in such clinical trial will achieve similar
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results or that the preliminary results from such patients will be maintained. As a result, interim and preliminary data should be viewed with caution until the
final data are available. Differences between preliminary or interim data and final data could significantly harm our business prospects and may cause the
trading price of our common stock to fluctuate significantly.
We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any of
our product candidates.
Before obtaining marketing approval from regulatory authorities for the sale of any of our product candidates, we or our collaborators must conduct
extensive trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive and difficult to design and implement,
can take many years to complete and is inherently uncertain as to the outcome. A failure of one or more trials can occur at any stage of testing. The outcome of
preclinical studies and early clinical trials may not accurately predict the success of later trials, and interim results of a trial do not necessarily predict final
results. For example, in May 2020, we announced that ECOG-ACRIN advised us that the E2112 trial did not achieve the primary endpoint of demonstrating a
statistically significant overall survival benefit over hormone therapy alone in the Phase 3 clinical trial and we decided to deprioritize the entinostat program to
focus resources on advancing the remainder of our pipeline. A number of companies in the pharmaceutical and biotechnology industries have suffered
significant setbacks in advanced trials due to lack of efficacy or unacceptable safety profiles, notwithstanding promising results in earlier trials.
We are dependent upon our collaboration with Incyte to further develop and commercialize axatilimab. If we or Incyte fail to perform as expected or if the
collaboration is terminated as a result of actions by the Federal Trade Commission or the Department of Justice, the potential for us to generate future
revenues under the collaboration could be significantly reduced, the development and/or commercialization of axatilmab may be terminated or
substantially delayed, and our business could be adversely affected.
We are subject to numerous risks related to the Incyte Agreement to collaborate on the development and commercialization of axatilimab.
For example, there is no assurance that the parties will achieve any of the regulatory development or sales milestones, that we will receive any future
milestone or royalty payments under the collaboration agreement or that the collaboration will not be unwound as a result of actions by the Federal Trade
Commission or the Department of Justice. Incyte’s activities may be influenced by, among other things, the efforts and allocation of resources by Incyte, which
we cannot control. If Incyte does not perform in the manner we expect or fulfill its responsibilities in a timely manner, or at all, the clinical development,
manufacturing, regulatory approval, and commercialization efforts related to axatilimab could be delayed or terminated. In addition, our license with Incyte
may be unsuccessful due to other factors, including, without limitation, the following:
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Incyte may terminate the agreement for convenience upon 90 or 180 days’ notice depending on whether or not the parties have commercialized
axatilimab in an indication in the respective territory;
Incyte may change the focus of its development and commercialization efforts or prioritize other programs more highly and, accordingly,
reduce the efforts and resources allocated to axatilimab
Incyte may, within its commercially reasonable discretion, choose not to develop and commercialize axatilimab in all relevant markets or for
one or more indications, if at all; and
if Incyte is acquired during the term of our collaboration, the acquirer may have competing programs or different strategic priorities that could
cause it to reduce its commitment to our collaboration or to terminate the collaboration.
We cannot ensure that the potential strategic benefits and opportunities expected from this collaboration with be realized on our anticipated timeline or
at all.
If we or our collaborators are unable to enroll patients in clinical trials, these clinical trials may not be completed on a timely basis or at all.
The timely completion of clinical trials largely depends on patient enrollment. Many factors affect patient enrollment, including:
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direct and indirect effects of the ongoing COVID-19 pandemic;
perception about the relative efficacy of our product candidates versus other compounds in clinical development or commercially available;
evolving standard of care in treating cancer patients;
the size and nature of the patient population, especially in the case of an orphan indication, we are pursuing;
the number and location of clinical trial sites enrolled;
competition with other organizations or our own clinical trials for clinical trial sites or patients;
the eligibility and exclusion criteria for the trial;
the design of the trial;
ability to obtain and maintain patient consent; and
risk that enrolled subjects will drop out before completion.
As a result of the above factors, there is a risk that our or our collaborators’ clinical trials may not be completed on a timely basis or at all.
We may be required to relinquish important rights to and control over the development and commercialization of our product candidates to our current or
future collaborators.
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Our collaborations, including any future strategic collaborations we enter into, could subject us to a number of risks, including:
we may be required to undertake the expenditure of substantial operational, financial and management resources;
we may be required to issue equity securities that would dilute our existing stockholders’ percentage of ownership;
we may be required to assume substantial actual or contingent liabilities;
we may not be able to control the amount and timing of resources that our strategic collaborators devote to the development or
commercialization of our product candidates;
strategic collaborators may delay clinical trials, provide insufficient funding, terminate a clinical trial or abandon a product candidate, repeat or
conduct new clinical trials or require a new version of a product candidate for clinical testing;
strategic collaborators may not pursue further development and commercialization of products resulting from the strategic collaboration
arrangement or may elect to discontinue research and development programs;
strategic collaborators may not commit adequate resources to the marketing and distribution of our product candidates, limiting our potential
revenues from these products;
disputes may arise between us and our strategic collaborators that result in the delay or termination of the research, development or
commercialization of our product candidates or that result in costly litigation or arbitration that diverts management’s attention and consumes
resources;
strategic collaborators may experience financial difficulties;
strategic collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in a manner
that could jeopardize or invalidate our proprietary information or expose us to potential litigation;
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business combinations or significant changes in a strategic collaborator’s business strategy may also adversely affect a strategic collaborator’s
willingness or ability to complete its obligations under any arrangement;
strategic collaborators could decide to move forward with a competing product candidate developed either independently or in collaboration
with others, including our competitors; and
strategic collaborators could terminate the arrangement or allow it to expire, which would delay the development and may increase the cost of
developing, our product candidates.
We may explore strategic collaborations that may never materialize or may fail.
We periodically explore a variety of possible strategic collaborations in an effort to gain access to additional product candidates or resources. At the
current time, we cannot predict what form such a strategic collaboration might take. We are likely to face significant competition in seeking appropriate
strategic collaborators, and strategic collaborations can be complicated and time consuming to negotiate and document. We may enter into strategic
collaborations that we subsequently no longer wish to pursue, and we may not be able to negotiate strategic collaborations on acceptable terms, or at all. We are
unable to predict when, if ever, we will enter into any additional strategic collaborations because of the numerous risks and uncertainties associated with
establishing them.
The regulatory approval processes of the FDA and foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable. Our inability
to obtain regulatory approval for our product candidates could harm our business.
The time required to obtain approval by the FDA and foreign regulatory authorities is unpredictable, but typically takes many years following the
commencement of preclinical studies and clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In
addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product
candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any of our product candidates, and it is
possible that we will never obtain regulatory approval for our existing product candidates or any future product candidates.
Due to the ongoing COVID-19 pandemic, it is possible that we could experience delays in the timing of our interactions with regulatory authorities
due to absenteeism by governmental employees, inability to conduct planned physical inspections related to regulatory approval, or the diversion of regulatory
authority efforts and attention to approval of other therapeutics or other activities related to COVID-19, which could delay anticipated approval decisions and
otherwise delay or limit our ability to make planned regulatory submissions or obtain new product approvals. In addition, our product candidates could fail to
receive regulatory approval from the FDA or foreign regulatory authorities for other reasons, including but not limited to:
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failure to demonstrate that our product candidates are safe and effective;
failure of clinical trials to meet the primary endpoints or level of statistical significance required for approval;
failure to demonstrate that the clinical and other benefits of a product candidate outweigh any of its safety risks;
disagreement with our interpretation of data from preclinical studies or clinical trials;
disagreement with the design or implementation of our or our collaborators’ trials;
the insufficiency of data collected from trials of our product candidates to support the submission and filing of an NDA or other submission or
to obtain regulatory approval;
failure to obtain approval of the manufacturing and testing processes or facilities of third-party manufacturers with whom we contract for
clinical and commercial supplies;
receipt of a negative opinion from an advisory committee due to a change in the standard of care regardless of the outcome of the clinical trials;
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changes in the approval policies or regulations that render our preclinical and clinical data insufficient for approval.
The FDA or foreign regulatory authorities may require more information, including additional preclinical or clinical data, to support approval, which
may delay or prevent approval and our commercialization plans, or may cause us to decide to abandon our development program. Even if we were to obtain
approval, regulatory authorities may approve one or more of our product candidates for a more limited patient population than we request, may grant approval
contingent on the performance of costly post-marketing trials, may impose a risk evaluation and mitigation strategy, or REMS, or foreign regulatory authorities
may require the establishment or modification of a similar strategy that may, for instance, restrict distribution of one or more of our product candidates and
impose burdensome implementation requirements on us, or may approve it with a label that does not include the labeling claims necessary or desirable for the
successful commercialization of one or more of our product candidates, all of which could limit our ability to successfully commercialize our product
candidates.
Our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community
to be commercially successful.
Even if our product candidates receive regulatory approval, they may not gain sufficient market acceptance among physicians, patients, healthcare
payors and others in the medical community. Our commercial success also depends on coverage and adequate reimbursement by third-party payors, including
government payors, which may be difficult or time-consuming to obtain, may be limited in scope and may not be obtained in all jurisdictions in which we may
seek to market our product candidates. The degree of market acceptance will depend on a number of factors, including:
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the efficacy and safety profile as demonstrated in trials;
the timing of market introduction as well as competitive products;
the clinical indications for which the product candidate is approved;
acceptance of the product candidate as a safe and effective treatment by physicians, clinics and patients;
the potential and perceived advantages of our product candidates over alternative treatments;
the cost of treatment in relation to alternative treatments;
pricing and the availability of coverage and adequate reimbursement by third-party payors, including government authorities;
relative convenience and ease of administration;
the frequency and severity of adverse events;
the effectiveness of sales and marketing; and
unfavorable publicity relating to our product candidates.
If our product candidates are approved but do not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we
may not generate sufficient revenue to become or remain profitable.
We rely on third-party suppliers to manufacture and distribute our clinical drug supplies for our product candidates, we intend to rely on third parties for
commercial manufacturing and distribution of our product candidates and we expect to rely on third parties for manufacturing and distribution of
preclinical, clinical and commercial supplies of any future product candidates.
We do not currently have, nor do we plan to acquire, the infrastructure or capability to manufacture or distribute preclinical, clinical or commercial
quantities of drug substance or drug product, including our existing product candidates. While we expect to continue to depend on third-party manufacturers for
the foreseeable future, we do not have direct control over the ability of these manufacturers to maintain adequate manufacturing capacity and capabilities to
serve our needs, including quality control, quality assurance and qualified personnel. In additional, public health epidemics, such as the COVID-19 pandemic,
may impact the ability of our existing or future manufacturers to perform their obligations to us.
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We are dependent on our third-party manufacturers for compliance with cGMPs and for manufacture of both active drug substances and finished drug
products. Facilities used by our third-party manufacturers to manufacture drug substance and drug product for commercial sale must be approved by the FDA
or other relevant foreign regulatory agencies pursuant to inspections that will be conducted after we submit our NDA or relevant foreign regulatory submission
to the applicable regulatory agency. If our third-party manufacturers cannot successfully manufacture materials that conform to our specifications and/or the
strict regulatory requirements of the FDA or foreign regulatory agencies, they will not be able to secure and/or maintain regulatory approval for their
manufacturing facilities. Furthermore, these third-party manufacturers are engaged with other companies to supply and/or manufacture materials or products for
such companies, which also exposes our third-party manufacturers to regulatory risks for the production of such materials and products. As a result, failure to
meet the regulatory requirements for the production of those materials and products may also affect the regulatory clearance of a third-party manufacturers’
facility. If the FDA or a foreign regulatory agency does not approve these facilities for the manufacture of our product candidates, or if it withdraws its approval
in the future, we may need to find alternative manufacturing facilities, which would impede or delay our ability to develop, obtain regulatory approval for or
market our product candidates, if approved.
Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties.
Even if we obtain regulatory approval for our product candidates, they would be subject to ongoing requirements by the FDA and foreign regulatory
authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export,
advertising, promotion, recordkeeping and reporting of safety and other post-market information. The FDA and foreign regulatory authorities will continue to
monitor closely the safety profile of any product even after approval. If the FDA or foreign regulatory authorities become aware of new safety information after
approval of a product candidate, they may require labeling changes or establishment of a REMS or similar strategy, impose significant restrictions on its
indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance.
In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other
regulatory authorities for compliance with cGMP regulations and standards. If we or a regulatory agency discover previously unknown problems with a
product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency
may impose restrictions on that product, the manufacturing facility or us, including withdrawal of the product from the market or suspension of manufacturing,
or we may recall the product from distribution. If we, or our third-party manufacturers, fail to comply with applicable regulatory requirements, a regulatory
agency may:
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issue warning letters or untitled letters;
mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;
require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates
for specific actions and penalties for noncompliance;
seek an injunction or impose civil or criminal penalties or monetary fines;
suspend or withdraw regulatory approval;
suspend any ongoing clinical trials;
refuse to approve pending applications or supplements to applications filed by us;
suspend or impose restrictions on operations, including costly new manufacturing requirements; or
seize or detain products, or refuse to permit the import or export of products.
The occurrence of any event or penalty described above may inhibit our ability to commercialize and generate revenue from the sale of our product
candidates.
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Advertising and promotion of any product candidate that obtains approval in the United States will be heavily scrutinized by the FDA, the Department
of Justice, the Department of Health and Human Services’ Office of Inspector General, state attorneys general, members of Congress, other government
agencies and the public. While physicians may prescribe products for off-label uses as the FDA and other regulatory agencies do not regulate a physician’s
choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their sales
force with respect to off-label uses of products for which marketing clearance has not been issued. Companies may only share truthful and not misleading
information that is otherwise consistent with a product’s FDA approved labeling. Violations, including promotion of our products for unapproved (or off-label)
uses, may be subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by the government. Additionally, foreign regulatory
authorities will heavily scrutinize advertising and promotion of any product candidate that obtains approval in their respective jurisdictions.
In the United States, engaging in the impermissible promotion of our products for off-label uses can also subject us to false claims litigation under
federal and state statutes, which can lead to administrative, civil and criminal penalties, damages, monetary fines, disgorgement, individual imprisonment,
exclusion from participation in Medicare, Medicaid and other federal healthcare programs, curtailment or restructuring of our operations and agreements that
materially restrict the manner in which a company promotes or distributes drug products. These false claims statutes include, but are not limited to, the federal
civil False Claims Act, which allows any individual to bring a lawsuit against an individual or entity, including a pharmaceutical or biopharmaceutical company
on behalf of the federal government alleging the knowing submission of false or fraudulent claims, or causing to present such false or fraudulent claims, for
payment or approval by a federal program such as Medicare or Medicaid. These False Claims Act lawsuits against pharmaceutical and biopharmaceutical
companies have increased significantly in number and breadth, leading to several substantial civil and criminal settlements regarding certain sales practices,
including promoting off-label drug uses involving fines in excess of $1.0 billion. This growth in litigation has increased the risk that a pharmaceutical company
will have to defend a false claim action, pay settlement fines or restitution, agree to comply with burdensome reporting and compliance obligations, and be
excluded from participation in Medicare, Medicaid and other federal and state healthcare programs. If we, or any partner that we may engage, do not lawfully
promote our approved products, we may become subject to such litigation, which may have a material adverse effect on our business, financial condition and
results of operations.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the
commercial scope of their approved use, or result in significant negative consequences following any marketing approval.
Undesirable side effects caused by our product candidates could cause the interruption, delay or halting of the trials and could result in a more
restrictive label or the delay or denial of regulatory approval by the FDA or other foreign regulatory authorities. Results of the clinical trials may reveal a high
and unacceptable severity and prevalence of side effects or other unexpected characteristics. In such event, the trials could be suspended or terminated, or the
FDA or foreign regulatory authorities could deny approval of our product candidates for any or all targeted indications. Drug-related side effects could affect
patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may harm our
business, financial condition and prospects.
Additionally, if our product candidates receive marketing approval, and we or others later identify undesirable side effects, a number of potentially
significant negative consequences could result, including:
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we may suspend marketing of, or withdraw or recall, the product;
regulatory authorities may withdraw approvals;
regulatory authorities may require additional warnings on the product labels;
the FDA or other regulatory authorities may issue safety alerts, Dear Healthcare Provider letters, press releases or other communications
containing warnings about the product;
the FDA may require the establishment or modification of a REMS or foreign regulatory authorities may require the establishment or
modification of a similar strategy that may, for instance, restrict distribution of the product and impose burdensome implementation
requirements on us;
regulatory authorities may require that we conduct post-marketing studies;
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we could be sued and held liable for harm caused to subjects or patients; and
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of our product candidates for use in targeted indications or
otherwise materially harm its commercial prospects, if approved, and could harm our business, results of operations and prospects.
Our failure to obtain regulatory approval in international jurisdictions would prevent us from marketing our product candidates outside the United States.
In order to market and sell our product candidates in other jurisdictions, we must obtain separate marketing approvals for those jurisdictions and
comply with their numerous and varying regulatory requirements. We may not obtain foreign regulatory approvals on a timely basis, or at all. The approval
procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain
FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In
addition, in many countries outside the United States, product reimbursement approvals must be secured before regulatory authorities will approve the product
for sale in that country. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays,
difficulties and costs for us and could delay or prevent the introduction of our product candidates in certain countries. Further, clinical trials conducted in one
country may not be accepted by regulatory authorities in other countries and regulatory approval in one country does not ensure approval in any other country,
while a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. Our failure to
obtain approval of our product candidates by foreign regulatory authorities may negatively impact the commercial prospects of such product candidates and our
business prospects could decline. Also, if regulatory approval for our product candidates is granted, it may be later withdrawn. If we fail to comply with the
regulatory requirements in international jurisdictions and receive applicable marketing approvals, our target market will be reduced and our ability to realize the
full market potential for our product candidates will be harmed and our business may be adversely affected.
We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete
effectively.
Even if any of our product candidates received regulatory approval, such product candidates would face competition from other therapies in the
relevant indication. For example, chronic graft versus host disease has historically been managed by off-label treatments. However, in the past five years, the
FDA has approved three drugs, ibrutinib (Imbruvica®), belomosidil (Rezurock®) and ruxolitinib (Jakafi®), for use in patients with cGVHD after failure of one
or more lines of systemic therapy. All three of these drugs may compete with axatilimab in patients diagnosed with cGVHD.
SNDX-5613 is being developed for the treatment of adult and pediatric patients with MLLr ALL, MLLr AML and NPM1 mutant AML. At this time,
there are no drugs approved for these defined populations and patients are managed using the standard of care treatment regimens developed for general AML
and ALL populations. While there are other agents in early development for similar populations, SNDX-5613 has the potential to be the first defined therapy
for patients with MLLr ALL, MLLr AML and/or NPM1 mutant AML.
Many of our existing or potential competitors 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 products and the commercialization of
those products. Our competitors may be more successful than us in obtaining FDA approval for drugs and achieving widespread market acceptance. Our
competitors’ drugs may be more effective or more effectively marketed and sold than any drug we may commercialize and may render our product candidates
obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our product candidates. Our competitors may also
obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours. We anticipate that we will face intense and
increasing competition as new drugs enter the market and advanced technologies become available.
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We believe that our ability to successfully compete will depend on, among other things:
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the efficacy and safety profile of our product candidates relative to marketed products and product candidates in development by third parties;
the time it takes for our product candidates to complete clinical development and receive marketing approval;
our ability to commercialize our product candidates if they receive regulatory approval;
the price of our product candidates, including in comparison to branded or generic competitors;
whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans, including
Medicare; and
our ability to manufacture commercial quantities of our product candidates if they receive regulatory approval.
Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors’ products could limit the demand and
the price we are able to charge. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition
or the reluctance of physicians to switch from existing methods of treatment, or if physicians switch to other new drug or biologic products or choose to reserve
our drugs for use in limited circumstances.
The actions of Eddingpharm Investment Company Limited, or Eddingpharm, and any other current or future sublicensees could adversely affect our
business.
We currently exclusively sublicense entinostat to Eddingpharm for development and commercialization of entinostat in China and select Asian
countries. In December 2021, Eddingpharm announced that the results of its multi-center, randomized, double-blinded, placebo-controlled Phase III registration
trial, which was designed to evaluate entinostat plus exemestane compared to placebo plus exemestane in patients with locally advanced or metastatic HR
positive, HER2 negative breast cancer who have previously progressed on hormone therapy, showed that entinostat plus exemestane improved progression free
survival, overall response rate and disease control rate, compared with placebo plus exemestane in patients with advanced HR positive, HER2 negative breast
cancer who had progressed after previous endocrine therapy. Nonetheless, it is possible that any future clinical trials conducted by Eddingpharm, including the
forthcoming overall survival data in its ongoing Phase III registration trial, and trials by other current or future sublicensees in their respective jurisdictions
could have negative results, which in turn could have a material adverse effect on the development of entinostat for development and commercialization in the
United States and the rest of the world.
We are dependent on UCB Biopharma Sprl, or UCB, to comply with the terms of our license agreement for axatilimab.
Our commercial success also depends upon our ability to develop, manufacture, market and sell axatilimab. In July 2016, we entered into the UCB
license agreement pursuant to which we obtained a worldwide, sublicenseable, exclusive license to axatilimab, an IND-ready anti-CSF-1R monoclonal
antibody. Certain of the rights licensed to us under the UCB license agreement are in-licensed by UCB from third parties. We are dependent on UCB
maintaining the applicable third-party license agreements in full force and effect, which may include activities and performance obligations that are not within
our control. If any of these third-party license agreements terminate, certain of our rights to develop, manufacture, commercialize or sell axatilimab may be
terminated as well. The occurrence of any of these events could adversely affect the development and commercialization of axatilimab, and materially harm our
business.
Our employees, consultants and collaborators may engage in misconduct or other improper activities, including insider trading and non-compliance with
regulatory standards and requirements.
We are exposed to the risk that our employees, consultants, distributors, and collaborators may engage in fraudulent or illegal activity. Misconduct by
these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violates the regulations of the FDA and
non-U.S. regulators, including those laws requiring the reporting of true, complete and accurate information to such regulators, manufacturing
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standards, healthcare fraud and abuse laws and regulations in the United States and abroad or laws that require the true, complete and accurate reporting of
financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry, including the sale of pharmaceuticals, are
subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations
may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business
arrangements. It is not always possible to identify and deter misconduct by our employees and other third parties, 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 such 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 significant fines or other sanctions, including the imposition of civil,
criminal and administrative penalties, damages, monetary fines, disgorgement, individual imprisonment, possible exclusion from participation in Medicare,
Medicaid and other federal 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
curtailment of operations, any of which could adversely affect our ability to operate our business and our results of operations. Whether or not we are successful
in defending against such actions or investigations, we could incur substantial costs, including legal fees, and divert the attention of management in defending
ourselves against any of these claims or investigations.
We must attract and retain additional highly skilled employees in order to succeed.
To succeed, we must recruit, retain, manage and motivate qualified clinical, scientific, technical and management personnel and we face significant
competition for experienced personnel. If we do not succeed in attracting and retaining qualified personnel, particularly at the management level, it could
adversely affect our ability to execute our business plan and harm our operating results. In particular, the loss of one or more of our executive officers could be
detrimental to us if we cannot recruit suitable replacements in a timely manner. The competition for qualified personnel in the pharmaceutical industry is
intense and as a result, we may be unable to continue to attract and retain qualified personnel necessary for the development of our business or to recruit
suitable replacement personnel.
Many of the other pharmaceutical companies that we compete against for qualified personnel have greater financial and other 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 unable to continue to attract and retain high-quality
personnel, the rate and success at which we can discover and develop product candidates and our business will be limited.
Even if we commercialize our product candidates, they or any other product candidates that we develop, may become subject to unfavorable pricing
regulations or third-party coverage or reimbursement practices, which could harm our business.
Our ability to successfully commercialize our existing product candidates, or any other product candidates that we develop, will depend in part on the
extent to which coverage and adequate reimbursement for these products and related treatments will be available from third-party payors, including government
healthcare programs, private health insurers, managed care plans and other organizations. Third-party payors determine which medications they will cover and
establish reimbursement levels. Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular
medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging
the prices charged for medical products.
We cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what
the level of reimbursement will be. Limitation on coverage and reimbursement may impact the demand for, or the price of, and our ability to successfully
commercialize any product candidates that we develop.
There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the
indications for which the drug is approved by the FDA or foreign regulatory
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authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs,
including research, development, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also not be
sufficient to cover our costs and may only be temporary. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is
used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for
drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws
that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.
Private payors often follow decisions by the Centers for Medicare & Medicaid Services, or CMS, regarding coverage and reimbursement to a
substantial degree. However, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for
the drug product. As a result, the coverage determination process is often 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 applied consistently
or obtained in the first instance. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors
for any approved products that we develop could have an adverse effect on our operating results, our ability to raise capital needed to commercialize products
and our overall financial condition.
The regulations that govern marketing approvals, coverage and reimbursement for new drug products vary widely from country to country. Current
and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals.
Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or
product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even
after initial approval is granted. As a result, we may obtain marketing approval for our product candidates in a particular country, but be subject to price
regulations that delay our commercial launch of the product, possibly for lengthy time periods, which could negatively impact the revenues we generate from
the sale of the product in that particular country. Adverse pricing limitations may hinder our ability to recoup our investment even if our product candidates
obtain marketing approval.
There can be no assurance that our product candidates, if they are approved for sale in the United States or in other countries, will be considered
medically reasonable and necessary for a specific indication, that it will be considered cost effective by third-party payors, that coverage and an adequate level
of reimbursement will be available, or that third-party payors’ reimbursement policies will not adversely affect our ability to sell our product candidates
profitably.
Current and future legislation may increase the difficulty and cost for us to commercialize our product candidates and affect the prices we may obtain.
The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting 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 candidate for which we obtain marketing approval. For example, then President Obama signed into law the Affordable Care Act. Among other cost
containment measures, the Affordable Care Act established an annual, nondeductible fee on any entity that manufactures or imports branded prescription drugs
and biologic agents, a Medicare Part D coverage gap discount program, and a formula that increased the rebates a manufacturer must pay under the Medicaid
Drug Rebate Program. There have been executive, judicial and Congressional challenges to certain aspects of the Affordable Care Act. While Congress has not
passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the Affordable Care Act have been signed into law.
The Tax Cuts and Jobs Act of 2017 includes a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the
Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the
“individual mandate.” On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is
unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Thus, the Affordable Care Act will remain in effect in its current
form. Moreover, prior to the U.S. Supreme Court ruling, January 28, 2021, President Biden issued an executive order that initiated a special enrollment period
for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace. The executive order also instructed certain governmental
agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining
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Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to
health insurance coverage through Medicaid or the Affordable Care Act. It is possible that the Affordable Care Act will be subject to judicial or Congressional
challenges in the future. It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the Affordable Care
Act and our business.
Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, in August 2011, then President
Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to
Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not agree upon a targeted deficit reduction of at least $1.2
trillion for fiscal years 2012 through 2021, triggering the legislation’s automatic reduction to several government programs. This included aggregate reductions
to Medicare payments to providers of up to 2% per fiscal year, effective as of 2013. Further legislation has extended the 2% reduction to 2031 with the
exception of a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless additional congressional action is
taken. In January 2013, then President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare
payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to
five years.
Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.
Specifically, there have been several recent U.S. Congressional inquiries, Presidential executive orders, and proposed and enacted federal and state legislation
designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce
the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration used
several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example,
on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that sought to
implement several of the administration’s proposals. As a result, the FDA released a final rule and guidance in September 2020, providing pathways for states
to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the U.S. Department of Health & Human Services, or HHS,
finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Medicare Part D, either
directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation of the rule has been delayed by the Biden
administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions reflected
at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation
of which have also been delayed by the Biden administration until January 1, 2023. On November 20, 2020, the Centers for Medicare & Medicaid Services, or
CMS, issued an interim final rule implementing the Trump administration’s Most Favored Nation, or MFN, executive order, which would tie Medicare Part B
payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries. On December 27, 2021, CMS issued a
final rule that rescinded the interim final rule implementing the Trump administration’s Most Favored Nation executive order. In July 2021, the Biden
administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In
response to Biden’s executive order, on September 9, 2021, the U.S. Department of Health and Human Services, or HHS, released a Comprehensive Plan for
Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as
well as potential administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement
these principles. Congress is also considering additional health reform measures. At the state level, legislatures are increasingly passing legislation and
implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts,
restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from
other countries and bulk purchasing.
It is also possible that additional governmental action is taken in response to the COVID-19 pandemic. We cannot predict the likelihood, nature or
extent of government regulations that may arise from future legislation, administrative or executive action. We expect that the Affordable Care Act, as well as
other current or future healthcare reform measures may result in more rigorous coverage criteria and in additional downward pressure on
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the price that we receive for any approved product. This could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other
government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare
reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products.
We do not currently have any sales, marketing or distribution experience or infrastructure.
In order to market any approved product candidate in the future, we must build our sales, marketing, managerial and other non-technical capabilities
or make arrangements with third parties to perform these services, as we do not presently have all of these capabilities. To develop our internal sales,
distribution and marketing capabilities, we must invest significant amounts of financial and management resources in the future. For drugs where we decide to
perform sales, marketing and distribution functions ourselves, we could face a number of challenges, including that:
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we may not be able to attract and build an effective marketing or sales force;
the cost of establishing, training and providing regulatory oversight for a marketing or sales force may not be justifiable in light of the revenues
generated by any particular product;
our direct or indirect sales and marketing efforts may not be successful; and
there are significant legal and regulatory risks in drug marketing and sales that we have never faced, and any failure to comply with all legal
and regulatory requirements for sales, marketing and distribution could result in enforcement action by the FDA or other authorities that could
jeopardize our ability to market the product or could subject us to substantial liabilities.
Alternatively, we may rely on third parties to launch and market our product candidates, if approved. We may have limited or no control over the
sales, marketing and distribution activities of these third parties and our future revenue may depend on the success of these third parties. Additionally, if these
third parties fail to comply with all applicable legal or regulatory requirements, the FDA or another governmental agency could take enforcement action that
could jeopardize their ability and our ability to market our product candidates.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of our product candidates.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human trials and will face an even greater risk
if we commercially sell any products that we may develop. Product liability claims may be brought against us by subjects enrolled in our trials, patients,
healthcare providers or others using, administering or selling our products. If we cannot successfully defend ourselves against claims that our product
candidates or other products that we may develop caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability
claims may result in:
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decreased demand for our product candidates;
termination of clinical trial sites or entire trial programs;
injury to our reputation and significant negative media attention;
withdrawal of trial participants;
significant costs to defend the related litigation;
substantial monetary awards to trial subjects or patients;
diversion of management and scientific resources from our business operations; and
the inability to commercialize any products that we may develop.
While we currently hold trial liability insurance coverage consistent with industry standards, this may not adequately cover all liabilities that we may
incur. We also may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise in the future.
We intend to expand our insurance coverage for products to include the sale of commercial products if we obtain marketing approval for our product
candidates, but we may be unable to obtain commercially reasonable product liability insurance. A
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successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and
adversely affect our business and financial condition.
Our relationships with healthcare providers, customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse, transparency
and other healthcare laws and regulations as well as privacy and data security laws and regulations, which could expose us to criminal sanctions, civil
penalties, contractual damages, reputational harm, fines, exclusion from participation in government healthcare programs, curtailments or restrictions of
our operations, administrative burdens and diminished profits and future earnings
Healthcare providers, including physicians and third-party payors play a primary role in the recommendation and prescription of any product
candidates for which we obtain marketing approval. Our current and future arrangements with healthcare providers, third-party payors and customers 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 conduct clinical research and market, sell and distribute our products for which we obtain marketing approval. Restrictions
under applicable federal and state healthcare laws and regulations, include, but are not limited to, the following:
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the federal Anti-Kickback Statute prohibits persons from, among other things, knowingly and willfully soliciting, offering, receiving or
providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, the referral of an individual for the
furnishing or arranging for the furnishing, or the purchase, lease or order, or arranging for or recommending purchase, lease or order, or any
good or service for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
the federal false claims, including the federal civil False Claims Act, impose criminal and civil penalties, including through civil whistleblower
or qui tam actions, and civil monetary penalties laws, which prohibit knowingly presenting, or causing to be presented, to the federal
government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay
money to the federal government;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which prohibits, among other things, knowingly and
willfully executing, or attempting to execute, a scheme or artifice to defraud any healthcare benefit program or obtain, by means of false or
fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare
benefit program, regardless of the payor (e.g., public or private), willfully obstructing a criminal investigation of a healthcare offense, and
knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or
fraudulent statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, also imposes
obligations on covered entities, including certain health care providers, health plans and health care clearinghouses as well as their business
associates that perform certain services involving the use or disclosure of individually identifiable health information for or on behalf of such
covered entities, and their covered subcontractors, with respect to safeguarding the privacy, security and transmission of individually
identifiable health information;
the federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which
payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to CMS information related to
“payments or other transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors),
other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals and applicable manufacturers and
applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians (as defined above)
and their immediate family members; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers;
state and foreign laws
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that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant
compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state
and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures; state laws that require manufacturers to report pricing information regarding certain drugs;
state and local laws that require the registration of pharmaceutical sales representatives; state and foreign laws that govern the privacy and
security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted
by HIPAA, thus complicating compliance efforts; and federal, state, and foreign laws that govern the privacy and security of other personal
information, including federal and state consumer protection laws, state data security laws, and data breach notification laws (a data breach
affecting sensitive personal information, including health information, could result in significant legal and financial exposure and reputational
damages).
Efforts to ensure that our business arrangements with third parties and our business generally, will comply with applicable healthcare laws and
regulations will involve substantial costs. It is possible that governmental 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 our operations are found to be in
violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative
penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual
damages, reputational harm, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to
resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations. Defending against any such actions can be costly,
time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that
may be brought against us, our business may be impaired. Further, if any physician or other healthcare provider or entity with whom we expect to do business is
found not to be in compliance with applicable laws, that person or entity may be subject to criminal, civil or administrative sanctions, including exclusions from
government-funded healthcare programs.
Significant disruptions of our information technology systems or data security incidents could result in significant financial, legal, regulatory, business and
reputational harm to us.
We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate our business. In the
ordinary course of our business, we collect, store, process and transmit large amounts of sensitive information, including intellectual property, proprietary
business information, personal information and other confidential information. It is critical that we do so in a secure manner to maintain the confidentiality,
integrity and availability of such sensitive information. We have also outsourced elements of our operations (including elements of our information technology
infrastructure) to third parties, and as a result, we manage a number of third-party vendors who may or could have access to our computer networks, our
confidential information or the confidential information of third parties that is in our possession. In addition, those third-party vendors may in turn subcontract
or outsource some of their responsibilities to other parties. While all information technology operations are inherently vulnerable to inadvertent or intentional
security breaches, incidents, attacks and exposures, the accessibility and distributed nature of our information technology systems, and the sensitive information
stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal and external attacks on our technology environment.
In addition, due to the COVID-19 pandemic, we have enabled substantially all of our employees to work remotely, which may make us more vulnerable to
cyberattacks. Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by
malicious third parties. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by
sophisticated and organized groups and individuals with a wide range of motives (including, but not limited to, industrial espionage) and expertise, including
organized criminal groups, “hacktivists,” nation states and others. In addition to the extraction of sensitive information, such attacks could include the
deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the
confidentiality, integrity and availability of information. The prevalent use of mobile devices further increases the risk of data security incidents.
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Significant disruptions of our, our third-party vendors’ and/or business partners’ information technology systems or other similar data security
incidents could adversely affect our business operations and/or result in the loss, misappropriation and/or unauthorized access, use or disclosure of, or the
prevention of access to, sensitive information, which could result in financial, legal, regulatory, business and reputational harm to us. In addition, information
technology system disruptions, whether from attacks on our technology environment or from computer viruses, natural disasters, terrorism, war and
telecommunication and electrical failures, could result in a material disruption of our development programs and our business operations. For example, the loss
of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to
recover or reproduce the data.
There is no way of knowing with certainty whether we have experienced any data security incidents that have not been discovered. While we have no
reason to believe this to be the case, attackers have become very sophisticated in the ways that they conceal access to systems. Many companies that have been
attacked are not aware that they have been attacked. Any event that leads to unauthorized access, use or disclosure of personal information, including but not
limited to personal information regarding employees or clinical trial patients, could disrupt our business, harm our reputation, compel us to comply with
applicable federal and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation,
regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability
under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased
costs to us, and result in significant legal and financial exposure and/or reputational harm. Any failure or perceived failure by us or our vendors or business
partners to comply with our privacy, confidentiality or data security-related legal or other obligations to third parties, or any further security incidents or other
inappropriate access events resulting in the unauthorized access, release or transfer of sensitive information, which could include personally identifiable
information, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or
others, and could cause third parties, including clinical sites, regulators or current and potential partners, to lose trust in us or we could be subject to claims by
third parties that we have breached our privacy- or confidentiality-related obligations, which could materially and adversely affect our business and prospects.
Moreover, data security incidents and other inappropriate access can be difficult to detect. Any delay in identifying them may lead to increased harm of the type
described above. While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance
that such measures will successfully prevent service interruptions or security incidents. Further, because of the work-from-home policies we implemented due
to COVID-19, information that is normally protected, including company confidential information, may be less secure.
Risks Related to Our Financial Position and Capital Needs
We have incurred net losses since our inception, except 2021, and anticipate that we will continue to incur net losses for the foreseeable future.
Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant
risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval or be commercially
viable. We are a clinical stage biopharmaceutical company with limited operating history. We have no products approved for commercial sale and have not
generated any product revenues to date, and we continue to incur significant research and development and other expenses related to our ongoing operations
and clinical development of our product candidates. As a result, we are not and have never been profitable and have incurred losses in each period since our
inception in 2005.
For the year ended December 31, 2021, we reported a net income of $24.9 million. We reported a net income attributable to stockholders of
$24.9 million for the year ended December 31, 2021. As of December 31, 2021, we had an accumulated deficit of $543.7 million, which included non-cash
charges for stock-based compensation, preferred stock accretion and historical extinguishment charges. We expect to continue to incur significant losses for the
foreseeable future, and we expect these losses to increase as we continue our pre-commercialization activities for, and our research and development of, and
seek regulatory approvals for, our product candidates. We may also 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
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expenses and our ability to generate revenues, if any. 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 currently have no source of product revenue and may never achieve or maintain profitability.
Our ability to generate product revenue and become profitable depends upon our ability to successfully commercialize our product candidates. We do
not anticipate generating revenue from the sale of our product candidates for the foreseeable future. Our ability to generate future product revenue also depends
on a number of additional factors, including, but not limited to, our ability to:
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successfully complete the research and clinical development of, and receive regulatory approval for, our product candidates;
launch, commercialize and achieve market acceptance of our product candidates, and if launched independently, successfully establish a sales,
marketing and distribution infrastructure;
continue to build a portfolio of product candidates through the acquisition or in-license of products, product candidates or technologies;
initiate preclinical and clinical trials for any additional product candidates that we may pursue in the future;
establish and maintain supplier and manufacturing relationships with third parties, and ensure adequate and legally compliant manufacturing of
bulk drug substances and drug products to maintain that supply;
obtain coverage and adequate product reimbursement from third-party payors, including government payors;
establish, maintain, expand and protect our intellectual property rights; and
attract, hire and retain additional qualified personnel.
In addition, because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of
increased expenses, and if or when we will achieve or maintain profitability. In addition, our expenses could increase beyond expectations if we decide to or are
required by the FDA or foreign regulatory authorities to perform studies or trials in addition to those that we currently anticipate. Even if we complete the
development and regulatory processes described above, we anticipate incurring significant costs associated with launching and commercializing our current
product candidates and any other product candidates we may develop.
Even if we generate revenues from the sale of our product candidates, we may not become profitable and may need to obtain additional funding to
continue operations or acquire additional products that will require additional funding to develop them. If we fail to become profitable or do not sustain
profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations or even shut
down.
We will require additional capital to finance our planned operations, which may not be available to us on acceptable terms, or at all. As a result, we may not
complete the development and commercialization of, or obtain regulatory approval for our existing product candidates or develop new product candidates.
Our operations have consumed substantial amounts of cash since our inception, primarily due to our research and development efforts. We expect our
research and development expenses to increase substantially in connection with our ongoing and planned activities. We believe that our existing cash, cash
equivalents and short-term investments will fund our projected operating expenses and capital expenditure requirements for at least the next 12 months.
Unexpected circumstances may cause us to consume capital more rapidly than we currently anticipate, including as a result of the COVID-19 pandemic. For
example, we may discover that we need to conduct additional activities that exceed our current budget to achieve appropriate rates of patient enrollment, which
would increase our development costs.
In any event, we will require additional capital to continue the development of, obtain regulatory approval for, and to commercialize our existing
product candidates and any future product candidates. Any efforts to secure
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additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to develop and commercialize our
product candidates. The COVID-19 pandemic has resulted in periods of significant disruption of global financial markets. If future disruption or volatility
occur, we could experience an inability to access additional capital. We cannot guarantee that future financing will be available in sufficient amounts or on
terms acceptable to us, if at all. If we do not raise additional capital when required or on acceptable terms, we may need to:
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delay, scale back or discontinue the development or commercialization of our product candidates or cease operations altogether;
seek strategic alliances for our existing product candidates on terms less favorable than might otherwise be available; or
relinquish, or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop
or commercialize ourselves.
If we need to conduct additional fundraising activities and we do not raise additional capital in sufficient amounts or on terms acceptable to us, we
may be unable to pursue development and commercialization efforts, which will harm our business, operating results and prospects.
Our future funding requirements, both short- and long-term, will depend on many factors, including:
the initiation, progress, timing, costs and results of clinical trials of our product candidates;
the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities,
including the potential for such authorities to require that we perform more trials than we currently expect;
the cost to establish, maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any
payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and
enforcing any patents or other intellectual property rights;
market acceptance of our product candidates;
the cost and timing of selecting, auditing and developing manufacturing capabilities, and potentially validating manufacturing sites for
commercial-scale manufacturing;
the cost and timing for obtaining pricing, and coverage and reimbursement by third-party payors, which may require additional trials to address
pharmacoeconomic benefit;
the cost of establishing sales, marketing and distribution capabilities for our product candidates if any candidate receives regulatory approval
and we determine to commercialize it ourselves;
the costs of acquiring, licensing or investing in additional businesses, products, product candidates and technologies;
the effect of competing technological and market developments;
our need to implement additional internal systems and infrastructure, including financial and reporting systems, as we grow our company; and
business interruptions resulting from pandemics and public health emergencies, including those related to the ongoing COVID-19 pandemic,
geopolitical actions, including war and terrorism or natural disasters including earthquakes, typhoons, floods and fires.
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If we cannot expand our operations or otherwise capitalize on our business opportunities because we cannot secure sufficient capital, our business,
financial condition and results of operations could be materially adversely affected.
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The terms of our loan and security agreements 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.
Our amended loan and security agreement, or the Loan Agreement, with Hercules Capital, Inc., or Hercules, for aggregate maximum borrowings of up
to $80.0 million, or the Credit Facility, is collateralized by substantially all of our and our subsidiaries personal property and other assets, other than our
intellectual property. As of December 31, 2021, the outstanding principal balance under the Credit Facility was $20.0 million. The Credit Facility contains
customary representations, warranties, affirmative and negative covenants and events of default applicable to us and our subsidiaries.
If we default under the Credit Facility, Hercules may accelerate all of our repayment obligations and exercise all of their rights and remedies under the
Credit Facility 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. Hercules could declare a
default upon the occurrence of any event, among others, that they interpret as a material adverse effect or a change of control as delineated under the Credit
Facility, payment defaults, or breaches of covenants thereby requiring us to repay the loan immediately or to attempt to reverse the declaration of default
through negotiation or litigation. 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. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and
financial flexibility.
Changes in tax laws or regulations could materially adversely affect our company.
New tax laws or regulations could be enacted at any time, and existing tax laws or regulations could be interpreted, modified or applied in a manner
that is adverse to us, which could adversely affect our business and financial condition. These changes could require us to pay additional taxes on a prospective
or retroactive basis, as well as penalties, interest and other costs for past amounts deemed to be due, and also could increase our compliance, operating and
other costs, as well as the costs of any future products. For example, tax legislation enacted in 2017 made many significant changes to the U.S. tax laws, some
of which were further modified in 2020, and may be modified or repealed in the future by the current or a future U.S. administration. Regulatory or other
guidance from the Internal Revenue Service and other tax authorities with respect to any tax legislation also may affect us. In addition, it is uncertain if and to
what extent various states will conform to current federal law, or any newly enacted federal tax legislation. Changes in corporate tax rates, the utilization of net
operating losses and other deferred tax assets, the deductibility of expenses, and the taxation of foreign earnings, as applicable, could increase our future tax
expense and could have a material adverse impact on our business and financial condition.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
We have incurred substantial losses during our history. We do not expect to become profitable in the near future, and we may never achieve
profitability. Unused losses generally are available to be carried forward to offset future taxable income, if any. Under Sections 382 and 383 of the Code if a
corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the
corporation’s ability to use its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes (such as research tax credits) to offset
its post-change taxable income or taxes may be limited. We completed an analysis through December 31, 2020 and determined that on March 30, 2007, August
21, 2015, and May 4, 2020, ownership changes had occurred. We may also experience ownership changes in the future as a result of shifts in our stock
ownership, some of which may be outside of our control. As a result, our ability to use our pre-change NOLs to offset U.S. federal taxable income may be
subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the
use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
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Risks Related to Intellectual Property
If we are unable to obtain or protect intellectual property rights, we may not be able to compete effectively in our market.
Our success depends in significant part on our and our licensors’ and licensees’ ability to establish, maintain and protect patents and other intellectual
property rights and operate without infringing the intellectual property rights of others. We have filed patent applications both in the United States and in
foreign jurisdictions to obtain patent rights to inventions we have discovered. We have also licensed from third parties rights to patent portfolios. Some of these
licenses give us the right to prepare, file and prosecute patent applications and maintain and enforce patents we have licensed, and other licenses may not give
us such rights.
The patent prosecution process is expensive and time-consuming, and we and our current or future licensors and licensees may not be able to prepare,
file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our licensors or licensees
will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent
protection on them. Moreover, 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. Therefore, these patents
and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If our current or future licensors or licensees
fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our licensors or licensees
are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and
has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our current or
future licensors’ or licensees’ patent rights are highly uncertain. Our and our licensors’ or licensees’ pending and future patent applications may not result in
patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive
technologies and products. The patent examination process may require us or our licensors or licensees to narrow the scope of the claims of our or our
licensors’ or licensees’ pending and future patent applications, which may limit the scope of patent protection that may be obtained. It is possible that third
parties with products that are very similar to ours will circumvent our or our licensors’ or licensees’ patents by means of alternate designs or processes. 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 candidate, 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 candidate 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. Our and our licensors’ or
licensees’ patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues
from such applications, and then only to the extent the issued claims cover the technology.
Furthermore, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such
candidates might expire before or shortly after such candidates are commercialized. 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. Entinostat composition of matter U.S.
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Patent RE39,754, which we licensed from Bayer, covers the chemical entity of entinostat and any crystalline or non-crystalline form of entinostat and expired
in September 2017.
The portfolio we licensed from Bayer also includes U.S. Patent 7,973,166, or the ‘166 patent, which covers a crystalline polymorph of entinostat
which is referred to as crystalline polymorph B, the crystalline polymorph used in the clinical development of entinostat. Many compounds can exist in
different crystalline forms. A compound which in the solid state may exhibit multiple different crystalline forms is called polymorphic, and each crystalline
form of the same chemical compound is termed a polymorph. A new crystalline form of a compound may arise, for example, due to a change in the chemical
process or the introduction of an impurity. Such new crystalline forms may be patented. The ‘166 patent expires in 2029. On March 7, 2014, our licensor Bayer
applied for reissue of the ‘166 patent. The reissue application seeks to add three inventors not originally listed on the ‘166 patent. The reissue application does
not seek to amend the claims issued in the ‘166 patent. On April 28, 2015, the USPTO re-issued the ‘166 patent as U.S. patent RE45,499. RE45,499 reissued
with the same claims originally issued in the ‘166 patent and the list of inventors on RE45,499 now lists the additional three inventors that were not included on
the ‘166 patent. The ‘166 patent has now been surrendered in favor of RE45,499. RE45,499 has the same term as the initial term of the ‘166 patent, which
expires in August 2029. After expiry of RE39,754, which occurred in September 2017, a competitor may develop a competing polymorphic form other than
based on polymorph B, which could compete with polymorph B.
In spite of our efforts and efforts of our licensor, we may not be successful in defending the validity of the claims of the RE45,499 reissue patent or
any of its foreign counterparts. If the claims of the ‘166 patent or any of its counterparts are found to be invalid by a competent court, we may not be able to
effectively block entry of generic versions of our entinostat crystalline polymorph B candidate products into markets where the crystalline polymorph B patent
claims are found to be invalid. Additionally, even if we submit an NDA before the expiration of U.S. Patent RE45,499 and are successful in obtaining an
extension of the term of U.S. Patent RE45,499 based on FDA regulatory delays, such extension will only extend the term of RE45,499 for a few additional
years (up to a maximum of five additional years for patent claims covering a new chemical entity).
The portfolio that we licensed from UCB includes granted patents and applications with pending claims directed to the composition of matter of
axatilimab (a humanized, full-length IgG4 (kappa light chain) antibody with high affinity for the CSF-1R) as well as claims directed to methods of use of
axatilimab. There is no guarantee that any further patents will be granted based on the pending applications we licensed from UCB or even if one or more
patents are granted that the claims issued in those patents would cover axatilimab or methods of using axatilimab. Based on the priority date and filing date of
the applications in the portfolio we licensed from UCB, we expect that additional patents, if any, granted based on the currently pending applications would
expire in 2034. The actual term of any patents granted based on the pending applications we licensed from UCB can only be determined after such patents are
actually granted.
The portfolio that we licensed from Vitae Pharmaceuticals, which is now a subsidiary of AbbVie Inc. (“AbbVie”), includes granted patents and
applications with pending claims directed to inhibitors of the interaction of menin with MLL and MLL fusion proteins, pharmaceutical compositions containing
the same, and their use in the treatment of cancer and other diseases mediated by the menin-MLL interaction. There is no guarantee that any additional patents
will be granted based on the pending applications that we licensed from AbbVie or even if one or more patents are granted that the claims issued in those
patents would cover the desired lead compounds, compositions, and methods of use thereof. Based on the priority date and filing date of the applications in the
portfolio that we licensed from AbbVie, we expect that a patent, if any, granted based on the currently pending applications would expire in 2037. The actual
term of any patents granted based on the pending applications that we licensed from AbbVie can only be determined after such patents are actually granted.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, enforcing and defending patents on product candidates in all countries throughout the world is prohibitively expensive, and our or
our licensors’ intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws
of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we and our
licensors may not be able to prevent third parties from practicing our and our licensors’ inventions in countries outside the United States, or from selling or
importing products made using our and our licensors’ inventions in and into the United States or other jurisdictions. Competitors may use our and our licensors’
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technologies in jurisdictions where we have not obtained patent protection to develop their own products and may export otherwise infringing products to
territories where we and our licensors have patent protection, but enforcement is not as strong as that in the United States. These products may compete with
our product candidates and our and our licensors’ patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal
systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection,
particularly those relating to biopharmaceuticals, which could make it difficult for us and our licensors to stop the infringement of our and our licensors’ patents
or marketing of competing products in violation of our and our licensors’ proprietary rights generally. Proceedings to enforce our and our licensors’ patent
rights in foreign jurisdictions could result in substantial costs and divert our attention from other aspects of our business, could put our and our licensors’
patents at risk of being invalidated or interpreted narrowly and our and our licensors’ patent applications at risk of not issuing and could provoke third parties to
assert claims against us or our licensors. We or our licensors may not prevail in any lawsuits that we or our licensors initiate and the damages or other remedies
awarded, if any, may not be commercially meaningful.
The requirements for patentability may differ in certain countries, particularly developing countries. For example, unlike other countries, China has a
heightened requirement for patentability, and specifically requires a detailed description of medical uses of a claimed drug. In India, unlike the United States,
there is no link between regulatory approval of a drug and its patent status. Furthermore, generic drug manufacturers or other competitors may challenge the
scope, validity or enforceability of our or our licensors’ patents, requiring us or our licensors to engage in complex, lengthy and costly litigation or other
proceedings. Generic drug manufacturers may develop, seek approval for, and launch generic versions of our products. In addition to India, certain countries in
Europe and developing countries, including China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third
parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a
third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our and our licensors’
efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property
that we own or license.
If we breach the UCB license agreement related to axatilimab or if the UCB license agreement is otherwise terminated, we could lose the ability to continue
the development and commercialization of axatilimab.
Our commercial success depends upon our ability to develop, manufacture, market and sell axatilimab. Subject to the achievement of certain
milestone events, we may be required to pay UCB up to $119.5 million in one-time development and regulatory milestone payments over the term of the UCB
license agreement. If we or any of our affiliates or sublicensees commercializes axatilimab, we will also be obligated to pay UCB low double-digit royalties on
sales, subject to reduction in certain circumstances, as well as up to an aggregate of $250 million in potential one-time sales-based milestone payments based on
achievement of certain annual sales thresholds. Under certain circumstances, we may be required to share a percentage of non-royalty income from
sublicensees, subject to certain deductions, with UCB.
Either party may terminate the UCB license agreement in its entirety or with respect to certain countries in the event of an uncured material breach by
the other party. Either party may terminate the UCB license agreement if voluntary or involuntary bankruptcy proceedings are instituted against the other party,
if the other party makes an assignment for the benefit of creditors, or upon the occurrence of other specific events relating to the insolvency or dissolution of the
other party. UCB may terminate the UCB license agreement if we seek to revoke or challenge the validity of any patent licensed to us by UCB under the UCB
license agreement or if we procure or assist a third party to take any such action.
Unless terminated earlier in accordance with its terms, the UCB license agreement will continue on a country-by-country and product-by-product
basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the
product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country. We cannot determine the date on which our
royalty payment obligations to UCB would expire because no commercial sales of axatilimab have occurred and the last-to-expire relevant patent covering
axatilimab in a given country may change in the future.
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If the UCB license agreement is terminated, we would not be able to develop, manufacture, market or sell axatilimab and would need to negotiate a
new or reinstated agreement, which may not be available to us on equally favorable terms, or at all.
If we breach the license agreement related to SNDX-5613 or if the license agreement is otherwise terminated, we could lose the ability to continue the
development and commercialization of SNDX-5613.
Our commercial success depends upon our ability to develop, manufacture, market and sell SNDX-5613. Subject to the achievement of certain
milestone events, we may be required to pay Vitae, which is now a subsidiary of AbbVie, up to $99 million in one-time development and regulatory milestone
payments over the term of the AbbVie license agreement. In the event that we or any of our affiliates or sublicensees commercializes SNDX-5613, we will also
be obligated to pay AbbVie low single to low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of
$70 million in potential one-time sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, we
may be required to share a percentage of non-royalty income from sublicensees, subject to certain deductions, with AbbVie. In June 2019, we achieved certain
development and regulatory milestones. As a result, in June 2019, we recorded $4.0 million as research and development expense. The amount was paid in
2020.
Either party may terminate the license agreement in its entirety or with respect to certain countries in the event of an uncured material breach by the
other party. Either party may terminate the license agreement if voluntary or involuntary bankruptcy proceedings are instituted against the other party, if the
other party makes an assignment for the benefit of creditors, or upon the occurrence of other specific events relating to the insolvency or dissolution of the other
party. AbbVie may terminate the license agreement if we seek to revoke or challenge the validity of any patent licensed to us by AbbVie under the license
agreement or if we procure or assist a third party to take any such action.
Unless terminated earlier in accordance with its terms, the license agreement will continue on a country-by-country and product-by-product basis until
the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such
country; and (iii) 10 years from the date of the first commercial sale of the product in such country. We cannot determine the date on which our royalty payment
obligations to AbbVie would expire because no commercial sales of SNDX-5613 have occurred and the last-to-expire relevant patent covering SNDX-5613 in a
given country may change in the future.
If the license agreement is terminated, we would not be able to develop, manufacture, market or sell SNDX-5613 and would need to negotiate a new
or reinstated agreement, which may not be available to us on equally favorable terms, or at all.
If we breach our license agreement with Bayer related to entinostat or if the license agreement is otherwise terminated, we could lose the ability to continue
the development and commercialization of entinostat.
We have a license, development and commercialization agreement, or the Bayer license agreement, with Bayer pursuant to which we obtained a
worldwide, exclusive license to develop and commercialize entinostat and any other products containing the same active ingredient. The Bayer license
agreement, as amended, permits us to use entinostat or other licensed products under the Bayer license agreement for the treatment of any human disease, and
we are obligated to use commercially reasonable efforts to develop, manufacture and commercialize licensed products for all commercially reasonable
indications.
We are obligated to pay Bayer up to approximately $50 million in the aggregate upon obtaining certain milestones in the development and marketing
approval of entinostat, assuming that we pursue at least two different indications for entinostat or any other licensed product under the Bayer license agreement.
We are also obligated to pay Bayer up to $100 million in aggregate sales milestones, and a tiered, single-digit royalty on net sales by us, our affiliates and
sublicensees of entinostat and any other licensed products under the Bayer license agreement. We are obligated to pay Bayer these royalties on a country-by-
country basis for the life of the relevant licensed patents covering such product or 15 years after the first commercial sale of such product in such country,
whichever is longer. We cannot determine the date on which our royalty payment obligations to Bayer would expire because no commercial sales of entinostat
have occurred and the last-to-expire relevant patent covering entinostat in a given country may change in the future.
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The Bayer license agreement will remain in effect until the expiration of our royalty obligations under the agreement in all countries. Either party may
terminate the Bayer license agreement in its entirety or with respect to certain countries in the event of an uncured material breach by the other party. Either
party may terminate the Bayer license agreement if voluntary or involuntary bankruptcy proceedings are instituted against the other party, if the other party
makes an assignment for the benefit of creditors, or upon the occurrence of other specific events relating to the insolvency or dissolution of the other party.
Bayer may terminate the Bayer license agreement if we seek to revoke or challenge the validity of any patent licensed to us by Bayer under the Bayer license
agreement or if we procure or assist a third party to take any such action.
If the Bayer license agreement is terminated, we would not be able to develop, manufacture, market or sell entinostat and would need to negotiate a
new or reinstated agreement, which may not be available to us on equally favorable terms, or at all.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents.
Obtaining and enforcing patents in the biopharmaceutical industry involve technological and legal complexity, and obtaining and enforcing biopharmaceutical
patents is costly, time-consuming, and inherently uncertain. The Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of
patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with
regard to our and our licensors’ ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents,
once obtained. Depending on decisions by Congress, the federal courts, and the U.S. Patent and Trademark Office, or USPTO, the laws and regulations
governing patents could change in unpredictable ways that may weaken our and our licensors’ ability to obtain new patents or to enforce existing patents and
patents we and our licensors or collaborators may obtain in the future. In view of recent developments in U.S. patent laws, in spite of our efforts and the efforts
of our licensors, we may face difficulties in obtaining allowance of our biomarker based patient selection patent claims or if we are successful in obtaining
allowance of our biomarker based patient selection claims, we or our licensor may be unsuccessful in defending the validity of such claims if challenged before
a competent court.
Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our and our licensors’ patent applications
and the enforcement or defense of our or our licensors’ issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the America Invents
Act, was signed into law. The America Invents Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way
patent applications are prosecuted and may also affect patent litigation. The USPTO recently developed new regulations and procedures to govern
administration of the American Invents Act, and many of the substantive changes to patent law associated with the America Invents Act and in particular, the
first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the America Invents Act will have on the
operation of our business. However, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of
our or our licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents, all of which could harm our business and
financial condition.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these
requirements.
Periodic maintenance and annuity fees on any issued patent are due to be paid to the 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 similar provisions during the patent application process. 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. Non-compliance events that could result in abandonment or lapse of
a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and
submit formal documents. If we or our licensors fail to maintain the patents and
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patent applications covering our product candidates, our competitors might be able to enter the market, which would harm our business.
We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time-consuming and unsuccessful and have
an adverse effect on the success of our business and on our stock price.
Third parties may infringe our or our licensors’ patents or misappropriate or otherwise violate our or our licensors’ intellectual property rights. In the
future, we or our licensors may initiate legal proceedings to enforce or defend our or our licensors’ intellectual property rights, to protect our or our licensors’
trade secrets or to determine the validity or scope of intellectual property rights we own or control. Also, third parties may initiate legal proceedings against us
or our licensors to challenge the validity or scope of intellectual property rights we own or control. The proceedings can be expensive and time-consuming and
many of our or our licensors’ adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions
than we or our licensors can. Accordingly, despite our or our licensors’ efforts, we or our licensors may not be able to prevent third parties from infringing upon
or misappropriating intellectual property rights we own or control, particularly in countries where the laws may not protect our rights as fully as in the United
States. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in
an infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid or unenforceable, or may refuse to stop the other party from
using the technology at issue on the grounds that our or our licensors’ patents do not cover the technology in question. An adverse result in any litigation
proceeding could put one or more of our or our licensors’ patents at risk of being invalidated, held unenforceable or interpreted narrowly.
Third-party preissuance submission of prior art to the USPTO, or opposition, derivation, reexamination, inter partes review or interference
proceedings, or other preissuance or post-grant proceedings in the United States or other jurisdictions provoked by third parties or brought by us or our
licensors or collaborators may be necessary to determine the priority of inventions with respect to our or our licensors’ patents or patent applications. An
unfavorable outcome could require us or our licensors to cease using the related technology and commercializing our product candidates, 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 or our licensors a license on commercially
reasonable terms or at all. Even if we or our licensors obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies
licensed to us or our licensors. In addition, if the breadth or strength of protection provided by our or our licensors’ patents and patent applications is threatened,
it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. Even if we successfully
defend such litigation or proceeding, we may incur substantial costs and it may distract our management and other employees. We could be found liable for
monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent.
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 process. There could also be public announcements of the results of hearings, motions
or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a downward effect on the
price of shares of our common stock.
Third parties may initiate legal proceedings against us alleging that we infringe their intellectual property rights or we may initiate legal proceedings
against third parties to challenge the validity or scope of intellectual property rights controlled by third parties, the outcome of which would be uncertain
and could have an adverse effect on the success of our business.
Third parties may initiate legal proceedings against us or our licensors or collaborators alleging that we or our licensors or collaborators infringe their
intellectual property rights or we or our licensors or collaborators may initiate legal proceedings against third parties to challenge the validity or scope of
intellectual property rights controlled by third parties, including in oppositions, interferences, reexaminations, inter partes reviews or derivation proceedings
before the United States or other jurisdictions. These proceedings can be expensive and time-consuming and many of our or our licensors’ adversaries in these
proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors or collaborators can.
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An unfavorable outcome could require us or our licensors or collaborators to cease using the related technology or developing or commercializing our
product candidates, 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 or our
licensors or collaborators a license on commercially reasonable terms or at all. Even if we or our licensors or collaborators obtain a license, it may be non-
exclusive, thereby giving our competitors access to the same technologies licensed to us or our licensors or collaborators. In addition, we could be found liable
for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. A finding of infringement could
prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business.
We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property, or claiming ownership of
what we regard as our own intellectual property.
Many of our employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical
companies, including our competitors or potential competitors. Some of these employees executed proprietary rights, non-disclosure and non-competition
agreements in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how
of others in their work for us, we may be subject to claims that we or these employees have used or disclosed confidential information or intellectual property,
including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary to defend against these claims.
In addition, for some of our in-licensed patents and patent applications, we do not have access to every patent assignments or employee agreements
demonstrating that all inventors have assigned their rights to the inventions or related patents. As a result, we may be subject to claims of ownership by such
inventors.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or
personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third
party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we successfully
prosecute or defend against such claims, litigation could result in substantial costs and distract management.
Our inability to protect our confidential information and trade secrets would harm our business and competitive position.
In addition to seeking patents for some of our technology and products, we also rely on trade secrets, including unpatented know-how, technology and
other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and
confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, third-party
manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our
employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade
secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade
secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts both within and outside the United States may be
less willing or unwilling to protect trade secrets. If a competitor lawfully obtained or independently developed any of our trade secrets, we would have no right
to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.
Risks Related to Ownership of Our Common Stock and Other General Matters
The market price of our stock may be volatile and you could lose all or part of your investment.
The trading price of our common stock is highly volatile and subject to wide fluctuations in response to various factors, some of which we cannot
control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this report, these factors include:
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the success of competitive products or technologies;
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regulatory actions with respect to our products or our competitors’ products;
actual or anticipated changes in our growth rate relative to our competitors;
announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures, collaborations or capital
commitments;
results of trials of our product candidates or those of our competitors;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to our product candidates or clinical development programs;
actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
variations in our financial results or those of companies that are perceived to be similar to us;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
announcement or expectation of additional financing efforts;
sales of our common stock by us, our insiders or our other stockholders;
changes in the structure of healthcare payment systems;
market conditions in the pharmaceutical and biotechnology sectors; and
general economic, industry, political and market conditions, including, but not limited to the ongoing impact of the COVID-19 pandemic.
In addition, the stock market in general, and the Nasdaq Global Select Market and biopharmaceutical companies in particular, frequently experiences
extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such companies, including very
recently in connection with the ongoing COVID-19 pandemic, which has resulted in decreased stock prices for many companies notwithstanding the lack of a
fundamental change in their underlying business models or prospects. Broad market and industry factors, including potentially worsening economic conditions
and other adverse effects or developments relating to the ongoing COVID-19 pandemic, may negatively affect the market price of our common stock,
regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including those described in this
“Risk Factors” section, could have a dramatic and negative impact on the market price of our common stock.
We may sell additional equity or debt securities or enter into other arrangements to fund our operations, which may result in dilution to our stockholders
and impose restrictions or limitations on our business.
Until we can generate a sufficient amount of revenue from our products, if ever, we expect to finance future cash needs through public or private
equity or debt offerings. If we raise additional funds through the issuance of additional equity or debt securities, it may result in dilution to our existing
stockholders and/or increased fixed payment obligations. For example, during 2021, we sold a total of 3,802,144 shares of our common stock and pre-funded
warrants to purchase 1,142,856 shares of our common stock. The pre-funded warrants are exercisable into shares of common stock for $0.0001 per share. The
shares of common stock into which the warrants may be exercised are considered outstanding for the purposes of computing earnings per share. As of
December 31, 2021, we had 3,975,024 pre-funded warrants outstanding. The issuance of these shares of our common stock resulted, and any future issuance
pursuant to the exercise of the outstanding pre-funded warrants will result, in dilution to our stockholders.
We may also seek additional funding through government or other third-party funding and other collaborations, strategic alliances and licensing
arrangements. These financing activities may have an adverse
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impact on our stockholders’ rights as well as on our operations, and such additional funding may not be available on reasonable terms, if at all. Furthermore,
these securities may have rights senior to those of our common stock and could contain covenants that would restrict our operations and potentially impair our
competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and
other operating restrictions that could adversely impact our ability to conduct our business. For example, on December 22, 2021, we entered into Amendment
No. 1 to our Loan Agreement with Hercules, which provided for increased aggregate maximum borrowings of up to $80.0 million in multiple tranches. Our
only borrowings to date under the Loan Agreement are the first tranche of $20.0 million, which we drew upon on February 7, 2020. Borrowings under the Loan
Agreement are collateralized by substantially all of our and our subsidiaries personal property and other assets, other than our intellectual property. In addition,
the Loan Agreement includes customary affirmative and restrictive covenants and representations and warranties, including a covenant against the occurrence
of a “change in control,” financial reporting obligations, and certain limitations on indebtedness, liens (including a negative pledge on intellectual property and
other assets), investments, distributions (including dividends), collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes,
and deposit accounts.
Additionally, if we seek funds through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of our
technologies or product candidates or otherwise agree to terms unfavorable to us. Any of these events could significantly harm our business, financial condition
and prospects.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our
stock, our stock price and trading volume could decline.
The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business.
If no or few securities or industry analysts continue coverage of us, the trading price for our stock could be negatively impacted. If any of the analysts who
cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our trials or
operating results fail to meet the expectations of analysts, our stock price could decline. If one or more of these analysts cease coverage of us or fail to publish
reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant influence control over matters
subject to stockholder approval.
As of December 31, 2021, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned
approximately 39.7% of our outstanding voting stock and options. As a result, these stockholders will continue to have a significant influence over all matters
requiring stockholder approval. For example, these stockholders may be able to 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. The interests of this group of stockholders may not always coincide with
your interests or the interests of other stockholders and they may act in a manner that advances their best interests and not necessarily those of other
stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.
Effective as of December 31, 2021, we are a large accelerated filer, which will increase our costs and demands on management.
As a result of the market value of our common stock held by non-affiliates as of June 30, 2021, we are a large accelerated filer as of December 31,
2021, and no longer qualify as an EGC. Additionally, due to our public float as of June 30, 2021, we will no longer qualify as a smaller reporting company as
defined in the Exchange Act. However, we are not required to reflect the change in our smaller reporting company status, and comply with the associated
increased disclosure obligations, until our quarterly report on Form 10-Q for the three-month period ending March 31, 2022.
As a large accelerated filer, we are subject to certain disclosure and compliance requirements that apply to other public companies that did not
previously apply to us due to our status as an emerging growth company. These requirements include, but are not limited to:
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the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002;
compliance with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;
the requirement that we provide full and more detailed disclosures regarding executive compensation; and
the requirement that we hold a non-binding advisory vote on executive compensation and obtain shareholder approval of any golden
parachute payments not previously approved.
We expect that compliance with the additional requirements of being a large accelerated filer will increase our legal and financial compliance costs and
may cause management and other personnel to divert attention from operational and other business matters to devote increased time to public company
reporting requirements. In addition, if we are not able to comply with changing requirements in a timely manner, the market price of our common stock could
decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and
management resources are also a smaller reporting company as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act.
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, and 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.
If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial
condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and
procedures. Commencing after the filing of our initial annual report on Form 10-K, we have been required, under Section 404 of the Sarbanes-Oxley Act, to
furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment needs to include
disclosure of any material weaknesses identified by our management in our internal control over financial reporting. A material weakness is a deficiency, or
combination of deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual
or interim financial statements will not be prevented or detected on a timely basis. Section 404 of the Sarbanes-Oxley Act also generally requires an attestation
from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
While we were an EGC, our independent registered public accounting firm was not required to attest to the effectiveness of our internal controls over
financial reporting pursuant to Section 404. This exemption no longer applies to us as of December 31, 2021. Accordingly, beginning with this annual report on
Form 10-K for the year ending December 31, 2021, we are required to include an attestation from our independent registered public accounting firm on the
effectiveness of our internal control over financial reporting. Our compliance with Section 404 requires that we incur substantial expense and expend significant
management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public
company experience and technical accounting knowledge, and compile the system and process documentation necessary to perform the evaluation needed to
comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and
testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal
control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control
over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our
financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our
independent registered public accounting firm determines we have a
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material weakness or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, we could lose investor
confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions
or investigations by the Nasdaq Global Select Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control
over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the
capital markets.
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an
acquisition would benefit our stockholders and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could
make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, or remove our current
management. These provisions include a classified board of directors, a prohibition on actions by written consent of our stockholders and the ability of our
board of directors to issue preferred stock without stockholder approval. These provisions may frustrate or prevent any attempts by our stockholders to replace
or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for
appointing the members of our management. Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware
General Corporation Law, or the DGCL, which may discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by
or beneficial to our stockholders. Under the DGCL, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its
capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Any provision of
our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change of
control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some
investors are willing to pay for our common stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our headquarters is currently located in Waltham, Massachusetts, and consists of 12,207 square feet of leased office space under a lease that expires on
February 28, 2025. We also have 4,039 square feet of leased office space in New York, New York, under a lease that expires on August 31, 2022. We believe
that our existing facilities are sufficient for our needs for the foreseeable future. If we determine that additional or new facilities are needed in the future, we
believe that sufficient options would be available to us on commercially reasonable terms.
Item 3. Legal Proceedings
We are not currently a party to any material legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock began trading on the Nasdaq Global Select Market on March 2, 2016, under the symbol “SNDX.” Prior to that time, there was no
PART II
public market for our common stock.
Holders of Record
As of February 24, 2022, we had approximately 17 holders of record of our common stock. Certain shares are held in “street” name and accordingly,
the number of beneficial owners of such shares is not known or included in the foregoing number. This number of holders of record also does not include
stockholders whose shares may be held in trust by other entities.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings to fund the development and
growth of our business. We do not expect to pay any cash dividends in the foreseeable future. Any future determination to pay dividends will be made at the
discretion of our board of directors and will depend on then-existing conditions, including our financial conditions, operating results, contractual restrictions,
capital requirements, business prospects and other factors our board of directors may deem relevant.
Performance Graph
The performance graph shown below compares the annual change in cumulative total shareholder return on our common shares with the Nasdaq
Composite Index and the Nasdaq Biotechnology Index from December 31, 2016, through the year ended December 31, 2021. The graph assumes an investment
of $100 on December 31, 2016 in our common shares, the Nasdaq Composite Index and the Nasdaq Biotechnology Index and assumes that any dividends are
reinvested. All index values are weighted by the capitalization of the companies included in the index. The comparisons shown in the graph below are based
upon historical data. The stock price performance included in this graph is not necessarily indicative of future stock price performance. The following
performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, or
SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, nor shall such information be incorporated by
reference into any future filing under the Exchange Act or Securities Act, except to the extent that we specifically incorporate it by reference into such filing.
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Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with “Selected Financial Data” and our consolidated financial statements and
related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis and other parts of this Annual Report on Form 10-K
contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements
regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those
anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this Annual
Report on Form 10-K. You should carefully read the “Risk Factors” section of this Annual Report on Form 10-K to gain an understanding of the important
factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Special Note Regarding
Forward-Looking Statements.”
For the discussion of the financial condition and results of operations for the year ended December 31, 2020 compared to the year ended December
31, 2019, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations" and "—Liquidity and
Capital Resources" included in the Annual Report on Form 10-K filed with the SEC on March 12, 2021.
Overview
We are a clinical-stage biopharmaceutical company developing an innovative pipeline of cancer therapies. Our two lead product candidates are SNDX-
5613 and SNDX-6352, or axatilimab. We are developing SNDX-5613, targeting the binding interaction of menin with the mixed lineage leukemia 1 (MLL1)
protein for the treatment of MLL-rearranged, or MLLr, acute leukemias and nucleophosmin 1, or NPM1, mutant acute myeloid leukemia (AML), as well as
axatilimab, a monoclonal antibody that blocks the colony stimulating factor 1, or CSF-1 receptor. We have deprioritized the development of entinostat, our
once-weekly, oral, small molecule, Class I HDAC inhibitor, to focus resources on advancing the remainder of our pipeline. We plan to continue to leverage the
technical and business expertise of our management team and scientific collaborators to license, acquire and develop additional therapeutics to expand our
pipeline.
We have no products approved for commercial sale and have not generated any product revenues from product sales to date. We continue to incur
significant research and development and other expenses related to our ongoing operations. We have generated minimal license revenue, except for in 2021.
Other than in 2021, we have never been profitable and have incurred losses in each period since our inception in 2005. For the year ended December 31, 2021,
we reported a net profit of $24.9 million, and for the years ended December 31, 2020, and 2019, we reported a net loss of $73.2 million and $56.0 million,
respectively. For the year ended December 31, 2021, we reported a net profit attributable to common stockholders of $24.9 million, and for the years ended
December 31, 2020, and 2019, we reported a net loss attributable to common stockholders of $77.1 million and $56.0 million, respectively. As of December 31,
2021, we had an accumulated deficit of $543.7 million, which included non-cash charges for stock-based compensation, preferred stock accretion and
extinguishment charges. As of December 31, 2021, we had cash, cash equivalents and short-term investments of $439.9 million.
We continue to monitor our daily operations and program timelines during the ongoing COVID-19 pandemic. The health and safety of our employees
as well as the patients and people participating in and operating our clinical trials are of paramount importance. COVID-19, including its variants did not impact
our financial guidance or changed our timelines for clinical data in 2021.
COVID-19 Business Update
We continue to address and mitigate the impact of the ongoing COVID-19 pandemic on our employees and our business. While we are not experiencing
financial impacts at this time, given the changes in global macroeconomic conditions, the overall disruption of global healthcare systems, potential limitations
to the efficacy of vaccines for COVID-19, the evolution of multiple variants of the virus and the other risks and uncertainties associated with the pandemic, our
business, financial condition, results of operations and growth prospects could be materially adversely affected. We continue to closely monitor the COVID-19
situation as we evolve our business continuity plans and response strategy. In March 2020, our workforce transitioned to working remotely. We have gradually
reopened our offices to allow employees to return to the office, while also supporting remote working options.
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We are working closely our third-party manufacturers, distributors and other partners to manage our supply chain activities and mitigate potential
disruptions to our product supplies as a result of the COVID-19 pandemic. We currently expect to have adequate supplies of SNDX-5613 and axatilimab. If the
COVID-19 pandemic continues to persist and if it impacts essential distribution systems such as FedEx and postal delivery or if it results in facility closures for
cleaning and/or insufficient staff, we could experience disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of
our products, and to our clinical trial operations.
With respect to clinical development, we continue to take measures to implement remote and virtual approaches, including remote patient monitoring
where possible, to maintain patient safety and trial continuity and to preserve study integrity. We have, and may continue to experience, disruptions and/or
delays in our ability to initiate trial sites and enroll and assess patients. As the COVID-19 pandemic continues, we anticipate an ongoing, though minimal,
impact on our ability to maintain patient enrollment in the AUGMENT-101 and AGAVE trials. We could also see an impact on the ability to supply study drug,
report trial results, or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or
otherwise. In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will
continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic. If the COVID-19 pandemic continues,
we could experience significant disruptions to our clinical development timelines, which would adversely affect our business, financial condition, results of
operations and growth prospects.
Financial Overview
Revenue
To date, we have not generated any product revenues. Our ability to generate revenue and become profitable depends upon our ability to obtain
marketing approval of and successfully commercialize our product candidates. Our revenues for the year ended December 31, 2021 and 2020 have been solely
derived from our license, development and commercialization agreements with Kyowa Kirin Co., Ltd., or KKC, and with Incyte Pharmaceuticals, Inc, or
Incyte.
We granted Incyte an exclusive license to develop and commercialize axatilimab in the United States and the rest of the world. In 2021, we received
$152.0 million total consideration from the Incyte Agreements. We allocated $126.6 million of the total consideration received to the license, and such amount
was recognized as license revenue upon transfer of license to Incyte in December 2021 .
We granted KKC an exclusive license to develop and commercialize entinostat in Japan and Korea, or the KKC license agreement. In 2015, we
received a $25.0 million upfront payment from KKC, inclusive of an equity investment. We allocated $17.3 million of the upfront payment to the license fee,
and such fee is being recognized as revenue ratably over our expected performance period (currently expected to be through 2029). The balance of the upfront
payment of $7.7 million was allocated to KKC’s purchase of shares of our convertible preferred stock.
In September 2021, KKC informed us that they discontinued the entinostat program and cancelled the license to develop and commercialize entinostat.
As a result, we recognized $12.4 million in revenue which was previously deferred.
Research and Development
Since our inception, we have primarily focused on our clinical development programs. Research and development expenses consist primarily of costs
incurred for the development of our product candidates and include:
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expenses incurred under agreements related to our clinical trials, including the costs for investigative sites and contract research organizations,
or CROs, that conduct our clinical trials;
employee-related expenses associated with our research and development activities, including salaries, benefits, travel and non-cash stock-
based compensation expenses;
manufacturing process-development, clinical supplies and technology-transfer expenses;
license fees and milestone payments under our license agreements;
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consulting fees paid to third parties;
allocated facilities and overhead expenses; and
costs associated with regulatory operations and regulatory compliance requirements.
Internal and external research and development costs are expensed as they are incurred. Cost-sharing amounts received by us are recorded as reductions
to research and development expense. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to
completion of specific tasks using data such as patient enrollment, clinical site activations or other information provided to us by our vendors.
Research and development activities are central to our business model. Drug candidates in late 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 late-stage clinical trials. We plan to
continue to spend a significant amount of our resources on research and development activities for the foreseeable future as we continue to advance the
development of our product candidates. The amount of research and development expenses allocated to external spending will continue to grow, while we
expect our internal spending to grow at a slower and more controlled pace.
It is difficult to determine, with certainty, the duration and completion costs of our current or future preclinical programs, clinical studies and clinical
trials of our product candidates. The duration, costs and timing of clinical studies and clinical trials of our product candidates will depend on a variety of factors
that include, but are not limited to, the following:
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per patient costs;
the number of patients that participate;
the number of sites;
the countries in which the studies and trials are conducted;
the length of time required to enroll eligible patients;
the potential additional safety monitoring or other studies requested by regulatory agencies;
the duration of patient monitoring;
the efficacy and safety profile of the product candidates; and
timing and receipt of any regulatory approvals.
In addition, the probability of success for each drug product candidate will depend on numerous factors, including competition, manufacturing
capability and commercial viability. The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the
nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of our product candidates for the period, if any, in
which material net cash inflows from these potential product candidates may commence. Clinical development timelines, the probability of success and
development costs can differ materially from expectations.
General and Administrative
General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits, non-cash stock-based compensation
and travel expenses, for our employees in executive, finance, business development and support functions. Other general and administrative expenses include
facility-related costs not otherwise allocated to research and development expenses and accounting, tax, legal and consulting services. We anticipate that our
general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential
commercialization of our product candidates. Additionally, if and when we believe a regulatory approval of the first product candidate appears likely, we
anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing
of our product candidates.
60
Interest expense
Interest expense consists primarily of interest expense on our term loan, operational and capital leases.
Interest Income
Interest income consists of income earned on our cash, cash equivalents and short-term investment balances.
Other (Expense) Income
Other (expense) income includes income recorded for the change in fair value of derivative liability established based on the terms under of the Letter
Agreement with connection with the share purchase agreement.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies
and adopted by us as of the specified effective date. Unless otherwise discussed in Note 3 to our audited consolidated financial statements included in this
Annual Report on Form 10-K, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial
position or results of operations upon adoption.
Critical Accounting Estimates
Our management’s discussion and analysis of financial condition and results of operations are based on our financial statements, which have been
prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our
financial statements. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management
employs critical accounting policies. Our critical accounting policies are described in greater detail in Note 3 to our audited consolidated financial statements
included in this Annual Report on Form 10-K.
We have listed below our critical accounting estimates that we believe to have the greatest potential impact on our consolidated financial statements.
Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results.
Revenue from Contracts with Customers
We enter into license agreements for the development and commercialization of our product candidates. License agreements may include non-
refundable upfront payments, contingent payments based on the occurrence of specified events under our license arrangements, partial or complete
reimbursement of research and development expenses, license fees and royalties on sales of entinostat if they are successfully approved and commercialized.
Our performance obligations under the license agreements may include the transfer of intellectual property rights in the form of licenses, obligations to provide
research and development services and related materials and participation on certain development and/or commercialization committees.
Revenue is recognized when, or as, performance obligations are satisfied, which occurs when control of the promised products or services is transferred
to customers. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a
customer (“transaction price”). To the extent that the transaction price includes variable consideration, we estimate the amount of variable consideration that
should be included in the transaction price utilizing the most likely amount method. Variable consideration is included in the transaction price if, in our
judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and
determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all
information (historical, current and forecasted) that is reasonably available.
61
We assessed the promises to determine if they are distinct performance obligations. Once the performance obligations are determined, the transaction
price is allocated based on a relative standalone selling price basis. Milestone payments and royalties are typically considered variable consideration at the
outset of the contract and are recognized in the transaction price either upon occurrence or when the constraint of a probable reversal is no longer applicable.
Licenses of intellectual property: If the license to our intellectual property is determined to be distinct from the other performance obligations identified
in the arrangement, we recognize revenues 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. For licenses that are bundled with other promises, we utilize 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 from non-refundable, up-front fees. Arrangements containing licenses to our intellectual
property typically provide for a know-how transfer period. These arrangements may or may not also include rights to future updates of that intellectual property
and related know-how. Revenues from non-refundable, up-front fees allocated to the licenses are recognized as the license is transferred to the customer and the
customer is able to use and benefit from the license. This generally takes place over the related know-how transfer period, or if applicable, over the term of
transfer of future updates to the intellectual property.
Development Milestone Payments: At the inception of each arrangement that includes development milestone payments, the Company evaluates
whether the milestones are considered probable of being reached 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 our control or the licensee, such as regulatory approvals, are generally not considered probable of being achieved until those
approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we
recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the
probability of achievement of such development milestones and any related 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 license fees and earnings in the period of adjustment. For development
milestones related to the KKC Agreement, we do not take a substantive role or control the research, development or commercialization of any products
generated by KKC. Therefore, we are not able to reasonably estimate when, if at all, any development milestone payments may be payable to us. As such, the
development milestone payments associated with the KKC Agreement involve a substantial degree of uncertainty and risk that they may never be received.
Commercial Milestone Payments and Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level
of commercial sales, and the license is deemed to be the predominant item to which the royalties or commercial milestones relate, we will recognize revenue at
the later of when the related sales occur or when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or
partially satisfied). To date no commercial milestone payments or royalties have been achieved.
When no performance obligations are required of us, or following the completion of the performance obligation period, such amounts are recognized as
revenue upon transfer of control of the goods or services to the customer. Generally, all amounts received or due other than sales-based milestones and royalties
are classified as license fees. Sales-based milestones and royalties will be recognized as royalty revenue at the later of when the related sales occur or when the
performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Deferred revenue arises from amounts received in advance of the culmination of the earnings process and is recognized as revenue in future periods as
performance obligations are satisfied. Deferred revenue expected to be recognized within the next twelve months is classified as a current liability. Upfront
payment contract liabilities resulting from our license agreements do not represent a financing component as the payment is not financing the transfer of goods
or services, and the technology underlying the licenses granted reflects research and development expenses already incurred by us.
62
For license fee revenues, we recorded revenues of $126.6 million relating to the Incyte Agreement and $13.3 million relating to the KKC Agreement.
We applied significant judgment to our Incyte Agreement. We evaluated whether our contractual obligations represented distinct performance
obligations. Such evaluation required judgment since it was made from the customer’s perspective. We determined that the transfer of the license to Incyte was
a distinct performance obligation, separate from the ongoing collaboration activities. As such, we estimated the standalone selling price to be $126.6 million
which we recognized as $126.6 million of license revenue for the year ended December 31, 2021.
We applied significant judgment to our KKC Agreement. We evaluated whether our contractual obligations represented distinct performance
obligations. Such evaluation required judgment since it was made from the customer’s perspective. We determined that our performance obligations under the
collaboration at contract inception were not distinct and represented a single performance obligation. In September 2021, KKC informed us, that they have
discontinued the entinostat program and have cancelled the license to develop and commercialize entinostat. As a result, we recognized $12.4 million in
revenue which was previously deferred.
Accrued Research and Development Expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses.
This process involves reviewing contracts and vendor agreements, communicating with our applicable personnel to identify services that have been performed
on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise
notified of actual cost. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and
circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to contract research organizations,
or CROs, and investigative sites in connection with clinical studies and to vendors related to product manufacturing and development of clinical supplies.
We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple
research institutions and CROs that conduct and manage clinical studies 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 and expense recognition. Payments under some of these contracts depend on factors out of
our control, such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period
over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of
effort varies from our estimate, we adjust the accrual accordingly. Although we do not expect our estimates to be materially different from amounts actually
incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, we may report amounts
that are too high or too low in any particular period. To date, we have not experienced any significant adjustments to our estimates.
63
Results of Operations
The following table summarizes our results of operations for the years ended December 31, 2021, 2020 and 2019:
For a comparison of our results of operations for the fiscal years ended December 31, 2021 and December 31, 2020, see “Part II, Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 12, 2021.
Comparison of the years ended December 31, 2021 and 2020:
(in thousands)
Revenues:
License fees
Total revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Income (Loss) from operations
Other (expense) income:
Interest income
Interest expense
Other (expense) income
Total other (expense) income
Net income (loss)
License Fees
Years Ended
December 31,
2020
2021
2021 - 2020 Increase
(Decrease)
2019
$
%
2020 - 2019 Increase
(Decrease)
$
%
$ 139,709
139,709
$
$
1,517
1,517
1,517
1,517
$ 138,192
138,192
9110% $
9110%
—
—
88,248
25,241
113,489
26,220
50,435
22,505
72,940
(71,423)
42,994
16,062
59,056
(57,539)
37,813
2,736
40,549
(97,643)
75%
12%
56%
(137)%
7,441
6,443
13,884
13,884
0%
0%
17%
40%
24%
24%
403
(1,899)
202
(1,294)
841
(2,357)
(219)
(1,735)
1,571
—
(79)
(438)
458
421
441
$ 24,926
1,492
$ (73,158) $ (56,047) $ (98,084)
(52)%
(19)%
192%
(25)%
(134)% $
(730)
(2,357)
(140)
(3,227)
17,111
(46)%
100%
(177)%
(216)%
31%
For the years ended December 31, 2021 and 2020, we recognized license fees of $139.7 million and $1.5 million, derived from the Incyte and KKC
license agreements, respectively. For additional information on our agreement with Incyte and KKC, please refer to Note 4 Revenue, to these consolidated
financial statements.
Research and Development
For the year ended December 31, 2021, our total research and development expenses increased by $37.8 million, or 75%, to $88.2 million from $50.4
million for the prior year due to increases in clinical trial activities expenses of $31.3 million, professional expenses of $1.2 million, and employee related
expenses of $5.3 million. The increase in clinical activities expenses was due to increased study activities related to SNDX-5613 of $7.7 million, increased
CMC batch production costs for the Menin program of $9.5 million, increased study activity related to axatilimab of $9.3 million, increased development
activities for the Menin program of $4.1 million and for axatilimab of $1.1 million, and an increase in license fees of $2.3 million, which were offset by
reduction in the entinostat program of $2.7 million. The increase in employee related expense is primarily due to salary and benefits of $3.3 million and
increase in stock-based compensation of $2.0 million due to increase in headcount.
We expect research and development expenses to fluctuate from quarter to quarter depending on the timing of clinical trial activities, clinical
manufacturing and other development activities.
64
Research and development expenses consisted of the following:
(in thousands)
External research and development expenses
Internal research and development expenses
Total research and development expenses
General and Administrative
Years Ended
December 31,
2021
2020
$
$
68,468
19,780
88,248
$
$
36,303
14,132
50,435
$
$
Increase
(Decrease)
$
32,165
5,648
37,813
%
89%
40%
75%
For the year ended December 31, 2021, our total general and administrative expenses increased by $2.7 million, or 12%, to $25.2 million, from $22.5
million for the prior year. The increase in general and administrative expenses was primarily due to increased employee related expenses of $2.7 million. The
increase in employee related expenses is due to an increase in stock compensation expense of $2.3 million and $0.4 million for salary and benefits due to
increased headcount. The increased stock compensation expense includes $0.7 million related to the modification of option agreements in connection with the
retirement of a certain employees.
Interest Income and Interest Expense
For the year ended December 31, 2021, interest income, decreased by $0.4 million from the prior year. This decrease was primarily due to a lower
average cash and investment balance and lower interest rates on our investments.
Interest expense consists primarily of interest expense on our term loan, operational and capital leases. The decrease is primarily due to our amended
term loan. For additional information on the loan amendment agreement, please refer to Note 14, Loan Payable, to these financial statements.
Other (Expense) Income
Other (expense) income increased by $0.4 million from the prior year. This increase was primarily due to the change in fair value of the derivative
liability recorded as of the Incyte Agreement.
Liquidity and Capital Resources
Overview
As of December 31, 2021, we had cash, cash equivalents and short-term investments totaling $439.9 million. Since our inception, our operations have
been primarily financed by net proceeds from our IPO, our follow-on stock offerings, our term loan, sale of convertible preferred stock and convertible debt
securities and proceeds from our license agreements. We believe that our cash, cash equivalents and short-term investments as of December 31, 2021, will fund
our projected operating expenses and capital expenditure requirements for at least the next 12 months. In addition to our existing cash, cash equivalents and
short-term investments, we are eligible to receive research and development funding and to earn milestone and other contingent payments for the achievement
of defined collaboration objectives and certain development, regulatory and commercial milestones and royalty payments under our collaboration agreements.
Our ability to earn these milestone and contingent payments and the timing of achieving these milestones is primarily dependent upon the outcome of our
collaborators’ research and development activities and is uncertain at this time.
Loan and Security Agreement
On December 22, 2021, we entered into Amendment No. 1 to our existing loan and security agreement, or the First Amendment with the several banks
and financial institutions or entities from time-to-time party thereto, or the Lender, and Hercules Capital, Inc., in its capacity as administrative agent for itself
and the Lender, or the Agent. The First Amendment amended that certain loan and security Agreement dated as of February 7, 2020, (as amended by the First
Amendment, the Loan Agreement), among the Borrower, the Lender and the Agent.
65
The First Amendment increases the amount that we may borrow by $50.0 million, from up to $30.0 million to up to $80.0 million, in multiple
tranches. The First Amendment increases the second tranche, or Tranche 2, from $10.0 million to $30.0 million with $15.0 million being available at our
option through April 30, 2022 and another $15.0 million being available at our option through November 30, 2022, which availability period will be extended
to April 30, 2023 if the first $15.0 million is drawn prior to April 30, 2022. The First Amendment also provides for a third tranche of $30.0 million, or Tranche
3, which is available, subject to the Agent’s investment committee approval, through an interest-only period. Our only borrowings to date under the Loan
Agreement are the first tranche of $20.0 million, which we drew upon the closing of the Loan Agreement on February 7, 2020.
Additionally, the First Amendment, among other things, (i) extended the expiration of the period in which interest-only payments on borrowings under
the Loan Agreement are required from October 1, 2021 to January 1, 2023, which is further extendable to December 31, 2023 upon the partial or full draw of
Tranche 2, or the Interest-Only Period, (ii) extended the maturity date of Loan Agreement from September 1, 2023 to April 1, 2024, (iii) decreased the annual
interest rate from the greater of (w) 9.85% or (x) 5.10% plus the Wall Street Journal prime rate to the greater of (y) 9.25% or (z) 6.00% plus the Wall Street
Journal prime rate, (iv) applies a facility charge equal to 0.50% of any future draws, (v) applies a 4.99% end of term charge to any future draws payable on the
maturity date, (vi) permits the entry into our collaboration and license agreement as previously disclosed with Incyte Corporation, and (vii) adds a minimum
cash covenant applicable on the occurrence of certain events. The First Amendment also resets the prepayment premium requirements as of the date of the First
Amendment so that any prepayments are subject to a prepayment premium equal to (i) 2.0% of the principal amount outstanding if the prepayment occurs
during the first year following the Loan Amendment, (ii) 1.5% of the principal amount outstanding if the prepayment occurs during the second year following
the Loan Amendment, and (iii) 1.0% of the principal amount outstanding at any time thereafter but prior to the maturity date.
Borrowings under the Loan Agreement are collateralized by substantially all of our and our subsidiaries personal property and other assets, other than
our intellectual property. In addition, the Loan Agreement includes customary affirmative and restrictive covenants and representations and warranties,
including a covenant against the occurrence of a “change in control,” financial reporting obligations, and certain limitations on indebtedness, liens (including a
negative pledge on intellectual property and other assets), investments, distributions (including dividends), collateral, investments, distributions, transfers,
mergers or acquisitions, taxes, corporate changes, and deposit accounts. The Loan Agreement also includes customary events of default, including payment
defaults, breaches of covenants following any applicable cure period, the occurrence of certain events that could reasonably be expected to have a “material
adverse effect” as set forth in the Loan Agreement, cross acceleration to third-party indebtedness and certain events relating to bankruptcy or insolvency. Upon
the occurrence of an event of default, a default interest rate of an additional 5.0% may be applied to the outstanding principal balance, and Hercules may
declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Loan Agreement.
Future Funding Requirements
We believe that our available cash, cash equivalents and short-term investments and continued access to our term loan are sufficient to fund existing
and planned cash requirements. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical
research and development services, clinical costs, legal and other regulatory expenses and general overhead costs. We have based our estimates on assumptions
that may prove to be incorrect, and we could use our capital resources sooner than we currently expect.
Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress in these trials is uncertain. We cannot estimate
the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve
profitability. Our future capital requirements will depend on many factors, including:
•
the initiation, progress, timing, costs and results of clinical trials of our product candidates;
66
•
•
•
•
•
•
•
•
•
•
•
•
the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities,
including the potential for such authorities to require that we perform more trials than we currently expect;
the cost to establish, maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any
payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and
enforcing any patents or other intellectual property rights;
market acceptance of our product candidates;
the cost and timing of selecting, auditing and developing manufacturing capabilities, and potentially validating manufacturing sites for
commercial-scale manufacturing;
the cost and timing for obtaining pricing and reimbursement, which may require additional trials to address pharmacoeconomic benefit;
the cost of establishing sales, marketing and distribution capabilities for our product candidates if any product candidate receives regulatory
approval and we determine to commercialize it ourselves;
the costs of acquiring, licensing or investing in additional businesses, products, product candidates and technologies;
the diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19 pandemic, including the
diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
the interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing
protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19
pandemic;
the cost of disruption to our supply chain and operations, and associated delays in the manufacturing and supply of our products, which would
adversely impact our ability to continue our clinical trial operations;
the effect of competing technological and market developments; and
our need to implement additional internal systems and infrastructure, including financial and reporting systems, as we grow our company.
We have no products approved for commercial sale and have not generated any product revenues from product sales to date. 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 and additional
funding from license and collaboration arrangements. Except for any obligations of our collaborators to reimburse us for research and development expenses or
to make milestone or royalty payments under our agreements with them, we will not have any committed external source of liquidity.
Our material cash requirements include the following contractual obligations as of December 31, 2021 and the effects that such obligations are
expected to have on our liquidity and cash flows in future periods. For additional information, see our consolidated financial statements.
(in thousands)
Term loan (1)
Operating leases for office space (2)
Operating lease for office equipment (3)
Capital lease for office equipment (4)
Total
$ 24,235
1,303
2
1
$ 25,541
Less than
1 Year
$
$
1,883
473
2
1
2,359
1 to 3
Years
$ 22,352
376
—
—
$ 22,728
$
$
3 to 5
Years
More than
5 Years
—
454
—
—
454
$
$
—
—
—
—
—
(1)
Amounts include the estimated interest under our Term loan based on the interest rates in effect as of December 31, 2021.
67
(2)
(3)
(4)
In September 2016, we entered into a new five-year operating lease for office space in Waltham, Massachusetts, with a lease commencement date of
March 1, 2017. In August 2021, the Company signed a 36-month extension of the lease for the office space in Waltham. In December 2015, we entered
into a 62-month building lease for office space in New York, New York, which commenced on January 1, 2016. The minimum lease payments above
do not include any related common area maintenance charges or real estate taxes. In February 2021, we extended the lease for a period of 18 months at
$15,000 per month.
In February 2016, we entered into a five-year non-cancelable operating lease for office equipment. In January 2021, and February 2022, we extended
the lease by 12 months.
In April 2018, we entered into a four-year non-cancelable lease for office equipment, which is accounted for as a capital lease. The leased asset is
included in property, plant and equipment, at cost.
We have incurred losses and cumulative negative cash flows from operations since our inception, excluding year ending December 31, 2021. As of
December 31, 2021, we had an accumulated deficit of $543.7 million. We anticipate that we will continue to incur significant losses for at least the next several
years. We expect that our research and development and general and administrative expenses will continue to increase. As a result, we will need additional
capital to fund our operations, which we may raise through a combination of the sale of equity, debt financings, or other sources, including potential
collaborations. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted,
and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise
additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or drug
candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings 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 drug
candidates that we would otherwise prefer to develop and market ourselves.
At-the-Market Offering Program
In March 2021, we entered into a sales agreement with Cowen and Company, LLC, or Cowen, under which we may issue and sell shares of our
common stock having aggregate sales proceeds of up to $75.0 million from time to time through Cowen, acting as agent, in a series of one or more ATM equity
offerings, or the 2021 ATM Program. Cowen is not required to sell any specific amount but acts as our sales agent using commercially reasonable efforts
consistent with its normal trading and sales practices. Shares sold pursuant to the sales agreement will be sold pursuant to a shelf registration statement on Form
S-3 ASR (Registration No. 333-254661), which became automatically effective upon filing on March 24, 2021. Our common stock will be sold at prevailing
market prices at the time of the sale; and as a result, prices may vary. As of December 31, 2021, we sold 277,629 shares of common stock under the 2021 ATM
Program for net proceeds of approximately $5.1 million.
Cash Flows
The following is a summary of cash flows:
(in thousands)
Net cash provided by (used in) operating activities
Net cash (used in) provided by investing activities
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Net Cash Provided by (Used in) Operating Activities
$
$
2021
$
Years Ended December 31,
2020
(71,260)
(142,530)
304,424
90,634
$
$
$
29,131
(40,873)
118,464
106,722
2019
(50,612)
12,781
28,570
(9,261)
Net cash provided by operating activities for the year ended December 31, 2021 was $29.1 million and primarily consisted of our net income of $24.9
million adjusted for non-cash items including stock-based compensation of $13.3 million, non-cash operating lease expense of $0.4 million, an investment
amortization of $0.6 million, a decrease in non-cash interest expense associated with the term loan of $0.2 million, a decrease of the
68
derivative liability associated with the Incyte Agreements of $0.4 million, and a net decrease in operating assets and liabilities of $9.6 million. The significant
items in the decrease in operating assets and liabilities include a decrease in prepaid expenses and other assets of $1.4 million, an increase in accounts payable
of $2.1 million, and a decrease in deferred revenue of $13.1 million partially offset by an increase in accrued expenses and other liabilities of $2.8 million.
Net cash used in operating activities for the year ended December 31, 2020 was $71.3 million and primarily consisted of our net loss of $73.2 million
adjusted for non-cash items including stock-based compensation of $9.1 million, non-cash interest expense associated with the term loan of $0.4 million, non-
cash operating lease expense of $0.4 million, an investment amortization of $0.1 million and a net decrease in operating assets and liabilities of $7.9 million.
The significant items in the decrease in operating assets and liabilities include a decrease in prepaid expenses and other assets of $4.3 million, a decrease in
accounts payable of $2.7 million, and a decrease in deferred revenue of $1.5 million partially offset by increases in accrued expenses and other liabilities of
$0.6 million.
Net Cash (Used in) Provided by Investing Activities
Net cash used in investing activities for the year ended December 31, 2021 was $40.9 million and was primarily due to the purchase of $294.7 million
of available-for-sale marketable securities partially offset by $254.0 million in proceeds from the maturities of available-for-sale marketable securities.
Net cash provided by investing activities for the year ended December 31, 2020 was $142.5 million and was primarily due to the purchase of $278.9
million of available-for-sale marketable securities partially offset by $136.4 million in proceeds from the maturities of available-for-sale marketable securities.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the year ended December 31, 2021 was $118.5 million and was primarily due to the $24.8 million of
proceeds from issuances of common stock for Incyte Agreement, proceeds of $81.2 million from issuance of common stock, $5.1 million of proceeds from an
at-the-market offering, $0.6 million of proceeds from the Incyte Agreement allocated to the derivate liability in connection with the side letter, and $6.7 million
of proceeds from stock option exercises and ESPP purchases.
Net cash provided by financing activities for the year ended December 31, 2020 was $304.4 million and was primarily due to the $242.8 million of
proceeds from issuances of common stock, $34.9 million of proceeds from a direct placement offering, $19.7 million of proceeds from the term loan, and $7.0
million of proceeds from stock options exercises and ESPP purchases.
Net Operating Loss and Research and Development Tax Credit Carryforwards
December 31, 2021, we had federal and state tax net operating loss carryforwards of approximately $73.5 million and $34.6 million, respectively. The
Company has generated federal NOLs of $48.5 million which have an indefinite carryforward period. The remaining $25.0 million of federal NOLs and the
Company’s state NOLs will begin to expire at various dates starting in 2026. At December 31, 2021, we had available income tax credits of approximately $6.6
million, with $4.1 million attributable to Federal R&D Credits and $2.5 million attributable to state R&D Credits, which are available to reduce future income
taxes, if any. These income tax credits begin to expire in 2022.
Utilization of the net operating losses and credits may be subject to a substantial annual limitation due to ownership change limitations provided by the
Internal Revenue Code of 1986, as amended. The annual limitation may result in the expiration of our net operating losses and credits before we can use them.
We have recorded a valuation allowance on all of our deferred tax assets, including our deferred tax assets related to our net operating loss and research and
development tax credit carryforwards.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest
rates. As of December 31, 2021, we had cash and cash equivalents of $222.0 million, consisting of overnight investments, interest-bearing money market funds
and highly rated corporate
69
bonds and short-term investments of $217.9 million, consisting of commercial paper, highly rated corporate bonds and treasuries. Our primary exposure to
market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. The primary objectives of our investment activities
are to ensure liquidity and to preserve principal while at the same time maximizing the income we receive from our marketable securities without significantly
increasing risk. We have established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and
liquidity. Due to the short-term maturities of our cash equivalents and the low risk profile of our short-term investments, an immediate 100 basis point change
in interest rates would not have a material effect on the fair market value of our cash equivalents and short-term investments. We have the ability to hold our
investments until maturity, and therefore, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a
change in market interest rates on our investment portfolio.
We also have exposure to market risk on our Loan Agreement with Hercules. Our Loan Agreement accrues interest from its date of issue at a variable
interest rate equal to the greater of (y) 9.25% or (z) 6.00% plus the Wall Street Journal prime rate. As of December 31, 2021, $20 million was outstanding under
the Loan Agreement. The effect of a 100 basis points adverse change in market interest rates on our 2021 Loan Payable, in excess of applicable minimum
floors, on our interest expense would be approximately $0.2 million per year.
We do not believe that inflation and changing prices had a significant impact on our results of operations for any periods presented herein.
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements, together with the report of our independent registered public accounting firm, appear in this Annual Report on
Form 10-K beginning on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of our Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, the effectiveness of our
disclosure controls and procedures as of December 31, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. Based on evaluation of our disclosure controls and procedures as of December 31,
2021, our principle executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the
reasonable assurance level.
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 Rules
13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and
principal financial officers 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. Because of its
70
inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring organizations of the Treadway Commission (COSO) in Internal Control – Integrated
Framework (2013). Based on that assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was
effective.
Attestation Report of the Registered Public Accounting Firm
Deloitte & Touche LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Annual
Report on Form 10-K, has issued an attestation report on the effectiveness of internal control over financial reporting as of December 31, 2021, included herein.
Changes in Internal Control 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
fiscal quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Syndax Pharmaceuticals, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Syndax Pharmaceuticals, Inc. and subsidiaries (the “Company”) as of December 31, 2021,
based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
financial statements as of and for the year ended December 31, 2021, of the Company and our report dated March 1, 2022, expressed an unqualified opinion on
those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered
with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
71
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
March 1, 2022
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable
72
Item 10. Directors, Executive Officers, and Corporate Governance
PART III
The information required by this item is incorporated by reference to the information set forth in the sections titled “Information About Our Board of
Directors,” “Executive Officers” and “The Board of Directors and Its Committees” and “Delinquent Section 16(a) Reports,” if applicable, in our 2022 Proxy
Statement.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the information set forth in the section titled “Executive Officer and Director
Compensation” in our 2022 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to the information set forth in the section titled “Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters” in our 2022 Proxy Statement.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this item is incorporated by reference to the information set forth in the section titled “The Board of Directors and Its
Committees – Board Independence” and “Certain Relationships and Related Party Transactions” in our 2022 Proxy Statement.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to the information set forth in the section titled “Independent Registered Public
Accounting Firm Fees” and “Pre-Approval Policies and Procedures” contained in Proposal 2 in our 2022 Proxy Statement.
73
Item 15. Exhibits, Financial Statements and Schedules
(a)(1) Financial Statements.
PART IV
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules.
Pages
F-1
F-4
F-5
F-7
F-8
F-9
F-11
All schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial Statements or
Notes thereto.
(a)(3) Exhibits.
Exhibit
No.
3.1
3.2
4.1
4.2
4.3
4.4
4.5
Description
Amended and Restated Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K (File No. 001-37708), as filed with the SEC on March 8, 2016).
Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form
8-K (File No. 001-37708), as filed with the SEC on March 8, 2016).
Specimen Common Stock Certificate of the Company (incorporated herein by reference to Exhibit 4.1 to the Company’s Registration
Statement on Form S-1/A (File No. 333-208861), as filed with the SEC on February 20, 2016).
Form of Pre-Funded Warrant to purchase Common Stock issued pursuant to the Exchange Agreement between the Company and
Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P. and Biotechnology Value Trading Fund OS, L.P., dated June 18, 2018
(incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-37708), as filed with the SEC on
June 20, 2018).
Form of Pre-Funded Warrant issued pursuant to the securities purchase agreement between the Company and Certain Purchasers, dated
March 26, 2019 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No. 001-37708), as filed with
the SEC on March 29, 2019).
Form of Pre-Funded Warrant issued pursuant to the securities purchase agreement between the Company and Certain Purchasers, dated
January 30, 2020 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-37708), as filed
with the SEC on February 4, 2020).
Description of Capital Stock (incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 10-K (File No. 001-
37708), as filed with the SEC on March 5, 2020).
10.1*
2007 Stock Plan (incorporated herein by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File No. 333-
208861), as filed with the SEC on January 4, 2016).
74
Exhibit
No.
Description
10.2*
2007 Stock Plan Amendment, dated as of March 8, 2013 (incorporated herein by reference to Exhibit 10.4 to the Company’s Registration
Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.3*
2007 Stock Plan Amendment, dated as of July 10, 2013 (incorporated herein by reference to Exhibit 10.5 to the Company’s Registration
Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.4*
2007 Stock Plan Amendment, dated as of January 23, 2014 (incorporated herein by reference to Exhibit 10.6 to the Company’s Registration
Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.5*
2007 Stock Plan Amendment, dated as of December 17, 2014 (incorporated herein by reference to Exhibit 10.7 to the Company’s
Registration Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.6*
2007 Stock Plan Amendment, dated as of May 28, 2015 (incorporated herein by reference to Exhibit 10.8 to the Company’s Registration
Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.7*
2007 Stock Plan Amendment, dated as of August 20, 2015 (incorporated herein by reference to Exhibit 10.9 to the Company’s Registration
Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.8*
Form of Incentive Stock Option Agreement under 2007 Stock Plan (incorporated herein by reference to Exhibit 10.10 to the Company’s
Registration Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.9*
Form of Non-Statutory Stock Option Agreement under 2007 Stock Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s
Registration Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.10*
2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-8 (File
No. 333-210412), as filed with the SEC on March 25, 2016).
10.11*
Form of Incentive Stock Option Agreement under 2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.13 to the
Company’s Registration Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.12*
Form of Non-Qualified Option Agreement under 2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.14 to the
Company’s Registration Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.13*
Form of Stock Unit Agreement under 2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q (File No. 001-37708), as filed with the SEC on August 6, 2020).
10.14*
Form of Deferred Settlement Stock Unit Agreement under 2015 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.14
to the Company’s Annual Report on Form 10-K (file No. 001-37708), as filed with the SEC on March 12, 2021).
10.15*
2015 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 4.16 to the Company’s Registration Statement on Form S-
8 (File No. 333-210412), as filed with the SEC on March 25, 2016).
10.16*
Amended and Restated Executive Employment Agreement by and between the Company and Briggs W. Morrison, M.D., dated as of
February 2, 2022.
10.17*
Amended and Restated Executive Employment Agreement by and between the Company and Michael A. Metzger, dated as of February 2,
2022.
75
Exhibit
No.
Description
10.18*
Amended and Restated Executive Employment Agreement by and between the Company and Michael L. Meyers, M.D., Ph.D., dated as of
April 27, 2020 (incorporated herein by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37708), as
filed with the SEC on May 7, 2020).
10.19*
10.20*
10.21†
Non-employee Director Compensation Policy, as amended, dated as of February 2, 2022.
Form of Indemnification Agreement by and between the company and each of its directors and officers (incorporated herein by reference to
Exhibit 10.21 to the Company’s Registration Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
License, Development and Commercialization Agreement by and between the company and Bayer Schering Pharma AG, dated as of March
26, 2007 (incorporated herein by reference to Exhibit 10.22 to the Company’s Registration Statement on Form S-1 (File No. 333-208861),
as filed with the SEC on January 4, 2016).
10.22†
First Amendment to the License, Development and Commercialization Agreement by and between the company and Bayer Pharma AG,
dated as of October 13, 2012 (incorporated herein by reference to Exhibit 10.23 to the Company’s Registration Statement on Form S-1 (File
No. 333-208861), as filed with the SEC on January 4, 2016).
10.23
Second Amendment to the License, Development and Commercialization Agreement by and between the company and Bayer Pharma AG,
dated as of February 1, 2013 (incorporated herein by reference to Exhibit 10.24 to the Company’s Registration Statement on Form S-1 (File
No. 333-208861), as filed with the SEC on January 4, 2016).
10.24†
Third Amendment to the License, Development and Commercialization Agreement by and between the company and Bayer Pharma AG,
dated as of October 9, 2013 (incorporated herein by reference to Exhibit 10.25 to the Company’s Registration Statement on Form S-1 (File
No. 333-208861), as filed with the SEC on January 4, 2016).
10.25†
Letter Agreement by and between the company and Bayer Pharma AG, dated as of September 18, 2014 (incorporated herein by reference to
Exhibit 10.26 to the Company’s Registration Statement on Form S-1 (File No. 333-208861), as filed with the SEC on January 4, 2016).
10.26†
License Agreement by and between the Company and UCB Biopharma Sprl, dated as of July 1, 2016 (incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001- 37708), as filed with the SEC on October 7, 2016).
10.27†
Side Agreement by and between the Company and UCB Biopharma Sprl, dated March 8, 2017 (incorporated herein by reference to Exhibit
10.4 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37708), as filed with the SEC on May 9, 2017).
10.28†
Amendment No. 1 to License Agreement by and between the Company and UCB Biopharma Sprl, dated as of July 9, 2019 (incorporated
herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37708), as filed with the SEC on
November 7, 2019).
10.29
Third Amended and Restated Investors’ Rights Agreement by and among the company and the parties thereto, dated as of August 21, 2015
(incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-208861), as filed with
the SEC on January 4, 2016).
10.30†
License Agreement by and between the Company and Vitae Pharmaceuticals, Inc., dated as of October 13, 2017 (incorporated herein by
reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K (File No. 001-37708), as filed with the SEC on March 8, 2018).
76
Exhibit
No.
Description
10.31†
Amendment No. 1 to License Agreement by and between the Company and Vitae Pharmaceuticals, Inc., dated as of January 25, 2019
(incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37708), as filed with the
SEC on May 8, 2019).
10.32†
Collaboration and License Agreement by and between the Company and Incyte Corporation, dated as of September 24, 2021 (incorporated
herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37708), as filed with the SEC on
November 15, 2021).
10.33
Purchase Agreement by and between the Company and Incyte Corporation, dated as of September 24, 2021 (incorporated herein by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37708), as filed with the SEC on November 15,
2021).
10.34
Loan and Security Agreement dated February 7, 2020 between Syndax Pharmaceuticals, Inc. and Hercules Capital, Inc. (incorporated herein
by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-37708), as filed with the SEC on May 7,
2020).
10.35
First Amendment to the Company’s Loan and Security Agreement with the several banks and financial institutions or entities from time-to-
time party thereto and Hercules Capital, Inc., in its capacity as administrative agent for itself and the Lender, dated December 22, 2021.
21.1
23.1
24.1
31.1
31.2
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm
Power of Attorney (included on the signature page to this report).
Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934.
Certification of the Principal Financial Officer and Principal Accounting Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities
Exchange Act of 1934.
32.1+
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Exchange Act
and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
+
†
Indicates a management contract or compensatory plan.
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.
Confidential treatment has been granted for certain portions of this exhibit. These portions have been omitted and filed separately with the SEC.
Item 16. Form 10-K Summary
Not applicable.
77
Pursuant to the requirements of Section 13 of 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.
SIGNATURES
Date: March 1, 2022
SYNDAX PHARMACEUTICALS, INC.
By:/s/ Michael A. Metzger
Michael A. Metzger
Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and appoints Michael A. Metzger and Luke J. Albrecht, and each of them,
with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or
her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all
amendments to this report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and
thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his or her substitute or substitutes may lawfully do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature
/s/ Michael A. Metzger
Michael A. Metzger
/s/ Alexander Nolte
Alexander Nolte
/s/ Dennis G. Podlesak
Dennis G. Podlesak
/s/ Martin H. Huber, M.D.
Martin H. Huber, M.D.
/s/ Jennifer Jarrett
Jennifer Jarrett
/s/ Keith A. Katkin
Keith A. Katkin
/s/ Pierre Legault
Pierre Legault
/s/ William Meury
William Meury
/s/ Briggs W. Morrison, MD.
Briggs W. Morrison, MD.
Title
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Accounting Officer
(Principal Accounting Officer,
Interim Principal Financial Officer)
Date
March 1, 2022
March 1, 2022
Chairman of the Board of Directors
March 1, 2022
Director
Director
Director
Director
Director
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
March 1, 2022
President, Head of Research & Development, Director
March 1, 2022
78
Syndax Pharmaceuticals, Inc.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 34)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
Pages
F-2
F-5
F-6
F-7
F-8
F-9
F-11
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and Board of Directors of Syndax Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Syndax Pharmaceuticals, Inc. and subsidiaries (the "Company") as of December 31, 2021
and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the
period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal
control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2022, expressed an unqualified opinion on the Company's
internal control over financial reporting.
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 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. 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 critical audit matters does not alter in any way our opinion on the 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.
Revenue from Collaboration and License Agreement— Refer to Notes 3 and 4 to the financial statements
Critical Audit Matter Description
The Company recognizes revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration the Company
expects to receive in exchange for those goods or services. The Company’s collaborative research and license agreements contain multiple elements. In
September 2021, the Company executed a collaboration and license agreement and a share purchase agreement (collectively, the “Incyte Agreement”) which
became effective December 9, 2021. Upon the effectiveness of the Incyte Agreement the
F-2
Company received an upfront fee of $117 million and the Company issued 1,421,523 shares of common stock for an aggregate purchase price of $35 million,
or $24.62 per share, for a total cash consideration $152 million.
Under the revenue portion of the Incyte Agreement the Company identified contract promises for the license. The Company determined that the license was
capable of being distinct from the ongoing collaboration activities. Management estimated the standalone selling price of the license based on an application of
the income approach by measuring the fair value of the discounted cash flows from commercialization. The valuation required management to make
significant judgments and estimates relating to the probability of achieving both regulatory and commercial milestones, forecasted future cash flows and the
selection of the discount rates. Changes in these assumptions could have a significant impact on the standalone selling price and the revenue recorded.
Significant judgments and estimates were made by the management in determining revenue recognition for the Incyte Agreement, including the following:
•
•
The determination of whether the license is considered a distinct performance obligation that should be accounted for separately or treated as a
combined performance obligation with other elements, such as a license and related research and development activities.
The determination of the valuation or standalone selling price for the license, specifically as it relates to probability of achieving both regulatory
and commercial milestones, forecasted future cash flows and the selection of the discount rates
Given the above factors, the related audit effort in evaluating management’s judgments and estimates made in the identification of the license as a distinct
performance obligation and valuation of the license was extensive and required a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s revenue recognition for the Incyte Agreement included the following, among others:
•
•
•
•
•
•
We tested the effectiveness of internal controls related to the identification of distinct performance obligations, and over the valuation of the license,
including management’s controls over the probability of achieving both regulatory and commercial milestones, forecasted future cash flows, and
the selection of discount rates.
We obtained and read contract source documents and other documents that were part of the Incyte Agreement.
We assessed the terms in the Incyte Agreement and evaluated the appropriateness of management’s application of their accounting policies, along
with their use of estimates, in the determination of revenue recognition conclusions. We tested management’s identification of significant terms for
completeness, including the identification of distinct performance obligations.
We evaluated the appropriateness of the methods and assumptions used by management to forecast future cash flows and select the discount rates.
We assessed the reasonableness of management’s forecasted future cash flows by comparing the projections to certain peer companies and external
market data and studies.
We evaluated the reasonableness of management’s valuation of the license. With the assistance of our fair value specialists, we evaluated the
reasonableness of the (1) valuation methodology, (2) selected discount rates and (3) probabilities applied for the occurrence of both regulatory and
commercial milestones by:
o
o
Testing the source information underlying the determination of the discount rates and the mathematical accuracy of the calculations.
Developing a range of independent estimates and comparing those to the discount rates selected by management.
F-3
o
Developing a range of independent estimates utilizing third party studies and comparing those to probabilities selected by management.
•
We tested the mathematical accuracy of management’s calculation of the transaction consideration allocable to the license and its recognition as
revenue in the financial statements.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
March 1, 2022
We have served as the Company’s auditor since 2008.
F-4
SYNDAX PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investments
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Right-of-use asset
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Current portion of deferred revenue
Current portion of right-of-use liability
Current portion of term loan
Derivative liability
Total current liabilities
Long-term liabilities:
Deferred revenue, less current portion
Right-of-use liability, less current portion
Term loan, less current portion
Other long-term liabilities
Total long-term liabilities
Total liabilities
Commitments, contingencies and guarantees (Note 16)
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized;
0 shares outstanding at December 31, 2021 and December 31, 2020,
respectively
Common stock, $0.0001 par value, 100,000,000 shares authorized;
54,983,105 and 47,881,223 shares outstanding at December 31, 2021
and December 31, 2020, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$
December 31,
2021
2020
$
$
$
221,965
115
217,971
8,345
448,396
278
983
—
449,657
5,669
14,466
—
361
—
187
20,683
-
711
19,895
—
20,606
41,289
115,243
115
177,822
5,684
298,864
192
290
1,267
300,613
3,508
11,246
1,517
316
2,285
—
18,872
11,617
101
17,834
1
29,553
48,425
—
—
6
952,019
45
(543,702)
408,368
449,657
$
5
820,815
(4)
(568,628)
252,188
300,613
$
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SYNDAX PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Revenues:
License fees
Total revenues
Operating expenses:
Research and development
General and administrative
Total operating expenses
Income (loss) from operations
Other (expense) income:
Interest expense
Interest income
Other (expense) income:
Total other (expense) income
Net income (loss)
Net income (loss) attributable to common stockholders
Net income (loss) Per Share:
Basic earnings (loss) per share attributable to common stockholders
Diluted earnings (loss) per share attributable to common stockholders
Weighted-average common shares used in calculating:
Basic earnings (loss) per share attributable to common stockholders
Diluted earnings (loss) per share attributable to common stockholders
2021
Years Ended December 31,
2020
2019
$
139,709 $
139,709
1,517 $
1,517
1,517
1,517
88,248
25,241
113,489
26,220
50,435
22,505
72,940
(71,423)
(1,899)
403
202
(1,294)
24,926 $
(2,357)
841
(219)
(1,735)
(73,158) $
42,994
16,062
59,056
(57,539)
—
1,571
(79)
1,492
(56,047)
24,926 $
(77,064) $
(56,047)
0.48 $
0.46 $
(1.87) $
(1.87) $
(1.84)
(1.84)
$
$
$
$
52,064,809
53,622,904
41,308,242
41,308,242
30,490,783
30,490,783
The accompanying notes are an integral part of these consolidated financial statements.
F-6
SYNDAX PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Net income (loss)
Other comprehensive gain (loss):
Unrealized gains (losses) on marketable securities, net of tax
Comprehensive income (loss)
$
$
2021
Years Ended December 31,
2020
(73,158) $
24,926 $
2019
(56,047)
49
24,975 $
(4)
(73,162) $
25
(56,022)
The accompanying notes are an integral part of these consolidated financial statement
F-7
SYNDAX PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY
(In thousands, except share and per share data)
Common Stock
$0.0001
Par Value
Shares
24,835,951
$
Amount
Additional
Paid-In
Capital
2
$
492,493
Accumulated
Other
Comprehensive
Income (Loss)
(25 )
$
Accumulated
Deficit
Total
Stockholders'
Equity
(Deficit)
$
(439,423 )
$
53,047
140,819
2,095,039
—
—
42,818
—
—
—
25,857
—
27,140,484
3,036,719
—
6,388,889
6,250,000
—
—
33,706
2,280,318
—
—
1,995,941
—
755,166
—
47,881,223
277,629
3,802,144
26,878
725,784
1,421,523
—
—
5,500
—
842,424
—
54,983,105
$
$
—
1
—
—
—
—
—
—
3
—
—
1
1
—
—
—
—
—
—
—
—
—
—
5
—
1
—
—
—
—
—
—
—
—
—
6
$
$
$
830
10,901
13,032
3,446
—
6,005
—
182
178
—
527,067
24,201
10,665
107,867
134,980
3,906
(3,906 )
—
—
9,057
—
—
345
6,633
—
820,815
5,131
81,205
—
24,848
13,317
—
—
367
6,336
—
952,019
$
$
$
—
—
—
—
—
—
25
—
—
—
—
—
—
—
—
—
—
—
—
—
(4 )
—
—
—
—
(4 )
—
—
—
—
—
49
—
—
—
—
45
—
—
—
—
—
—
—
—
—
(56,047 )
(495,470 )
—
—
—
—
—
—
—
—
—
—
—
—
—
(73,158 )
(568,628 )
—
—
—
—
—
—
—
—
—
24,926
$
$
$
$
$
(543,702 ) $
830
10,902
13,032
3,446
—
6,005
25
182
178
(56,047 )
31,600
24,201
10,665
107,868
134,981
3,906
(3,906 )
—
—
9,057
(4 )
—
345
6,633
(73,158 )
252,188
5,131
81,206
—
—
24,848
13,317
49
—
367
6,336
24,926
408,368
Balance—January 1, 2019
Proceeds from At-the-market offering, net of $34 offering
expense
Proceeds from direct offering, net of $1,571 in common stock
warrants, $98 offering expenses
Proceeds from pre-funded common stock warrant from direct
offering, net of $1,875 in common stock warrants, $93 offering
expenses
Issuance of common stock warrant with direct offering
Stock purchase under ESPP
Stock-based compensation expense
Unrealized gains on short-term investments
Employee withholdings ESPP
Proceeds from exercise of stock options
Net loss
Balance—December 31, 2019
Proceeds from direct offering, net of $93 offering expenses
Proceeds from pre-funded common stock warrant from direct
offering, net of $41 offering expenses
Proceeds from direct offering, net of $7,132 offering expenses
Proceeds from direct offering, net of $8,770 offering expenses
Deemed dividend from repricing Series 1 and 2 warrants
Repricing Series 1 and 2 warrants
Stock purchase under ESPP
Pre-funded warrant exercise
Stock-based compensation expense
Unrealized losses on short-term investments
Exercise of Series 1 and Series 2 warrants
Employee withholdings ESPP
Proceeds from exercise of stock options
Net loss
Balance—December 31, 2020
Proceeds from At-the-market offering, net of $159 offering
expenses
Proceeds from direct offering, net of $5,332 offering expenses
Stock purchase under ESPP
Pre-funded warrant exercise
Proceeds from Incyte Share Purchase Agreement
Stock-based compensation expense
Unrealized losses on short-term investments
Vesting of RSU
Employee withholdings ESPP
Proceeds from exercise of stock options
Net income
Balance—December 31, 2021
The accompanying notes are an integral part of these consolidated financial statements.
F-8
SYNDAX PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation
Amortization and accretion of investments
Non-cash operating lease expense
Non-cash interest expense
Changes in fair value of derivate liability
Stock-based compensation
Other
Changes in operating assets and liabilities:
Prepaid expenses and other assets
Accounts payable
Deferred revenue
Accrued expenses and other liabilities
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
Purchases of short-term investments
Proceeds from sales and maturities of short-term investments
Net cash (used in) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock in follow on public
offerings, net
Proceeds from issuance of common stock in at-the-market
offering, net
Allocation of proceeds to common stock issued under the Incyte Share Purchase Agreement
Allocation of proceeds to derivative liability recorded under the Incyte Share Purchase Agreement
Proceeds from issuance of common stock in direct placement
offering, net
Proceeds from term loan agreement, net
Proceeds from Employee Stock Purchase Plan
Proceeds from exercise of stock options
Other
Net cash provided by financing activities
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—beginning of year
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—end of year
$
F-9
2021
Years Ended December 31,
2020
2019
$
24,926
$
(73,158)
$
(56,047)
43
644
413
(225)
(389)
13,317
(1)
(1,394)
2,161
(13,133)
2,769
29,131
(129)
(294,719)
253,975
(40,873)
81,206
5,131
24,848
576
—
—
367
6,336
—
118,464
106,722
115,358
222,080
$
89
(130)
426
389
—
9,057
1
(4,314)
(2,670)
(1,517)
567
(71,260)
—
(278,937)
136,407
(142,530)
242,849
—
—
—
34,866
19,730
345
6,633
1
304,424
90,634
24,724
115,358
$
92
(780)
359
—
—
6,005
—
(52)
4,739
(1,517)
(3,411)
(50,612)
—
(104,018)
116,799
12,781
—
830
—
—
27,380
—
182
178
—
28,570
(9,261)
33,985
24,724
The following table provides a reconciliation of cash, cash equivalents, and restricted cash equivalents reported within the consolidated balance sheets that sum
to the total of the amounts shown in the consolidated statements of cash flows:
Cash and cash equivalents
Restricted cash included in current and noncurrent assets
Cash, cash equivalents and restricted cash
2021
Years Ended December 31,
2020
(In thousands)
2019
$
$
221,965 $
115
222,080 $
115,243 $
115
115,358 $
24,609
115
24,724
Supplemental disclosures of cash flow information (Note 17).
The accompanying notes are an integral part of these consolidated financial statements.
F-10
SYNDAX PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
Syndax Pharmaceuticals, Inc. (“the Company” or “Syndax”) is a clinical stage biopharmaceutical company developing an innovative pipeline of cancer
therapies. The Company is developing SNDX-5613, targeting the binding interaction of menin with the mixed lineage leukemia 1 (MLL1) protein for the
treatment of MLL-rearranged, or MLLr, acute leukemias and nucleophosmin 1, or NPM1, mutant acute myeloid leukemia (AML), as well as axatilimab, a
monoclonal antibody that blocks the colony stimulating factor 1, or CSF-1 receptor. The Company has deprioritized the development of entinostat, a once-
weekly, oral, small molecule, Class I HDAC inhibitor, to focus resources on advancing the remainder of our pipeline. The Company plans to continue to
leverage the technical and business expertise of its management team and scientific collaborators to license, acquire and develop additional cancer therapies to
expand its pipeline.
Since its inception, the Company has devoted its efforts principally to research and development and raising capital. The Company is subject to risks
common to companies in the development stage, including, but not limited to, successful development of therapeutics, obtaining additional funding, protection
of proprietary therapeutics, compliance with government regulations, fluctuations in operating results, dependence on key personnel and collaborative partners,
and risks associated with industry changes. The Company’s long-term success is dependent upon its ability to successfully develop and market its product
candidates, expand its oncology drug pipeline, earn revenue, obtain additional capital when needed, and ultimately, achieve profitable operations. The Company
anticipates that it will be several years before any of its product candidates is approved, if ever, and the Company begins to generate revenue from sales of such
product candidates. Accordingly, management expects to incur substantial losses on the ongoing development of its product candidates and does not expect to
achieve positive cash flow from operations for the foreseeable future, if ever. As a result, the Company will continue to require additional capital to move
forward with its business plan. While certain amounts of this additional capital were raised in the past, there can be no assurance that funds necessary beyond
these amounts will be available in amounts or on terms sufficient to ensure ongoing operations.
The Company’s management believes that the cash, cash equivalents and short-term investments balances as of December 31, 2021, should enable the
Company to maintain its planned operations for at least twelve months from the date these financial statements were issued. The Company’s ability to fund all
of its planned operations internally beyond that date, including the completion of its ongoing and planned clinical trial activities, may be substantially
dependent upon whether the Company can obtain sufficient funding on terms acceptable to the Company. Proceeds from additional capital transactions would
allow the Company to accelerate and/or expand its planned research and development activities. In the event that sufficient funds were not available, the
Company may be required to delay or reduce expenditures to conserve cash, which could involve scaling back or curtailing development and general and
administrative activities.
With the global spread of the ongoing COVID-19 pandemic in 2021, the Company has implemented business continuity plans designed to address and
mitigate the impact of the COVID-19 pandemic on its business. The Company anticipates that the COVID-19 pandemic could have an impact on the clinical
development timelines for one or more of its clinical programs. The extent to which the COVID-19 pandemic impacts the Company’s business, clinical
development, manufacturing of clinical and commercial drug substance and drug product, and regulatory efforts, the corporate development objectives and the
value of and market for the Company’s common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at
this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United
States, Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall
disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on its business,
financial condition, results of operations and growth prospects.
In addition, the Company is subject to other challenges and risks specific to its business and ability to execute on the strategy, as well as risks and
uncertainties common to companies in the pharmaceutical industry with
F-11
development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of the Company’s
late-stage product candidate; delays or problems in the supply of the Company’s products, loss of single source suppliers or failure to comply with
manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the
inherent uncertainty of clinical success; and the challenges of protecting and enhancing the Company’s intellectual property rights; complying with applicable
regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may
also have the effect of heightening many of the other risks and uncertainties discussed above.
2. Basis of Presentation
The Company has prepared the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America (“U.S. GAAP”).
3. Summary of Significant Accounting Policies
Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and
the reported amounts of costs and expenses during the reporting period. The Company bases estimates and assumptions on historical experience when available
and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. The
Company’s actual results may differ from these estimates under different assumptions or conditions.
Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As
of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update
its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional
information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those
estimates and any such differences may be material to the Company’s financial statements.
Cash Equivalents
Cash equivalents include all highly liquid investments maturing within 90 days or less from the date of purchase. Cash equivalents include money
market funds, corporate debt securities, U.S. government agency notes, and overnight deposits.
Restricted Cash
The Company classifies as restricted cash all cash pledged as collateral to secure long-term obligations and all cash whose use is otherwise limited by
contractual provisions. Amounts are reported as non-current unless restrictions are expected to be released in the next 12 months.
Short-Term Investments
Short-term investments include marketable securities with maturities of less than one year or where management’s intent is to use the investments to
fund current operations or to make them available for current operations. All investments in marketable securities are classified as available-for-sale and are
reported at fair value with unrealized gains and losses excluded from earnings and reported net of tax in accumulated other comprehensive income, which is a
component of stockholders’ equity. Unrealized losses that are determined to be other-than-temporary, based on current and expected market conditions, are
recognized in earnings. Declines in fair value determined to be credit related are charged to earnings. The cost of marketable securities sold is determined by the
specific identification method.
F-12
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the
chief operating decision maker, or decision-making group, in making decisions regarding resource allocation and assessing performance. The Company has one
operating segment.
Concentrations of Credit Risk
Cash and cash equivalents, restricted cash, and short-term investments are financial instruments that potentially subject the Company to concentrations
of credit risk. Substantially all of the Company’s cash, cash equivalents, and short-term investments were deposited in accounts at two financial institutions, and
at times, such deposits may exceed federally insured limits. The Company has not experienced any losses in such accounts, and management believes that the
Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company’s
available-for-sale investments primarily consist of government money market funds, corporate debt securities, commercial paper, credit card asset-backed
securities and overnight deposits and potentially subject the Company to concentrations of credit risk.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets (three
to five years). Assets under capital leases are amortized over the shorter of their useful lives or lease term using the straight-line method. Major replacements
and improvements are capitalized, while general repairs and maintenance are expensed as incurred.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be
recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If this
comparison indicates that there is impairment, the amount of impairment is calculated as the difference between the carrying value and fair value. To date, no
such impairments have been recognized.
Debt Issuance Cost
Debt issuance costs consist of payments made to secure commitments under certain debt financing arrangements. These amounts are recognized as
interest expense over the period of the financing arrangement using the effective interest method. If the financing arrangement is cancelled or forfeited, or if the
utility of the arrangement to the Company is otherwise compromised, these costs are recognized as interest expense immediately. The Company’s consolidated
financial statements present debt issuance costs related to a recognized debt liability as a direct reduction from the carrying amount of that debt liability.
Derivative Financial Instruments
The Company accounts for derivative financial instruments as either equity or liabilities in accordance with Accounting Standards Codification Topic
815, Derivatives and Hedging, based on the characteristics and provisions of each instrument. The derivative liability is recorded at fair value, which is
estimated using a Black Scholes model. The liability is measured quarterly with any change in fair value being recognized in the statement of operations. We do
not hold or issue derivative instruments for trading or speculative purposes.
Revenue Recognition
The Company enters into license agreements for the development and commercialization of its product candidates. License agreements may include
non-refundable upfront payments, contingent payments based on the occurrence of specified events under the Company’s license arrangements, partial or
complete reimbursement of research and development expenses, license fees and royalties on sales of entinostat if they are successfully approved and
commercialized. The Company’s performance obligations under the license agreements may include the transfer intellectual property rights in the form of
licenses, obligations to provide research and development services and related materials and participation on certain development and/or commercialization
committees.
F-13
The Company recognizes revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which
we expect to receive in exchange for those goods or services. We recognize revenue following the five – step model prescribed under FASB Accounting
Standards Codification (ASC 606), Revenue from Contracts with Customers: (i) identify contract(s) with customer; (ii) identify the performance obligations in
the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue
when (or as) we satisfy the performance obligations.
The Company assesses the promises to determine if they are distinct performance obligations. Once the performance obligations are determined, the
transaction price is allocated based on a relative standalone selling price basis. Milestone payments and royalties are typically considered variable consideration
at the outset of the contract and are recognized in the transaction price either upon occurrence or when the constraint of a probable reversal is no longer
applicable.
Licenses of intellectual property: 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 recognizes revenues 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. For licenses that are bundled 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 from non-refundable, up-front fees.
Arrangements containing licenses to the Company’s intellectual property typically provide for a know-how transfer period. These arrangements may or may not
also include rights to future updates of that intellectual property and related know-how. Revenues from non-refundable, up-front fees allocated to the licenses
are recognized as the license is transferred to the customer and the customer is able to use and benefit from the license. This generally takes place over the
related know-how transfer period, or if applicable, over the term of transfer of future updates to the intellectual property.
Development Milestone Payments: At the inception of each arrangement that includes development milestone payments, the Company evaluates
whether the milestones are considered probable of being reached 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 generally not considered probable of being achieved
until those approvals are received. The transaction price is then 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. At the end of each subsequent reporting period, the
Company re-evaluates the probability of achievement of such development milestones and any related 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 license fees and earnings in the period of
adjustment.
Commercial Milestone Payments and Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level
of commercial sales, and the license is deemed to be the predominant item to which the royalties or commercial milestones relate, the Company will recognize
revenue at the later of when the related sales occur or when the performance obligation to which some or all of the royalty has been allocated has been satisfied
(or partially satisfied). To date no commercial milestone payments or royalties have been achieved.
When no performance obligations are required of the Company, or following the completion of the performance obligation period, such amounts are
recognized as revenue upon transfer of control of the goods or services to the customer. Generally, all amounts received or due other than sales-based
milestones and royalties are classified as license fees. Sales-based milestones and royalties will be recognized as royalty revenue at the later of when the related
sales occur or when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Deferred revenue arises from amounts received in advance of the culmination of the earnings process and is recognized as revenue in future periods as
performance obligations are satisfied. Deferred revenue expected to be recognized within the next twelve months is classified as a current liability. Upfront
payment contract liabilities
F-14
resulting from the Company’s license agreements do not represent a financing component as the payment is not financing the transfer of goods or services, and
the technology underlying the licenses granted reflects research and development expenses already incurred by the Company.
For additional information on our collaboration and license arrangements, please read Note 4, Collaboration and License Agreements, to these
consolidated financial statements.
Research and Development
Research and development costs are expensed as incurred. Research and development expenses include payroll and personnel expenses, consulting
costs, external contract research and development expenses, and allocated overhead, including rent, equipment depreciation, and utilities. Research and
development costs that are paid in advance of performance are capitalized as a prepaid expense and amortized over the service period as the services are
provided. The Company expenses upfront license payments related to acquired technologies that have not yet reached technological feasibility and have no
alternative future use.
In instances where the Company enters into cost-sharing arrangements, all research and development costs reimbursed by the collaborators are
accounted for as reductions to research and development expense. During the year ended December 31, 2021 and 2020, the Company incurred no external costs
related to cost-sharing collaborations. During the year ended December 31, 2019, the Company incurred $2.0 million in external costs related to cost-sharing
collaborations, of which $1.0 million has been recorded as a reduction to research and development expense.
Clinical Trial Costs
Clinical trial costs are a component of research and development expenses. The Company accrues and expenses clinical trial activities performed by
third parties based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or other
information provided to us by our vendors.
Income Taxes
The Company records deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the Company’s
financial statement carrying amounts and the tax bases of assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in
effect in the years in which the differences reverse. A valuation allowance is provided to reduce the net deferred tax assets to the amount that will more likely
than not be realized. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely
than not that a position will be sustained, none of the benefit attributable to the position is recognized. The tax benefit to be recognized for any tax position that
meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the
contingency. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes.
Guarantees and Indemnifications
As permitted under Delaware law, the Company indemnifies its officers, directors, and employees for certain events or occurrences that happen by
reason of the relationship with, or position held at, the Company. The Company has standard indemnification arrangements under office leases (as described in
Note 5) that require it to indemnify the landlord against all costs, expenses, fines, suits, claims, demands, liabilities, and actions directly resulting from any
breach, violation, or nonperformance of any covenant or condition of the Company’s lease. Through December 31, 2021, the Company had not experienced any
losses related to these indemnification obligations and no claims were outstanding. The Company does not expect significant claims related to these
indemnification obligations, and consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.
F-15
Stock-Based Compensation
The Company accounts for all stock option awards granted to employees and non-employees using a fair value method. Stock-based compensation is
measured at the grant date fair value of the stock option grants and is recognized over the requisite service period of the awards (usually the vesting period) on a
straight-line basis. For equity awards that have a performance condition, the Company recognizes compensation expense based on its assessment of the
probability that the performance condition will be achieved. The Company accounts for forfeitures as they occur.
Earnings (Loss) Per Share
Basic earnings per share is computed by dividing undistributed net income attributable to Syndax by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share is computed based on the treasury method by dividing net income by the weighted-average number of
common shares outstanding during the period plus potentially dilutive common equivalent shares outstanding.
Recently Issued and Adopted Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board FASB or other accounting standard
setting bodies that we adopt as of the specified effective date. Unless otherwise discussed below, we do not believe that the adoption of recently issued
standards have or may have a material impact on our consolidated statements or disclosures.
Income Taxes: In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the
Accounting for Income Taxes. This standard removes certain exceptions to the general principles in Topic 740 and simplifies certain other aspects of the
accounting for income taxes. This standard became effective for us on January 1, 2021 and did not have a material impact on our consolidated financial
statements and related disclosures.
4. Collaborative Research and License Agreements
Incyte Collaboration
In September 2021, the Company entered into the Incyte License and Collaboration Agreement with Incyte covering the worldwide development and
commercialization of SNDX-6352 (axatilimab). Also, in September 2021 the Company entered into a share purchase agreement with Incyte, or Incyte Share
Purchase Agreement. These agreements are collectively referred to as the Incyte Agreements. Under the terms of the Incyte Agreements, Incyte will receive
exclusive commercialization rights outside of the United States, subject to its royalty payment obligations set forth below. In the United States, Incyte and the
Company will co-commercialize axatilimab, with the Company having the right to co-promote axatilimab with Incyte, subject to the Company’s exercise of its
co-promotion option. Incyte will be responsible for leading all aspects of commercialization of axatilimab in the United States. The Company and Incyte will
share equally the profits and losses from co-commercialization efforts in the United States. The Company and Incyte have agreed to co-develop axatilimab and
to share development costs associated with global and U.S. – specific clinical trials, with Incyte responsible for 55% of such costs and the Company responsible
for 45% of such costs. Incyte is responsible for 100% of future development costs for trials that are specific to ex-U.S. countries. Each company will be
responsible for funding any of its own independent development activities. All development costs related to the collaboration will be subject to a joint
development plan.
Under the terms of the Incyte Agreement, Incyte paid the Company a non-refundable cash payment of $117 million. The Company is eligible to receive
up to $220 million in future contingent development and regulatory milestones and up to $230 million in commercialization milestones as well as tiered
royalties ranging in the mid-teens percentage on net sales of the licensed product comprising axatilimab in Europe and Japan and low double digit percentage in
the rest of the world outside of the United States. The Company’s right to receive royalties in any particular country will expire upon the last to occur of (a) the
expiration of licensed patent rights covering the licensed product in that particular country, (b) a specified period of time after the first post – marketing
authorization sale of a licensed product in that country, and (c) the expiration of any regulatory exclusivity for that licensed product in that country.
F-16
In December 2021, the Company and Incyte signed a Letter Agreement. Upon the signing of the Letter Agreement both the Incyte Agreement and
Incyte Share Purchase Agreement became effective. As a result, the Company received the upfront fee of $117 million and the Company issued 1,421,523
shares of common stock for an aggregate purchase price of $35 million, or $24.62 per share, for total cash consideration $152 million.
The Incyte Agreement and the Incyte Share Purchase Agreement were executed on the same date and negotiated simultaneously. Management
therefore concluded that the Incyte Agreements are to be combined for accounting purposes and therefore allocated the total consideration to the units of
account identified. The common stock issued to Incyte was recorded at fair value of $24.8 million. Pursuant to the Letter Agreement, Incyte is permitted to
terminate the Incyte Agreement, if, prior to March 23, 2022 either Incyte or the Company receives a notification from any governmental authority (including
the Federal Trade Commission or the Department of Justice, Antitrust Division), challenging the transactions completed by the Incyte Agreements, hereafter
referred to as the Termination Right. If such challenge occurs and Incyte exercises the Termination Right, the Incyte Agreement will be rescinded, and the
Company will return the $117 million upfront payment to Incyte. In addition, Incyte will be required to sell the Syndax common shares that it received under
the Incyte Share Purchase Agreement and remit the net proceeds to the Company. To the extent that the net proceeds from the sale of the Syndax common stock
by Incyte is greater or less than the proceeds received by the Company in the Incyte Share Purchase Agreement, or $35 million, a cash payment will be made to
make the parties whole. The Company determined that the cash settlement feature of the Letter Agreement represents an embedded derivative requiring
bifurcation and separate accounting recognition at fair value. Accordingly, the Company allocated $0.6 million of the total consideration received to the
derivative liability, see Note 9 for further discussion of the derivative liability.
The Company evaluated the terms of the Incyte Agreement and determined it is within the scope of Accounting Standard Update 2018-18,
Collaborative Arrangements (Topic 808), and has elements that are within the scope of Topic 606 and Topic 808.
The Company identified the following promises in the Incyte Agreements that were evaluated under the scope of Topic 606: (i) delivery of a license for
SNDX-6532 to develop, commercialize, and conduct medical affairs and (ii) services to be performed in accordance with the development plan. The Company
also evaluated whether certain options outlined within the Incyte Agreements represented material rights that would give rise to a performance obligation and
concluded that none of the options convey a material right to Incyte and therefore are not considered separate performance obligations within the Incyte
Agreements.
The Company assessed the above promises and determined that the license for SNDX-6532 represents the only performance obligation within the
scope of Topic 606. The license for SNDX-6532 is considered functional intellectual property and distinct from other promises under the contract as Incyte can
benefit from the license on its own or together with other readily available resources. The services performed by the Company to obtain regulatory approval of
SNDX-6532 are not complex or specialized, could be performed by another qualified third party, are not expected to significantly modify or customize the
license given that SNDX-6532 is late-stage intellectual property that has completed its Phase 1/2 trial and is currently enrolling in a global pivotal Phase 2 trial,
and the services are expected to be performed over a short period of time. Therefore, the license represents a separate performance obligation within a contract
with a customer under the scope of Topic 606 at contract inception.
The Company considers the collaborative research and development activities and manufacturing activities to be separate units of account within the
scope of Topic 808 and are not deliverables under Topic 606. The Company and Incyte are both active participants in the activities and are exposed to
significant risks and rewards that are dependent on the commercial success of the activities in the arrangement.
Under the scope of Topic 606, the Company identified contract promises for the license of intellectual property and know-how rights for SNDX-6352.
The Company determined that the license was capable of being distinct from the ongoing collaboration activities. After the allocation to the common stock and
derivative liability, the total transaction price to be allocated to the Incyte Agreement is $126.6 million. The Company estimated the
F-17
standalone selling price of the license to be the entire $126.6 million, based on an application of the income approach by measuring the fair value of the
discounted cash flows from commercialization. Significant assumptions included in the valuation included judgments relating to the probability of achieving
both regulatory and commercial milestones, forecasted future cash flows and the election of the discount rate. As the Company concluded the license was
distinct, revenue of $126.6 million was recognized upon transfer of the license to Incyte in the year ended December 31, 2021.
The Company used the most likely amount method to estimate variable consideration and estimated that the most likely amount for each potential
preclinical, development, and regulatory variable consideration milestone payment under this agreement is zero, as achievement of those milestones is uncertain
and highly susceptible to factors outside the Company’s control. Accordingly, all such milestone payments were excluded from the transaction price.
Management will reevaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances
occur, will adjust the transaction price as necessary. Sales based royalties, including milestones based on the level of sales, were also excluded from the
transaction price, as the license is deemed to be the predominant item to which the royalties relate. The company will recognize such 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).
KKC Agreement
On December 19, 2014 (the “Effective Date”), the Company entered into the KKC License Agreement, under which the Company granted KKC an
exclusive license to develop and commercialize entinostat in Japan and Korea. Under the terms of the KKC License Agreement, the Company will be
responsible for the manufacture and supply of the products during the development activities. In addition to the license and manufacturing obligations, the
Company is obligated to provide KKC access to know-how and regulatory information the Company may develop over the life of the entinostat patent. Lastly,
to the extent additional intellectual property is developed during the term of the agreement, KKC will receive the right to the intellectual property when and if
available. KKC will conduct the development, regulatory approval filings, and commercialization activities of entinostat in Japan and Korea. KKC paid the
Company $25.0 million upfront, which included a $7.5 million equity investment and a $17.5 million non-refundable cash payment. In addition, to the extent
certain development and commercial milestones are achieved, KKC will be required to pay the Company up to $75.0 million in milestone payments over the
term of the license agreement. The term of the agreement commenced on the Effective Date and, unless earlier terminated in accordance with the terms of the
agreement, will continue on a country-by-country and product-by-product basis, until the later of: (i) the date all valid claims of the last effective patent among
the Company’s patents expires or is abandoned, withheld, or is otherwise invalidated in such country; and (ii) 15 years from the date of the first commercial sale
of a product in the Japan or Korea.
The equity purchase and the up-front payment of the license fee were accounted for separately. The Company allocated the amount of consideration
equal to the fair value of the shares on the Effective Date, which resulted in $7.7 million of proceeds allocated to the equity purchase and the remaining
consideration of $17.3 million allocated to the up-front license fee.
In October 2017, the Company announced that KKC enrolled the first Japanese patient into a local pivotal study of entinostat for the treatment of
hormone receptor positive, human epidermal growth factor receptor 2 negative breast cancer. In accordance with the terms of the license agreement, KKC paid
the Company a $5.0 million milestone payment which the Company received in December 2017.
The Company determined that the performance obligations associated with the KKC License Agreement include (i) the combined license, rights to
access and use materials and data, and rights to additional intellectual property, and (ii) the clinical supply obligation. All other goods or services promised to
KKC are immaterial in the context of the agreement. Under ASC 606, the identification of the clinical supply obligation as a distinct performance obligation
separate and apart from the license performance obligation resulted in a change in the performance period. The start of the performance period under ASC 606
was determined to be the contract inception date, December 19, 2014. The clinical supply was identified as a separate performance obligation under ASC 606
as (i) the Company is not providing a significant service of integration whereby the clinical supply and other promises are inputs into a combined output, (ii) the
clinical supply does not significantly modify or customize the other
F-18
promises nor is it significantly modified or customized by them, and (iii) the clinical supply is not highly interdependent or highly interrelated with the other
promises in the agreement as KKC could choose not to purchase the clinical supply from the Company without significantly affecting the other promised goods
or services. The Company further concluded that the clinical supply represented an immaterial performance obligation and therefore the entire $17.3 million
allocated to the upfront payment was allocated to the combined license and will be recognized ratably over the performance period, representing contract
inception though 2029. In 2017, KKC achieved a development milestone, and was required to pay the Company $5.0 million. The Company is recognizing the
development milestone consideration over the performance period coinciding with the license to intellectual property. As the Company determined that its
performance obligations associated with the KKC Agreement at contract inception were not distinct and represented a single performance obligation, and that
the obligations for goods and services provided would be completed over the performance period of the agreement, any payments received by the Company
from KKC, including the upfront payment and progress-dependent development and regulatory milestone payments, are recognized as revenue using a time-
based proportional performance model over the contract term (December 2014 through 2029) of the collaboration, within license fees. To date no commercial
milestone payments or royalties have been achieved.
In September 2021, KKC informed the Company that it is discontinuing its development of entinostat in Japan and Korea and terminating the KKC
License Agreement. As a result, the Company recognized all remaining deferred revenue of $12.4 million in September 2021.
5. Leases
Leases
The Company accounts for leases in accordance with ASC 842, Leases, and determines whether an arrangement is a lease at inception. Operating lease
right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at
commencement date. Lease agreements with lease and non-lease components are accounted for separately. For leases that do not provide an implicit rate, the
Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.
The ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease terms may include options to
extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with an initial term of 12 months or less are not
recorded on the balance sheet as the Company has elected to apply the short-term lease exemption. Lease expense for minimum lease payments is recognized
on a straight-line basis over the lease term.
The Company identified two existing long-term building leases on the adoption date of ASC 842 that are classified as operating leases. In September
2016, the Company entered into a five-year operating lease for 12,207 square feet of office space in Waltham, Massachusetts, with a lease commencement date
of March 1, 2017. On August 17, 2021, the Company signed a 36-month extension to the lease for the Waltham, Massachusetts office with aggregate payments
of $1.6 million, with a lease commencement date of March 1, 2022.
In December 2015, the Company entered into a 62-month operating lease for 4,039 square feet of space in New York, New York, which commenced on
January 1, 2016. In February 2021, the Company signed an 18-month extension to the lease for the New York office, with aggregate payments of $270,000,
with a lease commencement date of March 1, 2021.The remaining lease terms as of December 31, 2021, for the facility in Waltham, Massachusetts and New
York, New York, were 38 months and 8 months, respectively.
As of December 31, 2021, the consolidated balance sheet includes a $1.0 million operating lease ROU asset and a $1.1 million ROU liability. The
Company used a weighted average discount rate of 14% to calculate its lease obligations, and an increase or decrease in the rate does not have a significant
impact on the ROU asset or ROU liability. The ROU asset is amortized on a straight-line basis over the remainder of the lease term. For the year ended
December 31, 2021, the Company recorded approximately $413,000 in operating lease expense and made approximately $544,000 in lease payments.
F-19
Future minimum lease payments under the Company’s operating leases, were as follows:
Maturity of lease liabilities
(in thousands)
2021
2022
2023
Thereafter
Total lease payments
Less: imputed interest
Total operating lease liability
As of
December 31, 2021
As of
December 31, 2020
$
$
$
473
376
454
1,303
(231)
1,072
$
$
$
394
59
—
—
453
(36)
417
Future minimum lease payments under the Company’s capital leases as of December 31, 2021, and 2020, were $ 1,000 and $5,000, respectively.
6. Earnings (Loss) per Share
Basic and diluted earnings (loss) per share are calculated as follows (in 000s):
Numerator:
Net income (loss)
Deemed dividend due to warrant reset
Net income (loss) attributable to common stockholders
Denominator:
Weighted-average common shares outstanding
Effective of Dilutive Securities
Options to purchase common stock
Non - vested restricted stock units (RSUs)
ESPP to purchase common stock
Dilutive potential common shares
Shares used in calculating diluted earnings (loss) per share
2021
Years Ended December 31,
2020
2019
$
$
24,926 $
-
24,926 $
(73,158) $
(3,906)
(77,064) $
(56,047)
—
(56,047)
52,065
41,308
30,491
1,429
118
11
1,558
53,623
-
-
-
-
41,308
-
-
-
-
30,491
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares outstanding for 2020 and
2019, because such securities have an antidilutive impact due to losses reported (in common stock equivalent shares):
Options to purchase common stock
Warrants to purchase common stock
Employee Stock Purchase Plan
Non - vested restricted stock units (RSUs)
December 31,
2020
6,379,235
-
16,382
18,500
2019
6,057,011
4,595,039
15,223
-
As discussed in Note 12, in June 2018, the Company signed an exchange agreement with an investor under which the investor exchanged 2,000,000
shares of common stock for 2,000,000 pre-funded warrant shares. Further, in March 2019, the Company sold an additional 2,500,000 pre-funded warrant
shares. The pre-funded warrants are exercisable into shares of common stock for $0.0001 per share. The shares of common stock into which the pre-funded
warrants may be exercised are considered outstanding for the purposes of computing earnings per share. In January 2020, the Company sold 3,036,719 shares
of common stock at a price of $8.00 per share and pre-funded warrants to purchase 1,338,287 shares of our common stock. During the year ended December
31, 2021, 475,784 pre-funded warrants were exchanged for shares of common stock in a cashless exercise and 250,000 pre-funded warrants were exchanged for
shares of common stock in a cash excercise. As of December 31, 2021, 3,975,024 pre-funded warrants were considered issued and outstanding.
F-20
7. Significant Agreements
Vitae Pharmaceuticals, Inc.
In October 2017, the Company entered into a license agreement (the “Allergan License Agreement”) with Vitae Pharmaceuticals, Inc., a subsidiary of
Allergan (“Allergan”), under which Allergan granted the Company an exclusive, sublicensable, worldwide license to a portfolio of preclinical, orally available,
small molecule inhibitors of the interaction of menin with Mixed Lineage Leukemia (“MLL”) protein (the “Menin Assets”). The Company made a
nonrefundable upfront payment of $5.0 million to Allergan in the fourth quarter of 2017. Additionally, subject to the achievement of certain milestone events,
the Company may be required to pay Allergan up to $99.0 million in one-time development and regulatory milestone payments over the term of the Allergan
License Agreement. In the event that the Company or any of its affiliates or sublicensees commercializes the Menin Assets, the Company will also be obligated
to pay Allergan low single to low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $70.0 million in
potential one-time, sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, the Company may be
required to share a percentage of non-royalty income from sublicensees, subject to certain deductions, with Allergan. The Company is solely responsible for the
development and commercialization of the Menin Assets. Each party may terminate the Allergan License Agreement for the other party’s uncured material
breach or insolvency; and the Company may terminate the Allergan License Agreement at will at any time upon advance written notice to Allergan. Allergan
may terminate the Allergan License Agreement if the Company or any of its affiliates or sublicensees institutes a legal challenge to the validity, enforceability,
or patentability of the licensed patent rights. Unless terminated earlier in accordance with its terms, the Allergan License Agreement will continue on a country-
by-country and product-by-product basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all
regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country.
As of the date of the Allergan License Agreement, the asset acquired had no alternative future use nor had it reached a stage of technological feasibility.
As the processes or activities that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset
acquisition. As a result, in 2017, the upfront payment of $5.0 million was recorded as research and development expense in the consolidated statements of
operations. In June 2019, the Company achieved certain development and regulatory milestones. As a result, in June 2019, the Company recorded $4.0 million
as research and development expense. The amount was paid in 2020.
UCB Biopharma Sprl
In July 2016, the Company entered into a license agreement (the “UCB License Agreement”) with UCB Biopharma Sprl (“UCB”), under which UCB
granted to the Company a worldwide, sublicenseable, exclusive license to UCB6352, which the Company refers to as SNDX-6352 or axatilimab, an IND-ready
anti-CSF-1R monoclonal antibody. The Company made a nonrefundable upfront payment of $5.0 million to UCB in the third quarter of 2016. Additionally,
subject to the achievement of certain milestone events, the Company may be required to pay UCB up to $119.5 million in one-time development and regulatory
milestone payments over the term of the UCB License Agreement. In the event that the Company or any of its affiliates or sublicensees commercializes SNDX-
6352, the Company will also be obligated to pay UCB low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an
aggregate of $250.0 million in potential one-time, sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain
circumstances, the Company may be required to share a percentage of non-royalty income from sublicensees, subject to certain deductions, with UCB. The
Company will be solely responsible for the development and commercialization of SNDX-6352, except that UCB is performing a limited set of transitional
chemistry, manufacturing and control tasks related to SNDX-6352. Each party may terminate the UCB License Agreement for the other party’s uncured
material breach or insolvency; and the Company may terminate the UCB License Agreement at will at any time upon advance written notice to UCB. UCB may
terminate the UCB License Agreement if the Company or any of its affiliates or sublicensees institutes a legal challenge to the validity, enforceability, or
patentability of the licensed patent rights. Unless terminated earlier in accordance with its terms, the UCB License Agreement will continue on a country-by-
country and product-by-product basis until the later of: (i) the expiration of all of the licensed patent rights in such country; (ii) the expiration of all regulatory
exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country.
F-21
As of the date of the UCB License Agreement, the asset acquired had no alternative future use nor had it reached a stage of technological feasibility. As
the processes or activities that were acquired along with the license do not constitute a “business,” the transaction has been accounted for as an asset
acquisition. As a result, in 2016, the upfront payment of $5.0 million was recorded as research and development expense in the consolidated statements of
operations. In July 2020, the Company achieved certain development and regulatory milestones. As a result, in July 2020, the Company recorded $2.0 million
as research and development expense, which has been fully paid. In March and September 2021, the Company recorded $2.0 million, respectively, as research
and development expenses for the achievement of certain development milestones. The Company fully paid the March 2021 milestone in the second quarter of
2021. The September 2021 milestone of $2.0 million is recorded as an accrued expense as of December 31, 2021.
Eastern Cooperative Oncology Group
In March 2014, the Company entered into the “ECOG Agreement with Eastern Cooperative Oncology Group, a contracting entity for the Eastern
Cooperative Oncology Group—American College of Radiology Imaging Network Cancer Research Group (“ECOG-ACRIN”), that describes the parties’
obligations with respect to the NCI-sponsored pivotal Phase 3 clinical trial of entinostat. Under the terms of the ECOG Agreement, ECOG-ACRIN will
perform this clinical trial in accordance with the clinical trial protocol and a mutually agreed scope of work. The Company will provide a fixed level of
financial support for the clinical trial through an upfront payment of $0.7 million and a series of payments of up to $1.0 million each that are comprised of
milestone payments through the completion of enrollment and time-based payments through the completion of patient monitoring post-enrollment. In addition,
the Company is obligated to supply entinostat and placebo to ECOG-ACRIN for use in the clinical trial. From the second quarter of 2016 through the fourth
quarter of 2018, the Company has entered into a number of amendments to the agreement to provide for additional study activities resulting in an increase of
the contractual obligation of $5.3 million. The Company has agreed to provide this additional financial support to fund the additional activities required to
ensure that the E2112 clinical trial will satisfy FDA registration requirements.
In May 2020, the Company announced that the E2112 trial did not achieve the primary endpoint of demonstrating a statistically significant overall
survival benefit over hormone therapy alone. As a result, the Company has decided to deprioritize the entinostat program to focus resources on advancing the
remainder of its pipeline. As of December 31, 2021, the Company’s aggregate payment obligations under this agreement are approximately $24.7 million; and
its maximum remaining payment obligations are $3.2 million, which are estimated to be paid over a period of approximately one year. As of December 31,
2021, the Company has accrued $3.0 million related to the ECOG Agreement.
Data and inventions from the Phase 3 clinical trial are owned by ECOG-ACRIN. The Company has access to the data generated in the clinical trial,
both directly from ECOG-ACRIN under the ECOG Agreement as well as from the NCI. Additionally, ECOG-ACRIN has granted the Company a non-
exclusive royalty-free license to any inventions or discoveries that are derived from entinostat as a result of its use during the clinical trial, along with a first
right to negotiate an exclusive license to any of these inventions or discoveries. Either party may terminate the ECOG Agreement in the event of an uncured
material breach by the other party or if the U.S. Food and Drug Administration (“FDA”) or National Cancer Institute (“NCI”) withdraws the authorization to
perform the clinical trial in the United States. The parties may jointly terminate the ECOG Agreement if the parties agree that safety-related issues support
termination of the clinical trial. The Company accounts for these expenses according to the progress of the clinical trial as measured by patient enrollment and
the timing of various aspects of the clinical trial. The Company determines accrual estimates through financial models,taking into account discussion with
applicable personnel and ECOG-ACRIN as to the progress of consummation of the clinical trial or the services completed.
Bayer Pharma AG (formerly known as Bayer Schering Pharma AG)
In March 2007, the Company entered into a license agreement (the “Bayer Agreement”) with Bayer Schering Pharma AG (“Bayer”) for a worldwide,
exclusive license to develop and commercialize entinostat and any other products containing the same active ingredient. Under the terms of the Bayer
Agreement, the Company paid a nonrefundable up-front license fee of $2.0 million and is responsible for the development and marketing of entinostat. The
Company recorded the $2.0 million license fee as research and development expense during the year ended December 31, 2007, as it had no alternative future
use. The Company will pay Bayer royalties on a sliding scale based on net sales, if any, and make future milestone payments to Bayer of up to $150.0 million in
the event that certain specified development and regulatory goals and sales levels are achieved.
F-22
8. Property and Equipment, net
Property and equipment, net, consisted of the following (in thousands):
Equipment
Leasehold improvements
Furniture and fixtures
Office and computer equipment
Office equipment under capital lease
Total property and equipment
Accumulated depreciation
Property and equipment, net
December 31,
2021
2020
$
$
386
167
134
21
13
721
(443)
278
$
$
256
167
134
21
13
591
(399)
192
Depreciation expense was $43,000 and $90,000 for years ended December 31, 2021 and 2020.
9. Fair Value Measurements
The carrying amounts of cash and cash equivalents, restricted cash, accounts payable, and accrued expenses approximated their estimated fair values
due to the short-term nature of these financial instruments. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use
of unobservable inputs.
The accounting standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value, which are the following:
Level 1—Quoted prices (unadjusted) in active markets that are accessible at the market date for identical unrestricted assets or liabilities.
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs for which all significant inputs are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
F-23
The table below presents information about the Company’s assets and liabilities that are regularly measured and carried at fair value and indicate the
level within the fair value hierarchy of valuation techniques the Company utilized to determine such fair values (in thousands):
December 31, 2021
Assets:
Cash equivalents
Short-term investments
Total assets
Liabilities:
Derivative Liability
Total Liabilities
December 31, 2020
Assets:
Cash equivalents
Short-term investments
Total assets
Quoted
Prices
in Active
Markets
(Level 1)
Fair Value Measurements Using
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Carrying
Value
$
$
$
$
$
221,964
217,971
439,935
$
$
96,816
—
96,816
$
$
125,148
217,971
343,119
$
$
187
187
$
—
—
$
—
—
$
115,243
177,822
293,065
$
$
110,246
—
110,246
$
$
4,997
177,822
182,819
$
$
—
—
—
187
187
—
—
—
There have been no material impairments of our assets measured and carried at fair value during the years ended December 31, 2021, and 2020. In
addition, there have been no changes in valuation techniques during the years ended December 31, 2021, and 2020. The fair value of Level 1 instruments
classified as cash equivalents are valued using quoted market prices in active markets. The fair value of Level 2 instruments classified as cash equivalents and
short-term investments was determined other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date and
fair value is determined using models or other valuation methodologies. The fair value of the Level 3 instrument is determined using unobservable inputs and
the Company utilized a Black Scholes valuation model as of December 9, 2021 (initial recognition) and December 31, 2021 respectively.
The following table summarizes the significant unobservable inputs in the fair value measurement of the Company’s contingent consideration
obligations as of December 31, 2021:
(in thousands)
Liabilities:
Derivative Liability
Fair Value
Unobservable Input
Range
Weighted Average
As of December 31, 2021
$
187
Discount Rate
Volatility
Expected timing of the
Termination Right
4-5%
58-61%
9 months
4.5%
59.5%
9 months
The following table summarizes the fair value rollforward (in thousands):
Derivative Liability:
Beginning Balance 1/1/2021
Additions
Change in fair value
Ending Balance 12/31/2021
Fair Value
—
576
(389)
187
$
$
F-24
The short-term investments are classified as available-for-sale securities. As of December 31, 2021, the remaining contractual maturities of the
available-for-sale securities were less than 12 months, and the balance in the Company’s accumulated other comprehensive income was comprised solely of
activity related to the Company’s available-for-sale securities. There were no realized gains or losses recognized on the sale or maturity of available-for-sale
securities during the three years ended December 31, 2021. As a result, the Company did not reclassify any amounts out of accumulated other comprehensive
income for the same periods. The Company has a limited number of available-for-sale securities in insignificant loss positions as of December 31, 2021, which
the Company does not intend to sell and has concluded will not be required to sell before recovery of the amortized cost for the investment at maturity
The following table summarizes the available-for-sale securities (in thousands):
December 31, 2021
Commercial paper
Corporate bonds
US treasury
December 31, 2020
Commercial paper
Corporate bonds
US treasury
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
$
$
$
$
306,715
22,147
14,212
343,074
154,176
22,617
6,030
182,823
$
$
$
$
70
—
—
70
13
2
—
15
$
$
$
$
(17)
(6)
(2)
(25)
(16)
(3)
—
(19)
$
$
$
$
306,768
22,141
14,210
343,119
154,173
22,616
6,030
182,819
10. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
Short-term deposits
Prepaid insurance
Interest receivable on investments
Prepaid clinical supplies
Reimbursable costs
Other
Total prepaid expenses and other current assets
11. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
Accrued clinical costs
Accrued compensation and related costs
Accrued professional fees
Other
Total accrued expenses
F-25
December 31,
2021
2020
$
$
$
6,894
642
429
-
-
380
8,345 $
4,683
427
175
58
24
317
5,684
December 31,
2021
2020
$
$
7,760 $
4,342
662
1,702
14,466 $
7,132
3,213
373
528
11,246
12. Common Stock
The Company is authorized to issue 100,000,000 shares of common stock. The holders of each share of common stock are entitled to one vote per
share held and are entitled to receive dividends, if and when declared by the Board, and to share ratably in the Company’s assets available for distribution to
stockholders, in the event of liquidation.
In March 2021, the Company entered into a new sales agreement with Cowen and Company, LLC (“Cowen”) under which the Company may issue and
sell shares of its common stock having aggregate sales proceeds of up to $75.0 million from time to time through Cowen, acting as agent, in a series of one or
more ATM equity offerings (the “2021 ATM Program”). Cowen is not required to sell any specific amount but acts as the Company’s sales agent using
commercially reasonable efforts consistent with its normal trading and sales practices. Shares sold pursuant to the sales agreement will be sold pursuant to a
shelf registration statement on Form S-3ASR (Registration No. 333-254661), which became automatically effective upon filing on March 24, 2021. The
Company’s common stock will be sold at prevailing market prices at the time of sale; and as a result, prices may vary. For the year ended December 31, 2021,
the Company sold 277,629 common shares of common stock under the 2021 ATM Program, with net proceeds of approximately $5.1 million.
On June 18, 2018, the Company signed an exchange agreement with Biotechnology Value Fund and certain affiliated funds (“BVF”) under which BVF
exchanged 2,000,000 shares of common stock for 2,000,000 Pre-Funded Warrant shares. The Company recorded the issuance of the pre-funded warrants and
the retirement of the common stock at fair value within additional paid-in capital. BVF can exercise the Pre-Funded Warrants at an exercise price per share
equal to $0.0001 per share and the Pre-Funded Warrants expire 20 years from issuance. Per the terms of the warrant agreement, the outstanding Pre-Funded
Warrants may not be exercised if the holder's ownership of the Company’s common stock would exceed 9.99 % following such exercise.
In March 2019, the Company issued 2,095,039 shares of its common stock and pre-funded warrants to purchase 2,500,000 shares of common stock
(the “Pre-Funded Warrants”) to certain investors in a registered direct offering. The Pre-Funded Warrants are exercisable immediately upon issuance at an
exercise price of $0.0001 per share and have a term of 20 years. The Company sold the shares of common stock and Pre-Funded Warrants together with two
series of warrants, Series 1 Warrants and Series 2 Warrants, to purchase an aggregate of 4,595,039 shares of the Company’s common stock (the “Series
Warrants”). The offering price for the securities was $6.00 per share (or $5.9999 for each Pre-Funded Warrant). The aggregate gross proceeds to the Company
from this offering were $27.6 million, excluding any proceeds the Company may receive upon exercise of the Pre-Funded Warrants and Series Warrants and
offering costs of $0.2 million. No underwriter or placement agent participated in the offering.
The Series Warrants are immediately exercisable. Each Series 1 Warrant has an initial exercise price of $12.00 per share of common stock and each
Series 2 Warrant has an initial exercise price of $18.00 per share of common stock, in each case subject to certain adjustments. All Series 1 and Series 2
warrants were exercised in 2020.
The Pre-Funded Warrants and the Series Warrants may not be exercised by the holder to the extent that the holder, together with its affiliates, would
beneficially own, after such exercise more than 9.99% of the shares of the Company’s common stock then outstanding (subject to the right of the holder to
increase or decrease such beneficial ownership limitation upon notice to the Company, provided that such limitation cannot exceed 19.99%) and provided that
any increase in the beneficial ownership limitation shall not be effective until 61 days after such notice is delivered.
The Series Warrants were classified as a component of permanent equity and were recorded at the issuance date using a relative fair value allocation
method. The Series Warrants are equity classified because they are freestanding financial instruments that are legally detachable and separately exercisable
from the equity instruments, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permits the holders to
receive a fixed number of common shares upon exercise. In addition, such warrants do not provide any guarantee of value or return. The Company valued the
Series Warrants at issuance using the Black Scholes option pricing model and determined the fair value of the 4,595,039 Series Warrants at $3.4 million. The
key inputs to the valuation model included the weighted average volatility of 89.1% and the weighted average expected term of 1.4 years. During 2020, holders
of Series 1 warrants and Series 2 warrants exercised 4,595,039 Series Warrants in exchange for 1,995,941 shares of the Company’s common stock. As of
December 31, 2020, all Series Warrants have been exercised.
F-26
In January 2020, the Company sold 3,036,719 shares of common stock, par value per share $0.0001 and Pre-Funded Warrants to purchase 1,338,287
shares of common stock. The offering price for the securities was $8.00 per share or $7.9999 for each pre-funded warrant. As a result of this offering, the
exercise price of Series 1 and Series 2 Warrants outstanding reset from $12.00 per share to $10.00 per share and from $18.00 per share to $13.00, respectively.
The Company recorded $3.9 million as a deemed dividend which represents the value transferred to the warrant holders due to the Series Warrant adjustment
mechanisms being triggered. The deemed dividend was recorded as both an increase and a decrease in Additional Paid in Capital and reduced net income
available to common stockholders by the same amount. The key inputs to the validation model included the weighted volatility of 96.74% and weighted
average expected term of 0.4 years.
In May 2020, the Company sold 6,388,889 shares of common stock, par value $0.0001 per share, at $18.00 per share, with net proceeds of
approximately $107.9 million.
In December 2020, the Company sold 6,250,000 shares of common stock, par value $0.0001 per share, at $23.00 per share, with net proceeds of
approximately $135.0 million.
In December 2021, the Company issued 3,802,144 shares of common stock and Pre-Funded Warrants to purchase 1,142,856 shares of common stock.
The offering price for the securities was $17.50 per share or $17.4999 for each Pre-Funded Warrant, with net proceeds of approximately $81.2 million.
In December 2021, in connection with the Incyte License and Collaboration Agreement and Share Purchase Agreement, the Company issued 1,421,523
shares of common stock, with net proceeds of approximately $35.0 million. The Company recorded the equity issuance at a fair value of $24.8 million based on
the market price of the stock on the date of issuance.
The Company has reserved for future issuance the following shares of common stock related to the potential warrant exercise, exercise of stock
options, and the employee stock purchase plan:
Common stock issuable under pre-funded warrants
Options to purchase common stock
Employee Stock Purchase Plan
Total
December 31, 2021
3,975,024
8,071,089
1,296,410
13,342,523
13. Stock-Based Compensation
In September 2015, the Company’s board of directors adopted its 2015 Omnibus Incentive Plan (“2015 Plan”), which was subsequently approved by its
stockholders and became effective upon the closing of the IPO on March 8, 2016. The 2015 Plan replaced the 2007 Stock Plan (“2007 Plan”) and allows for the
granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, unrestricted stock, stock units, dividend equivalent
rights, performance awards, annual incentive awards, and other equity-based awards to the Company’s executives and other employees, non-employee
members of the board of directors, and consultants of the Company. Any options or awards outstanding under the Company’s 2007 Plan remains outstanding
and effective. Any shares of common stock related to awards outstanding under the 2007 Plan that thereafter terminate by expiration, forfeiture, cancellation or
otherwise without the issuance of such shares will be added to, and included in, the 2015 Plan reserve amount. The Company initially reserved 1,750,000 shares
of its common stock for the issuance of awards under the 2015 Plan. As of December 31, 2021, there were 1,017,242 shares available for issuance under the
2015 Plan.
F-27
The 2015 Plan provides that the number of shares reserved and available for issuance under the 2015 Plan will automatically increase each January 1,
beginning on January 1, 2017, 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 Company’s board of directors. On January 1, 2022, the shares available for issuance under the 2015 Plan were increased to
3,215,376.
The Company recognized stock-based compensation expense related to the issuance of stock option awards to employees and non-employees and
related to the Employee Stock Purchase Plan in the consolidated statements of operations as follows (in thousands):
Research and development
General and administrative
Total
Stock Options and Restricted Stock Units
Years Ended December 31,
2020
2019
2021
$
$
4,398 $
8,919
13,317 $
2,400 $
6,657
9,057 $
2,061
3,944
6,005
As of December 31, 2021, there was $25.7 million of unrecognized compensation cost related to employee and non-employee unvested stock options
and restricted stock units (“RSU’s”) granted under the 2007 and 2015 Plans, which is expected to be recognized over a weighted-average remaining service
period of 2.8 years. Stock compensation costs have not been capitalized by the Company. As of December 31, 2021, there was $0.9 million of unrecognized
compensation cost related to performance-based options, and $24.8 million of unrecognized compensation expense related to service-based options.
Our stock-based awards are subject to either service or performance-based vesting conditions. Compensation expense related to awards to employees,
directors and non-employees with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated
service period of the award, which is generally the vesting term. Compensation expense related to awards to employees with performance-based vesting
conditions is recognized based on the grant date fair value over the requisite service period using the straight-line method to the extent achievement of the
performance condition is probable.
In 2017, the Company granted 60,000 options with performance conditions (“2017 Performance Awards”), 13,333 of which vested in 2019 and 6,667
which were cancelled as of December 31, 2019. On January 1, 2021, the Company determined that a second performance had not been achieved. As a result of
this, the Company cancelled 20,000 options. In the years ended December 31, 2021, 2020 and 2019 the Company recorded approximately $25,000, $9,000,
and $88,000, respectively of stock compensation associated with these awards.
In 2019, the Company granted to certain employees 583,000 stock options that contain performance-based vesting criteria (“2019 Performance
Awards”), primarily related to the achievement of certain clinical and regulatory development milestones related to product candidates. Recognition of stock-
based compensation expense associated with these performance-based stock options commences when the performance condition is considered probable of
achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones.
In the fourth quarter of 2020 one of the performance milestones for the 2019 Performance Awards was achieved and of the associated 194,331 stock
options, 64,777 stock options vested, and 388,669 options were cancelled. In 2021, 64,780 stock options vested with the remaining 64,774 options to vest in
2022. The Company recorded approximately $257,000 and $207,000 of stock compensation expense associated with these awards for the years ended
December 31, 2021 and 2020, respectively. For the remaining performance milestones, achievement of the performance conditions was not met as of December
31, 2021. Therefore no expense has been recognized related to these performance milestones for the year ended December 31, 2021, and no options were
cancelled in 2021.
In October 2021, in connection with the retirement of two employees, the Company entered into severance and consulting agreements. Under these agreements
the Company extended vesting term for a total of 34,728 unvested options unvested options, which would not have otherwise vested and extended the exercise
period of the vested
F-28
options post termination of the consulting agreement. The Company accounted for the change as a modification of an equity award under ASC 718. As a result
of the modifications, the Company recognized approximately $0.8 million of incremental stock compensation expense in 2021.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model with the weighted-average
assumptions noted in the table below. Expected volatility for the Company’s common stock was determined based on an average of the historical volatility of a
peer group of similar public companies. The Company estimated the expected term of its employee stock options using the “simplified” method, whereby, the
expected term equals the average of the vesting term and the original contractual term of the option. The contractual life of the option was used for the
estimated life of the non-employee grants. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable
future. The risk-free interest rate for periods within the expected life of the option is based upon the U.S. Treasury yield curve in effect at the time of grant. The
Company accounts for forfeitures when they occur. The grant date fair values of options issued to employees and non-employees were estimated using the
Black-Scholes option-pricing model with the following assumptions:
2021
Years Ended December 31,
2020
2019
Expected term (in years)
Volatility rate
Risk-free interest rate
Expected dividend yield
A summary of employee and non-employee option activity under the Company’s equity award plans is presented below (in thousands, except share
81.59%
1.20%
0.00%
85.84%
0.67%
0.00%
5.97
76.95%
2.29%
0.00%
5.97
6.02
data):
Outstanding—January 1, 2021
Granted
Exercised
Canceled, forfeited or expired
Outstanding—December 31, 2021
Exercisable—December 31, 2021
Options vested, exercisable or expected to
vest—December 31, 2021
Weighted
Average
Exercise
Price
9.40
20.61
7.82
15.57
Number of
Options
6,379,235 $
1,595,400 $
(842,424) $
(210,697) $
6,921,514
4,547,354
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
7.1 $
81,940
6.9 $
68,609
6.0 $
54,012
6,921,514
6.9 $
68,609
The weighted-average grant date fair value of options granted during the years ended December 31, 2021, 2020 and 2019, was $14.70, $7.88, and
$4.81 per share, respectively. The fair value is being expensed over the vesting period of the options (usually three to four years) on a straight-line basis as the
services are being provided.
There were 842,424 options exercised for the year ended December 31, 2021, resulting in total proceeds of $6.3 million; 755,166 options exercised for
the year ended December 31, 2020, resulting in total proceeds of $6.6 million; and 25,857 options exercised for the year ended December 31, 2019, resulting in
total proceeds of $178,000. The intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019 was $10.1 million, $7.1 million,
and $9,000, respectively. In accordance with the Company’s policy, the shares were issued from a pool of shares reserved for issuance under the 2007 and 2015
Plans.
Restricted Stock Units
RSUs awarded to Board of Directors or employees vest on either i) one – year anniversary date of the related grant or ii) 25% on each anniversary for 4
years. The following table summarizes our RSU activity:
F-29
Number of
Shares
Weighted
Average
Grant Date Fair
Value
Unvested—December 31, 2020
Granted
Vested
Forfeited
Unvested—December 31, 2021
(1) RSUs granted in 2021 primarily represent RSUs granted in conjunction with our annual awards made in February 2021granted to our Board of Directors.
18,500 $
119,333 $
(5,500) $
- $
132,333
10.48
21.19
11.17
-
RSU’s granted in 2021 and 2020 had a weighted average grant date fair value of $21.19 and $10.48, respectively. There were no RSU’s granted in
2019. The fair values of RSU’s vested in 2021 totaled $60,000. There were no RSU’s vested in 2020.
Employee Stock Purchase Plan
In September 2015, the Company’s Board adopted the Employee Stock Purchase Plan (the “ESPP”), which was subsequently approved by the
Company’s stockholders in February 2016 and became effective upon the closing of the IPO on March 8, 2016. The ESPP authorizes the initial issuance of up
to a total of 250,000 shares of common stock to the Company’s employees. The Company issued 26,878 and 33,706 shares during 2021 and 2020, respectively.
On January 1, 2022, the shares of common stock reserved for issuance under the ESPP was increased to 1,546,410. Under the terms of the ESPP, eligible
employees can elect to acquire shares of the Company’s common stock through periodic payroll deductions during a series of six month offering periods.
Purchases under the ESPP are affected on the last business day of each offering period at a 15% discount to the lower of closing price on that day or the closing
price on the first day of the offering period.
The ESPP is considered a compensatory plan with the related compensation cost expensed over the six-month offering period. For the years ended
December 31, 2021, 2020 and 2019 the Company recorded stock-based compensation expense related to the ESPP of $175,000, $203,000 and $113,000
respectively.
Employee Benefit Plan
The Company has a Section 401(k) defined contribution savings plan for its employees. The plan covers substantially all employees who meet
minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pretax basis, subject to legal limitations.
Company contributions to the plan may be made at the discretion of the Board. For the years ended December 31, 2021, 2020 and 2019, the Company made
$444,000, $250,000 and $119,000 contributions to the plan, respectively.
14. Loan Payable
In February 2020, the Company entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), which
provided for aggregate maximum borrowings of up to $30.0 million, consisting of (i) a term loan of up to $20.0 million, which was funded on February 7, 2020
(the “Initial Advance”), and (ii) subject to Hercules’ investment committee approval, an additional term loan of up to $10.0 million, available for borrowing
from February 7, 2020 to December 15, 2020 (the “Tranche 2 Advance”). The Company elected not to draw the additional term of $10.0 million. Borrowings
under the Loan Agreement bear interest at an annual rate equal to the greater of (i) 9.85% or (ii) 5.10% plus the Wall Street Journal prime rate. The company
paid a $100,000 facility charge upon closing, which is being expensed over the term of the debt. The final payment will be accrued over the term of the debt.
On December 22, 2021, the Company entered into Amendment No. 1 to the Company’s Loan and Security Agreement (the “First Amendment”) with
the several banks and financial institutions or entities from time-to-time party thereto (collectively, the “Lender”) and Hercules Capital, Inc., in its capacity as
administrative agent for itself and the Lender (in such capacity, the “Agent”). The First Amendment amended that certain Loan and Security
F-30
Agreement dated as of February 7, 2020 (the “Loan Agreement,” as amended by the First Amendment, the “Amended Loan Agreement”) among the Borrower,
the Lender and the Agent. The First Amendment was accounted for a modification during the year ended December 31, 2021.
The First Amendment increases the amount that the Company may borrow by $50.0 million, from up to $30.0 million to up to $80.0 million, in
multiple tranches. The First Amendment increases the second tranche (“Tranche 2”) from $10.0 million to $30.0 million with $15.0 million being available at
the Company’s option through April 30, 2022 and another $15.0 million being available at the Company’s option through November 30, 2022, which
availability period will be extended to April 30, 2023 if the first $15.0 million is drawn prior to April 30, 2022. The First Amendment also provides for a third
tranche of $30.0 million (“Tranche 3”), which is available, subject to the Agent’s investment committee approval, through the Interest-Only Period (as defined
below). The Company’s only borrowings to date under the Loan Agreement are the first tranche of $20.0 million, which the Company drew upon the closing of
the Loan Agreement on February 7, 2020.
Additionally, the First Amendment, among other things, (i) extended the expiration of the period in which interest-only payments on borrowings under
the Loan Agreement are required from October 1, 2021 to January 1, 2023, which is further extendable to December 31, 2023 upon the partial or full draw of
Tranche 2 (the “Interest-Only Period”), (ii) extended the maturity date of Loan Agreement from September 1, 2023 to April 1, 2024, (iii) decreased the annual
interest rate from the greater of (w) 9.85% or (x) 5.10% plus the Wall Street Journal prime rate to the greater of (y) 9.25% or (z) 6.00% plus the Wall Street
Journal prime rate, (iv) applies a facility charge equal to 0.50% of any future draws, (v) applies a 4.99% end of term charge to any future draws payable on the
maturity date, (vi) permits the entry into the Collaboration and License Agreement as previously disclosed with Incyte Corporation, and (vii) adds a minimum
cash covenant applicable on the occurrence of certain events. The First Amendment also resets the prepayment premium requirements as of the date of the First
Amendment so that any prepayments are subject to a prepayment premium equal to (i) 2.0% of the principal amount outstanding if the prepayment occurs
during the first year following the First Loan Amendment, (ii) 1.5% of the principal amount outstanding if the prepayment occurs during the second year
following the First Loan Amendment, and (iii) 1.0% of the principal amount outstanding at any time thereafter but prior to the Maturity Date.
Borrowings under the Amended Loan Agreement are collateralized by substantially all of the Company’s and its subsidiaries personal property and
other assets, other than its intellectual property. The Amended Loan Agreement includes a minimum cash covenant of $12.5 million that has applied since
October 1, 2020, subject to reduction upon satisfaction of certain conditions as set forth in the Amended Loan Agreement. As of December 31, 2020, the
conditions set forth in the Loan Agreement were met. The cash covenant of $12.5 million was waived. In addition, the Amended Loan Agreement includes
customary affirmative and restrictive covenants and representations and warranties, including a minimum cash covenant applicable on the occurrence of certain
events, a covenant against the occurrence of a “change in control,” financial reporting obligations, and certain limitations on indebtedness, liens (including a
negative pledge on intellectual property and other assets), investments, distributions (including dividends), collateral, investments, distributions, transfers,
mergers or acquisitions, taxes, corporate changes, and deposit accounts. The Amended Loan Agreement also includes customary events of default, including
payment defaults, breaches of covenants following any applicable cure period, the occurrence of certain events that could reasonably be expected to have a
“material adverse effect” as set forth in the Amended Loan Agreement, cross acceleration to third-party indebtedness and certain events relating to bankruptcy
or insolvency. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% may be applied to the outstanding principal balance, and
Hercules may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Amended Loan Agreement.
In connection with the Amended Loan Agreement, the Company was required to enter into separate deposit account control agreements with the lender
in order to perfect the lender’s security interest in the cash collateral in the Company’s operating accounts. In the event of a default under the Amended Loan
Agreement, the lender would have the right to take control of the operating accounts and restrict the Company’s access to the operating accounts and the funds
therein.
During the year ended December 31, 2021 the Company recognized $1.9 million of interest expense related to the Initial Advance pursuant to the
Amended Loan Agreement.
F-31
As of December 31, 2021, the Company’s maturities of principal obligations under its long-term debt are as follows:
Amount
2022
2023
2024
Total principal outstanding
Amortized final fee
Unamortized debt issuance costs
Total
Term loan, current portion
Term loan, less current portion
15. Income Taxes
$
$
—
14,764,764
5,235,236
20,000,000
17,591
(122,927)
19,894,664
-
19,894,664
The Company has not recorded any net tax provision for the periods presented due to the utilization of tax attributes to offset current year federal and
state taxable income, the historical losses incurred, and the need for a full valuation allowance on deferred tax assets. The Company’s current year profit and
historical losses before income tax for the periods presented was generated entirely in the United States.
A reconciliation of the provision for income taxes computed at the statutory federal income tax rate to the provision for income taxes as reflected in the
financial statements is as follows:
Income tax computed at federal statutory rate
State taxes, net of federal benefit
General business credit carryovers
Non-deductible expenses
Change in valuation allowance
Other
The significant components of the Company’s deferred tax are as follows (in thousands):
Deferred tax assets (liabilities):
Net operating loss carryforwards
Research and development credits
Capitalized start-up and other costs
Capitalized research and development costs
Deferred revenue
Equity based compensation
Accruals
Other temporary differences
Deferred tax assets before valuation allowance
Valuation allowances
Net deferred tax assets
2021
Years Ended December 31,
2020
2019
21.0%
2.9%
-5.0%
-0.5%
-19.2%
0.8%
0.0%
21.0%
1.8%
0.9%
0.0%
-23.7%
0.0%
0.0%
21.0%
2.1%
0.9%
-0.8%
-22.8%
-0.4%
0.0%
Years Ended
December 31,
2021
2020
$
$
17,642
6,113
34,898
31,365
—
6,277
845
10
97,150
(97,150)
—
$
$
22,794
4,856
28,854
35,632
2,989
5,117
1,657
29
101,928
(101,928)
—
The Company has provided a valuation allowance for the full amount of the net deferred tax assets as the realization of the deferred tax assets is not
determined to be more likely than not. The valuation allowance decreased by $4.8 million in 2021 due to the decrease in deferred tax assets, primarily driven by
the utilization of tax attributes to offset federal and state taxable income, partially offset by an increase to other deferred tax assets. The valuation allowance
increased by $17.5 million in 2020 due to the increase in deferred tax assets, primarily driven by net operating loss carryforwards and capitalized research and
development costs.
F-32
As of December 31, 2021, the Company had approximately $73.5 million and $34.6 million in federal and state Net Operating Losses (“NOLs”),
respectively, which may be available to offset future taxable income. The Company has generated federal NOLs of $48.5 million which have an indefinite
carryforward period. The remaining $25.0 million of federal NOLs and the Company’s state NOLs will begin to expire at various dates starting in 2026.
As of December 31, 2021, the Company had federal and state research credits of $4.1 million and $2.5 million, respectively, which begin to expire in
2022.
Realization of future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating
loss carryforward period. Under the Internal Revenue Code provisions, certain substantial changes in the Company’s ownership, including the sale of the
Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss
carryforwards which could be used annually to offset future taxable income. The Company completed an analysis through December 31, 2020 and determined
that on March 30, 2007, August 21, 2015 and May 4, 2020 ownership changes had occurred. The Company may also experience ownership changes in the
future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. As a result, its ability to use its pre-change NOLs to
offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability. In addition, at the state level,
there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
As of December 31, 2021, and 2020, the Company had uncertain tax positions of $0.2 million related to research and development credits, which
reduce the deferred tax assets with a corresponding decrease to the valuation allowance. The Company has elected to recognize interest and penalties related to
income tax matters as a component of income tax expense, of which no interest or penalties were recorded for the years ended December 31, 2021 and 2020.
The Company expects none of the unrecognized tax benefits to decrease within the next 12 months related to expired statutes or settlement with the taxing
authorities. Due to the Company’s valuation allowance as of December 31, 2021, none of the Company’s unrecognized tax benefits, if recognized, would affect
the effective tax rate.
A reconciliation of the Company’s unrecognized tax benefits is as follows (in thousands):
Unrecognized tax benefit--beginning of year
Decreases related to prior period positions
Unrecognized tax benefit--end of year
Years Ended December 31,
2020
2019
2021
$
$
163
—
163
$
$
163 $
—
163 $
163
—
163
The Company files tax returns in the United States, Massachusetts, California, New Jersey, New York, Rhode Island and Pennsylvania. All tax years
since inception (October 11, 2005) remain open to examination by major tax jurisdictions to which the Company is subject, as carryforward attributes generated
in years past may still be adjusted upon examination by the Internal Revenue Service or state tax authorities 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.
16. Commitments and Contingencies
License Agreements
Incyte – In September 2021, the Company entered into the Incyte Agreement and Incyte Stock Purchase Agreement. Under the terms of the Incyte
Agreement, Incyte will receive exclusive commercialization rights of axatilimab outside of the United States. In the United States, Incyte and the Company
will co-commercialize
F-33
axatilimab, with the Company having the right to co-promote the product with Incyte. In exchange for these rights, Incyte agreed to pay a non-refundable cash
payment of $117 million and in addition a $35 million equity investment. In certain cases, the Company is required to assist Incyte and is responsible for 45%
of development costs associated with global and U.S. specific clinical trials.
NovaMedica—In August 2013, in connection with the third tranche of its Series B-1 financing, the Company entered into a Technology Transfer
Agreement (the “Tech Transfer Agreement”) with Domain Russia Investments Limited (“DRI”). Pursuant to the Tech Transfer Agreement, in exchange for
nominal payment, the Company assigned to DRI certain patent applications and granted to DRI a license to develop and commercialize entinostat in certain
Eastern European countries (the “Covered Territory”). The Company concurrently entered into a sublicense agreement with DRI (the “DRI Sublicense”) and a
sublicense agreement (the “NovaMedica Sublicense”) with NovaMedica LLC (“NovaMedica”), which is jointly owned by Rusnano Medinvest LLC and DRI.
Pursuant to the DRI Sublicense, the Company granted to DRI an exclusive sublicense to develop, manufacture and commercialize entinostat in the Russian
Federation. Pursuant to the NovaMedica Sublicense, the Company granted to NovaMedica an exclusive sublicense to develop, manufacture and commercialize
entinostat in the rest of the Covered Territory. Immediately thereafter, the Company, DRI and NovaMedica executed an assignment and assumption agreement,
pursuant to which the assigned patents and all of DRI’s rights and obligations under the Tech Transfer Agreement and the DRI Sublicense were transferred to
NovaMedica. Under the Tech Transfer Agreement, in certain cases, the Company is required to assist NovaMedica, and NovaMedica is required to reimburse
the Company for any out-of-pocket expenses incurred in providing this assistance, including travel-related expenses.
Eddingpharm—In April 2013, the Company entered into a License and Development Agreement (the “Eddingpharm License Agreement”) and a Series
B-1 purchase agreement (the “Eddingpharm Purchase Agreement”) with Eddingpharm International Company Limited (“Eddingpharm”). Under the terms of
the Eddingpharm License Agreement, Eddingpharm, in exchange for rights to develop and commercialize entinostat in China and certain other Asian countries,
purchased $5.0 million of Series B-1 and agreed to make certain contingent milestone and royalty payments based on revenue targets. In certain cases, the
Company is required to assist Eddingpharm, and Eddingpharm is required to reimburse the Company for any out-of-pocket expenses incurred in providing this
assistance, including reimbursement for person-hours above a certain cap.
Sublicensing Revenue
On February 17, 2022, UCB Biopharma SRL (“UCB”) sent the Company a demand for payment alleging that the Company is obligated to pay a
portion of the consideration that the Company has received or will receive in the future pursuant to the License Agreement as sublicensing revenue. The
Company believes that it has fully satisfied its payment obligation and is in discussions with UCB regarding the matter.
From time to time, the Company may be subject to various claims and proceedings in the ordinary course of business. If the potential loss from any
claim, asserted or unasserted, or proceeding is considered probable and the amount is reasonably estimable, the Company will accrue a liability for the
estimated loss. There were no contingent liabilities recorded as of December 31, 2021 or 2020.
17. Supplemental Cash Flow Information
Supplemental Disclosures of Cash Flow Information
Interest paid
Supplemental Disclosures of Non-Cash Investing and Financing
Activities:
Issuance costs included in accounts payable and accrued expenses
F-34
Years Ended December 31,
2020
2021
2019
(In thousands)
$
1,997 $
1,631 $
—
$
134 $
43 $
—
F-35
AMENDED & RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.16
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of the
2nd day of February, 2022 (the “Effective Date”), between Briggs W. Morrison, M.D. (“Executive”) and SYNDAX PHARMACEUTICALS,
INC. (the “Company”). Certain capitalized terms used in this Agreement are defined in Article 7.
A.
B.
The Company is a biopharmaceutical company.
RECITALS
The Company desires to employ Executive, or to continue Executive’s employment, in the position set forth below,
and Executive wishes to be employed, or continue to be employed, by the Company in such position, upon the terms and conditions set forth in
this Agreement.
follows:
NOW, THEREFORE, in consideration of the mutual promises contained herein, the Company and Executive agree as
AGREEMENT
ARTICLE 1
PRELIMINARY MATTERS
1.1.
Prior Agreement. This Agreement, on its Effective Date, amends, restates and supersedes the Prior Employment
Agreement.
1.2.
Effectiveness of Agreement. This Agreement shall be effective and shall supersede the Prior Employment
Agreement concurrently with the Effective Date.
ARTICLE 2
TERMS OF EMPLOYMENT
2.1.
Appointment. Executive shall serve as the President, Head of Research and Development, reporting to the Chief
Executive Officer and ultimately to the Board. As President, Head of Research and Development, Executive will have such duties and
responsibilities typically associated with such officer plus other duties as may from time to time be assigned to Executive. During Executive’s
employment with the Company, Executive shall (i) devote substantially all of Executive’s business efforts to the Company, provided, however,
that Executive may continue to serve as a managing director of MPM Asset Management, LLC and as a member of corporate boards of directors,
so long as such activities do not materially interfere with the discharge of Executive’s duties as Chief Executive Officer, and (ii) faithfully and to
the best of Executive’s abilities and experience, and in accordance with the standards and ethics of the business in which the Company is
engaged, perform all duties that may be required of Executive by this Agreement, the Company’s policies and procedures, and such other duties
and responsibilities as may be assigned to Executive from time to time, as well as the directives of the Board. During Executive’s employment
with the Company, Executive shall not engage in any activity that conflicts with or is detrimental to the Company’s best interests, as determined
by the Board.
2.2.
Employment Term. Executive will be employed by the Company on an “at-will” basis. This means that either
the Company or Executive may terminate Executive’s employment at any time, for any reason, with or without Cause, and with or without
advance notice (provided that Resignation for Good Reason (as defined below) requires certain advanced notice by Executive of Executive’s
termination of employment). It also means that Executive’s job title, duties, responsibilities, reporting level, compensation
and benefits, as well as the Company’s personnel policies and procedures, may be changed with or without notice at any time in the Company’s
sole discretion. This at-will employment relationship shall not be modified by any conflicting actions or representations of any Company
employee or other party before or during the term of Executive’s employment.
Compensation.
2.3.
a)
Annual Base Salary. Executive’s annual base salary shall be $637,500 per year (“Annual Base
Salary”), payable in equal installments, less applicable deductions and withholdings, in accordance with the Company’s standard payroll
practices. Executive’s Annual Base Salary shall be subject to review by the Company’s compensation committee and may be increased, from
time to time.
b)
Benefits. Executive will be entitled to participate in all of the employee benefits and benefit plans that the
Company generally makes available to its full-time employees and executives and for which Executive is eligible in accordance with the
Company’s policies as in effect from time to time. These benefits are subject to the terms, conditions, and eligibility requirements that govern or
apply to them. Notwithstanding the foregoing, if applicable, the Company shall make a group health plan available to Executive, which provides
applicable coverage at both Executive’s permanent residence and Executive’s principal place of employment. From time to time and as the Board
deems appropriate, Executive may be eligible to receive options to purchase the Company’s common stock.
c)
Bonus. In addition to Annual Base Salary, Executive shall be eligible to earn an annual performance bonus of up
to fifty percent (50%) of Executive’s Annual Base Salary, which bonus shall be earned upon Executive’s attainment of objectives to be
determined by the Board (or the compensation committee thereof, as such determination may be delegated by the Board to the compensation
committee) and continued employment with the Company as described below (the “Target Performance Bonus”). For clarity, it is expected that
Executive will propose corporate objectives for each calendar year that will be Executive’s individual performance milestones. The Board will
work with Executive to revise and refine these annual corporate objectives until a mutually acceptable set of corporate objectives is approved by
the Board. The Board may award Executive a Target Performance Bonus for partial achievement of objectives and may grant Executive a higher
bonus for exceptional performance. At Executive’s request, these annual corporate objectives may be revised in the discretion of the Board during
the course of the year depending on changed circumstances. The amount of and Executive’s eligibility for the Target Performance Bonus shall be
determined in the sole discretion of the Board (or the compensation committee thereof, as such determination may be delegated by the Board to
the compensation committee). If earned, any Target Performance Bonus shall be paid to Executive, less authorized deductions and applicable
withholdings, on or before the February 15th following the calendar year during which such bonus was earned. Except as provided in Sections
3.2 and 4.2, Executive shall be eligible to earn the Target Performance Bonus only if Executive is actively employed and in good standing with
the Company on both the determination and payment dates for the Target Performance Bonus.
2.4.
Reimbursement of Expenses. Subject to Section 5.10(c), the Company shall reimburse Executive for
Executive’s necessary and reasonable business expenses incurred in connection with Executive’s duties in accordance with the Company’s
generally applicable policies. Executive and the Company acknowledge that Executive will be required to spend a certain amount of time each
month at the Company’s Waltham headquarters. Accordingly, the Company will reimburse, or pay for, all reasonable expenses incurred by
Executive in connection with commuting between the Company’s Waltham office and Executive’s current principal residence in New Jersey,
including Executive’s actual and reasonable living expenses incurred in the Waltham area and Executive’s actual and reasonable commuting
expenses incurred between Waltham and Executive’s current principal residence in New Jersey. Executive will not be expected to relocate his
residence to Waltham, but should Executive choose to relocate his residence to Waltham, the Company will pay for Executive’s relocation. The
foregoing
2
provisions of this Section 2.4 are subject to Section 5.10(c).
ARTICLE 3
CHANGE IN CONTROL SEVERANCE BENEFITS
3.1.
Severance Benefits. Upon a Change in Control Termination, and subject to the limitations and conditions set
forth in this Agreement, Executive shall be eligible to receive the benefits set forth in this Article 3. The receipt of any severance payments or
benefits pursuant to this Agreement is subject to Executive signing and not revoking a separation agreement and general release of claims (the
“Release”), in substantially the form attached hereto and incorporated herein as Exhibit A, Exhibit B or Exhibit C, as appropriate, which
Release must become effective and irrevocable no later than the sixtieth (60th) day following Executive’s termination of employment (the
“Release Deadline Date”). If the Release does not become effective and irrevocable by the Release Deadline Date, Executive will forfeit any
right to any severance payments or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the
Release actually becomes effective and irrevocable.
3.2.
Salary and Pro-Rata Bonus Payment. In consideration of Executive’s execution and non-revocation of the
Release by the Release Deadline Date, in a form provided by the Company and in accordance with Article 5, the Company shall pay Executive a
severance payment equal to (i) the sum of Executive’s Monthly Base Salary and Pro-Rata Bonus multiplied by (ii) the number of months in the
Change in Control Severance Period, less applicable withholdings. The severance payment shall be payable (except as set forth in Article 5) in a
lump sum on the first regularly-scheduled payroll date occurring on or after the Release Deadline Date.
3.3.
Health Continuation Coverage.
a)
Provided that Executive is eligible and has made the necessary elections for continuation coverage
pursuant to COBRA under a health, dental or vision plan sponsored by the Company, the Company shall pay the applicable premiums (inclusive
of premiums for Executive’s dependents for such health, dental or vision plan coverage as in effect immediately prior to the date of the Change in
Control Termination) for such continued health, dental or vision plan coverage following the date of the Change in Control Termination for up to
the number of months equal to the Change in Control Benefits Period (but in no event after such time as Executive is eligible for coverage under
a health, dental or vision insurance plan of a subsequent employer or as Executive and Executive’s dependents are no longer eligible for COBRA
coverage); provided that if continued payment by the Company of the applicable premiums would result in a violation of the nondiscrimination
rules of Section 105(h)(2) of the Internal Revenue Code of 1986, as amended, or any statute or regulation of similar effect (including, without
limitation, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in
lieu of providing such continued payment, the Company will instead pay Executive on the first day of each month a fully taxable cash payment
equal to the applicable premiums for that month, subject to applicable tax withholdings, for the remainder of the Change in Control Benefits
Period. Such coverage shall be counted as coverage pursuant to COBRA. The Company shall have no obligation in respect of any premium
payments (or any other payments in respect of health, dental or vision coverage from the Company) following the effective date of Executive’s
coverage by a health, dental or vision insurance plan of a subsequent employer. Executive shall be required to notify the Company immediately if
Executive becomes covered by a health, dental or vision insurance plan of a subsequent employer. If Executive and Executive’s dependents
continue coverage pursuant to COBRA following the conclusion of the Change in Control Benefits Period, Executive will be responsible for the
entire payment of such premiums required under COBRA for the duration of the COBRA period.
For purposes of this Section 3.3, (i) references to COBRA shall be deemed to refer also to analogous provisions
of state law, and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by Executive under
a Code Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of Executive.
b)
3
3.4.
Stock Awards. Upon a Change in Control Termination, (i) the vesting and exercisability of all outstanding
options to purchase the Company’s common stock (or stock appreciation rights or other rights with respect to the stock of the Company issued
pursuant to any equity incentive plan of the Company) that are held by Executive on the Termination Date shall be accelerated in full, (ii) any
reacquisition or repurchase rights held by the Company with respect to common stock issued or issuable (or with respect to other rights with
respect to the stock of the Company issued or issuable) pursuant to any other stock award granted to Executive pursuant to any equity incentive
plan of the Company shall lapse and (iii) the time period that Executive has to exercise any outstanding options to purchase the Company’s
common stock that are held by Executive on the Termination Date shall be extended for a period equal to the shorter of (A) twelve (12) months
or (B) the remaining term of the outstanding option.
ARTICLE 4
COVERED TERMINATION SEVERANCE BENEFITS
4.1.
Severance Benefits. Upon a Covered Termination, and subject to the limitations and conditions set forth in this
Agreement, Executive shall be eligible to receive the benefits set forth in this Article 4. The receipt of any severance payments or benefits
pursuant to this Agreement is subject to Executive signing and not revoking the appropriate Release, which Release must become effective and
irrevocable no later than the Release Deadline Date. If the Release does not become effective and irrevocable by the Release Deadline Date,
Executive will forfeit any right to any severance payments or benefits under this Agreement. In no event will severance payments or benefits be
paid or provided until the Release actually becomes effective and irrevocable.
4.2.
Salary Payment. In consideration of Executive’s timely execution and non-revocation of a full release of all
claims, in a form provided by the Company and in accordance with Article 5, the Company shall pay Executive a severance payment equal to the
sum of (i) Executive’s Monthly Base Salary multiplied by the number of months in the Covered Termination Severance Period and (ii) the Target
Performance Bonus as in effect on the date of a Covered Termination multiplied by the number of days Executive was employed in the year of
the Covered Termination divided by the total number of days in such year, less applicable withholdings. The severance payment shall be payable
(except as set forth in Article 5) in a lump sum on the first regularly-scheduled payroll date occurring on or after the Release Deadline Date.
4.3.
Health Continuation Coverage.
Provided that Executive is eligible and has made the necessary elections for continuation coverage pursuant to
a)
COBRA under a health, dental or vision plan sponsored by the Company, the Company shall pay for the applicable premiums (inclusive of
premiums for Executive’s dependents for such health, dental or vision plan coverage as in effect immediately prior to the date of the Covered
Termination) for such continued health, dental or vision plan coverage following the date of the Covered Termination for up to the number of
months equal to the Covered Termination Benefits Period (but in no event after such time as Executive is eligible for coverage under a health,
dental or vision insurance plan of a subsequent employer or as Executive and Executive’s dependents are no longer eligible for COBRA
coverage); provided that if continued payment by the Company of the applicable premiums would result in a violation of the nondiscrimination
rules of Section 105(h)(2) of the Internal Revenue Code of 1986, as amended, or any statute or regulation of similar effect (including, without
limitation, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in
lieu of providing such continued payment, the Company will
4
instead pay Executive on the first day of each month a fully taxable cash payment equal to the applicable premiums for that month, subject to
applicable tax withholdings, for the remainder of the Covered Termination Benefits Period. Such coverage shall be counted as coverage pursuant
to COBRA. The Company shall have no obligation in respect of any premium payments (or any other payments in respect of health, dental or
vision coverage from the Company) following the effective date of Executive’s coverage by a health, dental or vision insurance plan of a
subsequent employer. Executive shall be required to notify the Company immediately if Executive becomes covered by a health, dental or vision
insurance plan of a subsequent employer. If Executive and Executive’s dependents continue coverage pursuant to COBRA following the
conclusion of the Covered Termination Benefits Period, Executive will be responsible for the entire payment of such premiums required under
COBRA for the duration of the COBRA period.
For purposes of this Section 4.3, (i) references to COBRA shall be deemed to refer also to analogous provisions
of state law, and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts payable by Executive under
a Code Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of Executive.
b)
4.4.
Stock Awards. Upon a Covered Termination:
a)
the vesting and exercisability of all outstanding options to purchase the Company’s common stock (or stock
appreciation rights or other rights with respect to the stock of the Company issued pursuant to any equity incentive plan of the Company) that are
held by Executive on the Termination Date shall be accelerated as to the number of shares of common stock issuable upon exercise of such option
(“Option Shares”) as equals the number of Option Shares as would otherwise vest during the twelve (12) month period following the
Termination Date in accordance with the applicable options’ vesting schedule were the Executive to remain an employee of the Company during
such twelve (12) month period (disregarding any other basis for acceleration of vesting of Option Shares during such twelve (12) month period);
b)
any reacquisition or repurchase rights held by the Company with respect to common stock issued or issuable (or
with respect to other rights with respect to the stock of the Company issued or issuable) pursuant to any option to purchase the Company’s
common stock (or stock appreciation rights or other rights with respect to the stock of the Company) (“Restricted Shares”) held by the Executive
as of the Termination Date shall lapse as to the number of Restricted Shares as equals the number of Restricted Shares as to which such
reacquisition or repurchase rights would otherwise lapse during the twelve (12) month period following the Termination Date in accordance with
the option’s vesting schedule were the Executive to remain an employee of the Company during such twelve (12) month period (disregarding any
other basis for acceleration of the lapsing of such reacquisition or repurchase rights on Restricted Shares during such twelve (12) month period);
and
c)
the time period that Executive has to exercise any outstanding options to purchase the Company’s common stock
that are held by Executive on the Termination Date shall be extended for a period equal to the shorter of (A) twelve (12) months or (B) the
remaining term of the outstanding option.
ARTICLE 5
LIMITATIONS AND CONDITIONS ON BENEFITS
5.1.
Rights Conditioned on Compliance. Executive’s rights to receive all severance benefits described in Article 3
and Article 4 shall be conditioned upon and subject to Executive’s compliance with the limitations and conditions on benefits as described in this
Article 5.
5.2.
Continuation of Service Until Date of Termination. Executive shall continue to provide service to the Company
in good faith until the Termination Date, unless such performance is otherwise excused in writing by the Company.
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5.3.
Release Prior to Payment of Benefits. Upon the occurrence of a Change in Control Termination or a Covered
Termination, as applicable, and prior to Executive earning any entitlement to any severance or separation benefits under this Agreement on
account of such Change in Control Termination or Covered Termination, as applicable, Executive must execute the appropriate Release, and such
Release must become effective in accordance with its terms, but in no event later than the Release Deadline Date. No amount shall be paid prior
to such date. Instead, on the first regularly-scheduled payroll date occurring on or after the Release Deadline Date, the Company will pay
Executive the severance amount that Executive would otherwise have received on or prior to such date but for the delay in payment related to the
effectiveness of the Release, with the balance of the severance amount being paid as originally scheduled. The Company may modify the Release
in its discretion to comply with changes in applicable law at any time prior to Executive’s execution of such Release. Such Release shall
specifically relate to all of Executive’s rights and claims in existence at the time of such execution and shall confirm Executive’s obligations
under the Confidentiality Agreement and any similar obligations under applicable law. It is understood that, as specified in the applicable
Release, Executive has a certain number of calendar days to consider whether to execute such Release. If Executive does not execute and deliver
such Release within the applicable period, no benefits shall be provided or payable under this Agreement, and Executive shall have no further
rights, title or interests in or to any severance benefits or payments pursuant to this Agreement. It is further understood that if Executive is age 40
or older at the time of a Change in Control Termination or a Covered Termination, as applicable, Executive may revoke the applicable Release
within seven (7) calendar days after its execution by Executive. If Executive revokes such Release within such subsequent seven (7) day period,
no benefits shall be provided or payable under this Agreement pursuant to such Change in Control Termination or Covered Termination, as
applicable.
5.4.
Return of Company Property. Not later than the Termination Date, Executive shall return to the Company all
documents (and all copies thereof) and other property belonging to the Company that Executive has in his or her possession or control. The
documents and property to be returned include, but are not limited to, all files, correspondence, email, memoranda, notes, notebooks, records,
plans, forecasts, reports, studies, analyses, compilations of data, proposals, agreements, financial information, research and development
information, marketing information, operational and personnel information, databases, computer-recorded information, tangible property and
equipment (including, but not limited to, computers, facsimile machines, mobile telephones and servers), credit cards, entry cards, identification
badges and keys, and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all
reproductions thereof in whole or in part). Executive agrees to make a diligent search to locate any such documents, property and information. If
Executive has used any personally owned computer, server or e-mail system to receive, store, review, prepare or transmit any Company
confidential or proprietary data, materials or information, then within ten (10) business days after the Termination Date, Executive shall provide
the Company with a computer- useable copy of all such information and then permanently delete and expunge such confidential or proprietary
information from those systems. Executive agrees to provide the Company access to Executive’s system as requested to verify that the necessary
copying and/or deletion is done.
5.5.
Cooperation and Continued Compliance with Restrictive Covenants.
a)
From and after the Termination Date, Executive shall cooperate fully with the Company in connection with its
actual or contemplated defense, prosecution or investigation of any existing or future litigation, arbitrations, mediations, claims, demands, audits,
government or regulatory inquiries, or other matters arising from events, acts or failures to act that occurred during the time period in which
Executive was employed by the Company (including any period of employment with an entity
6
acquired by the Company). Such cooperation includes, without limitation, being available upon reasonable notice, without subpoena, to provide
accurate and complete advice, assistance and information to the Company, including offering and explaining evidence, providing truthful and
accurate sworn statements, and participating in discovery and trial preparation and testimony. Executive also agrees to promptly send the
Company copies of all correspondence (for example, but not limited to, subpoenas) received by Executive in connection with any such legal
proceedings, unless Executive is expressly prohibited by law from so doing. The Company will reimburse Executive for reasonable out-of-pocket
expenses incurred in connection with any such cooperation (excluding foregone wages, salary or other compensation) within thirty (30) days of
Executive’s timely presentation of appropriate documentation thereof, in accordance with the Company’s standard reimbursement policies and
procedures, and will make reasonable efforts to accommodate Executive’s scheduling needs.
Confidentiality Agreement (and any other comparable agreement signed by Executive), in accordance with its terms.
b)
From and after the Termination Date, Executive shall continue to abide by all of the terms and provisions of the
c)
Executive agrees that the choice of law and choice of forum provisions in Section
10.10 of the Confidentiality Agreement shall be amended to conform to the choice of law and choice of forum provisions in Section 8.11 of this
Agreement. No other terms of the Confidentiality Agreement are amended by this Agreement, and the Confidentiality Agreement remains in full
force and effect.
d)
Executive acknowledges and agrees that Executive’s obligations under this Section 5.5 are an essential part of
the consideration Executive is providing hereunder in exchange for which and in reliance upon which the Company has agreed to provide the
payments and benefits under this Agreement. Executive further acknowledges and agrees that Executive’s violation of this Section 5.5 inevitably
would involve use or disclosure of the Company’s proprietary and confidential information. Accordingly, Executive agrees that Executive will
forfeit, effective as of the date of any breach, any right, entitlement, claim or interest in or to any unpaid portion of the severance payments or
benefits provided in Article 3 or Article 4. If it is determined by a court of competent jurisdiction in any state that any restriction in this Section
5.5 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such
restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.
5.6.
Parachute Payments.
a)
Parachute Payment Limitation. If any payment or benefit (including payments and benefits pursuant to this
Agreement) Executive would receive in connection with a Change in Control from the Company or otherwise (“Payment”) would (i) constitute a
“parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this paragraph, be subject to the excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then the Company shall cause to be determined, before any amounts of the Payment are paid to
Executive, which of the following two alternative forms of payment shall be paid to Executive: (A) payment in full of the entire amount of the
Payment (a “Full Payment”), or (B) payment of only a part of the Payment so that Executive receives the largest payment possible without the
imposition of the Excise Tax (a “Reduced Payment”). A Full Payment shall be made in the event that the amount received by Executive on a net
after-tax basis is greater than what would be received by Executive on a net after-tax basis if the Reduced Payment were made, otherwise a
Reduced Payment shall be made. If a Reduced Payment is made, (i) the Payment shall be paid only to the extent permitted under the Reduced
Payment alternative, and Executive shall have no rights to any additional payments and/or benefits constituting the Payment, and (ii) reduction in
payments and/or benefits shall occur in the following order: (A) reduction of cash payments; (B) cancellation of accelerated vesting of equity
awards other than stock options; (C) cancellation of accelerated vesting of stock options; and (D) reduction of other benefits paid to Executive. In
the event that acceleration of compensation from
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Executive’s equity awards is to be reduced, such acceleration of vesting shall be canceled in the reverse order of the date of grant.
b)
The independent registered public accounting firm engaged by the Company for general audit purposes as of the
day prior to the effective date of the Change in Control shall make all determinations required to be made under this Section 5.6. If the
independent registered public accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Company shall appoint a nationally recognized independent registered public accounting firm to make the
determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such independent registered public
accounting firm required to be made hereunder.
c)
The independent registered public accounting firm engaged to make the determinations hereunder shall provide
its calculations, together with detailed supporting documentation, to the Company and Executive within fifteen (15) calendar days after the date
on which Executive’s right to a Payment is triggered (if requested at that time by the Company or Executive) or such other time as requested by
the Company or Executive. If the independent registered public accounting firm determines that no Excise Tax is payable with respect to a
Payment, either before or after the application of the Reduced Amount, it shall furnish the Company and Executive with an opinion reasonably
acceptable to Executive that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm
made hereunder shall be final, binding and conclusive upon the Company and Executive.
5.7.
Certain Reductions and Offsets. To the extent that any federal, state or local laws, including, without limitation,
the Worker Adjustment and Retraining Notification Act or any other so- called “plant closing” laws, require the Company to give advance notice
or make a payment of any kind to Executive because of Executive’s involuntary termination due to a layoff, reduction in force, plant or facility
closing, sale of business, change in control or any other similar event or reason, the benefits payable under this Agreement shall be
correspondingly reduced. The benefits provided under this Agreement are intended to satisfy any and all statutory obligations that may arise out
of Executive’s involuntary termination of employment for the foregoing reasons, and the parties shall construe and enforce the terms of this
Agreement accordingly.
5.8.
Mitigation. Except as otherwise specifically provided herein, Executive shall not be required to mitigate damages
or the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by
any retirement benefits received by Executive after the date of a Change in Control Termination or Covered Termination (except as expressly
provided in Sections 3.3 and 4.3 above).
5.9.
Indebtedness of Executive. If Executive is indebted to the Company on the effective date of a Change in Control
Termination or Covered Termination, the Company reserves the right to offset any severance payments and benefits under this Agreement by the
amount of such indebtedness.
5.10.
Application of Section 409A.
a)
Separation from Service. Notwithstanding any provision to the contrary in this Agreement, no amount deemed
deferred compensation subject to Section 409A of the Code shall be payable pursuant to Article 3 or Article 4 unless Executive’s termination of
employment constitutes a “separation from service” with the Company within the meaning of Section 409A of the Code and the Department of
Treasury Regulations and other guidance promulgated thereunder and, except as provided under Section 5.10(b) hereof, any such amount shall
not be paid, or in the case of installments, commence
8
payment, until the first regularly-scheduled payroll date occurring on or after the sixtieth (60th) day following Executive’s separation from
service. Any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s
separation from service but for the preceding sentence shall be paid to Executive on the first regularly-scheduled payroll date occurring on or
after the sixtieth (60th) day after Executive’s separation from service and the remaining payments shall be made as provided in this Agreement.
b)
Specified Executive. Notwithstanding any provision to the contrary in this Agreement, if Executive is deemed
at the time of his or her separation from service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent
delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a
prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s benefits shall not be provided to Executive prior
to the earlier of (i) the expiration of the six (6)-month period measured from the date of Executive’s “separation from service” with the Company
(as such term is defined in the Treasury Regulations issued under Section 409A of the Code) or (ii) the date of Executive’s death. Upon the first
business day following the expiration of the applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this Section
5.10(b) shall be paid in a lump sum to Executive, and any remaining payments due under this Agreement shall be paid as otherwise provided
herein.
c)
Expense Reimbursements. To the extent that any reimbursement payable pursuant to this Agreement is subject
to the provisions of Section 409A of the Code, any such reimbursement payable to Executive pursuant to this Agreement shall be paid to
Executive no later than December 31 of the year following the year in which the expense was incurred; the amount of expenses reimbursed in one
year shall not affect the amount eligible for reimbursement in any subsequent year; and Executive’s right to reimbursement under this Agreement
will not be subject to liquidation or exchange for another benefit.
d)
Installments. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury
Regulation Section 1.409A-2(b)(2)(iii)), Executive’s right to receive any installment payments under this Agreement shall be treated as a right to
receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct
payment.
5.11.
Tax Withholding. All payments under this Agreement shall be subject to applicable withholding for federal,
state and local income and employment taxes.
No Duplication of Severance Benefits. The severance and other benefits provided in Article 3 and Article 4 are
mutually exclusive of each other, and in no event shall Executive receive any severance or other benefits pursuant to both Article 3 and Article 4.
5.12.
ARTICLE 6
TERMINATION WITH CAUSE OR BY VOLUNTARY RESIGNATION; OTHER RIGHTS AND BENEFITS
6.1.
Termination for Cause by the Company. If the Company shall terminate the Executive’s employment with the
Company for Cause, then upon such termination, the Company shall have no further obligation to Executive hereunder except for the payment or
provision, as applicable, of (i) the portion of the Annual Base Salary for the period prior to the effective date of termination earned but unpaid (if
any), (ii) all unreimbursed expenses (if any), subject to Sections 2.4 and 5.10(c), and (iii) other payments, entitlements or benefits, if any, in
accordance with terms of the applicable plans, programs, arrangements or other agreements of the Company (other than any severance plan or
policy) as
9
to which the Executive held rights to such payments, entitlements or benefits, whether as a participant, beneficiary or otherwise on the date of
termination (“Other Benefits”). For the avoidance of doubt, Executive shall have no right to receive (and Other Benefits shall not include) any
amounts under any Company severance plan or policy or pursuant to Article 3 or Article 4 upon Executive’s termination for Cause.
6.2.
Termination by Voluntary Resignation by the Executive (other than Resignation for Good Reason). Upon
any voluntary resignation by Executive that is not a Resignation for Good Reason, the Company shall have no further obligation to the Executive
hereunder except for the payment of (i) the portion of the Annual Base Salary for the period prior to the effective date of termination earned but
unpaid (if any), (ii) all unreimbursed expenses (if any), subject to Section 2.4 and Section 5.10(c), and (iii) the payment or provision of any Other
Benefits. For the avoidance of doubt, Executive shall have no right to receive (and Other Benefits shall not include) any amounts under any
Company severance plan or policy or pursuant to Article 3 or Article 4 upon any voluntary resignation by Executive that is not a Resignation for
Good Reason.
6.3.
Other Rights and Benefits. Nothing in this Agreement shall prevent or limit Executive’s continuing or future
participation in any benefit, bonus, incentive or other plans, programs, policies or practices provided by the Company and for which Executive
may otherwise qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under other agreements with the
Company except as provided in Article 1, Article 5, Section 6.1 and Section 6.2 above. Except as otherwise expressly provided herein, amounts
that are vested benefits or that Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company at or
subsequent to the date of a Change in Control shall be payable in accordance with such plan, policy, practice or program.
Unless otherwise provided, for purposes of this Agreement, the following definitions shall apply:
7.1.
“Board” means the Board of Directors of the Company.
ARTICLE 7
DEFINITIONS
7.2.
“Cause” means, upon a reasonable determination by the Company, Executive’s: (i) dishonest statements or acts
with respect to the Company, any subsidiary or any affiliate of the Company, which has the effect of materially injuring (whether financially or
otherwise) the business or reputation of the Company; (ii) conviction of or indictment for (A) a felony or (B) any misdemeanor (excluding minor
traffic violations) involving moral turpitude, deceit, dishonesty or fraud (“indictment,” for these purposes, meaning an indictment, probable cause
hearing or any other procedure pursuant to which an initial determination of probable or reasonable cause with respect to such offense is made);
(iii) gross negligence, willful misconduct or insubordination with respect to the Company or any subsidiary or any affiliate of the Company; or
(iv) material breach of any of Executive’s obligations under any agreement to which Executive and the Company or any subsidiary are a party.
With respect to clause (iv), Executive will be given notice and a 30-day period in which to cure such breach, only to the extent such breach can
be reasonably expected to be able to be cured within such period. Executive agrees that the breach of any confidentiality obligation to the
Company or any subsidiary shall not be curable to any extent.
7.3.
“Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one
or more of the following events:
of 1934, as amended (“Exchange Act Person”), becomes the owner,
a)
Any natural person, entity or group within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act
10
directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s
then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in
Control shall not be deemed to occur (i) on account of the acquisition of securities of the Company by any institutional investor, any affiliate
thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions that are
primarily a private financing transaction for the Company or (ii) solely because the level of ownership held by any Exchange Act Person (the
“Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition
of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person
becomes the owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the
percentage of the then outstanding voting securities owned by the Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;
b)
There is consummated a merger, consolidation or similar transaction involving, directly or indirectly, the
Company if, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company
immediately prior thereto do not own, directly or indirectly, either (i) outstanding voting securities representing more than fifty percent (50%) of
the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or (ii) more than fifty percent
(50%) of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction;
the Company, or a complete dissolution or liquidation of the Company shall otherwise occur; or
c)
The stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of
d)
There is consummated a sale, lease, license or other disposition of all or substantially all of the consolidated
assets of the Company and its subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets
of the Company and its subsidiaries to an entity, more than fifty percent (50%) of the combined voting power of the voting securities of which
are owned by stockholders of the Company in substantially the same proportion as their ownership of the Company immediately prior to such
sale, lease, license or other disposition.
The term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of
changing the domicile of the Company. Notwithstanding the foregoing or any other provision of this Agreement, the definition of Change in
Control (or any analogous term) in an individual written agreement between the Company or any affiliate and the participant shall supersede the
foregoing definition with respect to stock awards subject to such agreement (it being understood, however, that if no definition of Change in
Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply).
Date.
7.4.
7.5.
Termination Date.
“Change in Control Benefits Period” means the period of eighteen (18) months commencing on the Termination
“Change in Control Severance Period” means the period of eighteen (18) months commencing on the
7.6.
“Change in Control Termination” means an “Involuntary Termination Without Cause” or “Resignation for
Good Reason,” either of which occurs on, or within three (3) months prior to, or within twelve (12) months following, the effective date of a
Change in Control, provided that any such termination is a “separation from service” within the meaning of Treasury Regulation Section 1.409A-
11
1(h). Death and disability shall not be deemed Change in Control Terminations.
7.7.
7.8.
7.9.
“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” means Syndax Pharmaceuticals, Inc. or, following a Change in Control, the surviving entity resulting
from such transaction, or any subsequent surviving entity resulting from any subsequent Change in Control.
7.10.
“Confidentiality Agreement” means Executive’s Assignment of Developments, Non- Disclosure and Non-
Solicitation Agreement with the Company, dated June 22, 2015 (or any successor agreement thereto).
7.11.
“Covered Termination” means an “Involuntary Termination Without Cause” or “Resignation for Good
Reason,” provided that any such termination is a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h).
Death and disability shall not be deemed Covered Terminations. If an Involuntary Termination Without Cause or Resignation for Good Reason
qualifies as a Change in Control Termination, it shall not constitute a Covered Termination.
7.12.
Termination Date.
7.13.
Termination Date.
“Covered Termination Benefits Period” means the period of eighteen (18) months commencing on the
“Covered Termination Severance Period” means the period of twelve (12) months commencing on the
7.14.
“Involuntary Termination Without Cause” means Executive’s dismissal or discharge by the Company for
reasons other than Cause and other than as a result of death or disability.
7.15.
“Monthly Base Salary” means 1/12th of the greater of (i) Executive’s annual base salary (excluding incentive
pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation) as in effect on the date of a Change in Control
Termination or a Covered Termination, as applicable, or (ii) in the case of a Change in Control Termination, Executive’s annual base salary
(excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation) as in effect on the date of a
Change in Control.
7.16.
“Prior Employment Agreement” means that certain offer letter agreement, between the Company and Executive,
dated September 30, 2015, as previously amended and restated on April 27, 2020.
7.17.
“Pro-Rata Bonus” means 1/12th of the greater of (i) the average Target Performance Bonus paid to Executive
for the three years preceding the date of a Change in Control Termination (or such lesser number of years during which Executive has been
employed by the Company), or (ii) the Target Performance Bonus, as in effect on the date of a Change in Control Termination.
7.18.
“Resignation for Good Reason” means Executive’s resignation from all employee positions Executive then
holds with the Company within sixty (60) days following any of the following events taken without Executive’s consent, provided Executive has
given the Company written notice of such event within thirty (30) days after the first occurrence of such event and the Company has not cured
such event within thirty (30) days thereafter:
reduction in Executive’s base compensation and a material breach by the
a)
A decrease in Executive’s total target cash compensation (base and bonus) of more than 10% (i.e., a material
12
Company of Executive’s employment terms with the Company), other than in connection with a comparable decrease in compensation for all
comparable executives of the Company;
b)
reporting relationships);
Executive’s duties, authority or responsibilities are materially diminished (not simply a change in title or
c)
A material breach by the Company of the terms of the Agreement;
d)
Either (i) Executive is required to establish residence in a location more than 50 miles from Executive’s current
principal personal residence or (ii) there is an increase in Executive’s round-trip driving distance of more than fifty (50) miles from Executive’s
current principal personal residence to the principal office or business location at which Executive is required to perform services (except for
required business travel to the extent consistent with Executive’s prior business travel obligations) (“Executive’s Principal Place of Business”)
as a result of a change in location by the Company of Executive’s Principal Place of Business; provided however, that the foregoing shall not
include the establishment of a secondary residence within fifty (50) miles from the Company’s Waltham headquarters with Executive’s consent or
any commute between Executive’s current principal personal residence and the Company’s Waltham headquarters; or
materially agree to perform under the terms of this Agreement.
e)
The failure of the Company to obtain a satisfactory agreement from any successor to materially assume and
7.19.
“Termination Date” means the effective date of the Change in Control Termination, the Covered Termination or
a termination for Cause, as applicable.
ARTICLE 8
GENERAL PROVISIONS
8.1.
Employment Status. This Agreement does not constitute a contract of employment or impose upon Executive
any obligation to remain as an employee, or impose on the Company any obligation (i) to retain Executive as an employee, (ii) to change the
status of Executive as an at-will employee or (iii) to change the Company’s policies regarding termination of employment.
8.2.
Notices. Any notices provided hereunder must be in writing, and such notices or any other written communication
shall be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile) or the third day after mailing by first
class mail, to the Company at its primary office location and to Executive at Executive’s address as listed in the Company’s payroll records. Any
payments made by the Company to Executive under the terms of this Agreement shall be delivered to Executive either in person or at the address
as listed in the Company’s payroll records.
8.3.
Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other
jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provisions had never been contained herein.
8.4.
Waiver. If either party should waive any breach of any provisions of this Agreement, he, she or it shall not
thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
8.5.
Complete Agreement. This Agreement, including Exhibit A, Exhibit B and Exhibit C, and the Confidentiality
Agreement constitute the entire agreement between Executive and the Company
13
and is the complete, final and exclusive embodiment of their agreement with regard to this subject matter, wholly superseding all written and oral
agreements with respect to payments and benefits to Executive in the event of employment termination. It is entered into without reliance on any
promise or representation other than those expressly contained herein.
8.6.
Amendment or Termination of Agreement; Continuation of Agreement. This Agreement may be changed or
terminated only upon the mutual written consent of the Company and Executive. The written consent of the Company to a change or termination
of this Agreement must be signed by an executive officer of the Company (other than Executive) after such change or termination has been
approved by the Board. Unless so terminated, this Agreement shall continue in effect for as long as Executive continues to be employed by the
Company or by any surviving entity following any Change in Control. In other words, if, following a Change in Control, Executive continues to
be employed by the surviving entity without a Change in Control Termination and the surviving entity then undergoes a Change in Control,
following which Executive is terminated by the subsequent surviving entity in a Change in Control Termination, then Executive shall receive the
benefits described in Article 3 hereof.
8.7.
Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain
signatures of more than one party, but all of which taken together will constitute one and the same Agreement.
8.8.
Headings. The headings of the Articles and Sections hereof are inserted for convenience only and shall not be
deemed to constitute a part hereof nor to affect the meaning thereof.
8.9.
Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by
Executive, and the Company, and any surviving entity resulting from a Change in Control and upon any other person who is a successor by
merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company, and their respective successors, assigns,
heirs, executors and administrators, without regard to whether or not such person actively assumes any rights or duties hereunder; provided,
however, that Executive may not assign any duties hereunder and may not assign any rights hereunder without the written consent of the
Company, which consent shall not be withheld unreasonably.
8.10.
Choice of Law. Because of the Company’s and Executive’s interests in ensuring that disputes regarding this
Agreement are resolved on a uniform basis, the parties agree that all questions concerning the construction, validity and interpretation of this
Agreement will be governed by the law of the State of New York, without regard for any conflict of law principles. Further, the parties consent to
the jurisdiction of the state and federal courts of the State of New York for all purposes in connection with this Agreement. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law, any objection which Executive or the Company may now or hereafter have to
the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute.
8.11.
Arbitration. To ensure the rapid and economical resolution of any disputes that may arise under or relate to this
Agreement or Executive’s employment relationship, Executive and the Company agree that any and all disputes, claims, or causes of action, in
law or equity, arising from or relating to the performance, enforcement, execution, or interpretation of this Agreement, Executive’s employment
with the Company, or the termination of Executive’s employment (collectively, “Claims”), shall be resolved to the fullest extent permitted by
law, by final, binding, and (to the extent permitted by law) confidential arbitration before a single arbitrator in the state where Executive is
employed. The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. Section 1 et seq., as amended, and shall be administered by
the Judicial Arbitration & Mediation Services, Inc. (“JAMS”), in accordance with its then-current Employment Arbitration Rules & Procedures
(the “JAMS Rules”). The JAMS Rules are also available online at http://www.jamsadr.com/rules-employment-arbitration/. The parties or their
representatives may also call JAMS at 800.352.5267 if they have questions about the arbitration process. If the JAMS Rules are inconsistent with
the terms of this Agreement, the terms of this Agreement shall govern. Notwithstanding the foregoing, this provision shall exclude Claims that by
law are not subject to arbitration. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of all Claims and to
award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision including the arbitrator’s essential findings
and conclusions and a statement of the award. The Company shall pay all JAMS fees in excess of the amount of filing and other court-related
fees Executive would have been required to pay if the Claims were asserted in a court of law. EXECUTIVE AND THE COMPANY
UNDERSTAND AND FULLY AGREE THAT BY ENTERING INTO THIS AGREEMENT, BOTH EXECUTIVE AND THE COMPANY ARE
GIVING UP THE CONSTITUTIONAL RIGHT TO HAVE A TRIAL BY JURY, AND ARE GIVING UP THE NORMAL RIGHTS OF
APPEAL FOLLOWING THE RENDERING OF A DECISION, EXCEPT AS THE FEDERAL ARBITRATION ACT AND APPLICABLE
FEDERAL LAW ALLOW FOR JUDICIAL REVIEW OF ARBITRATION PROCEEDINGS. Nothing in this Agreement shall prevent either
Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.
Any awards or final orders in such arbitrations may be entered and enforced as judgments or orders in the federal and state courts of any
competent jurisdiction in compliance with Section 8.11 of this Agreement.
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8.12.
Construction of Agreement. In the event of a conflict between the text of this Agreement and any summary,
description or other information regarding this Agreement, the text of this Agreement shall control.
8.13.
Circular 230 Disclaimer. THE FOLLOWING DISCLAIMER IS PROVIDED IN ACCORDANCE WITH
THE INTERNAL REVENUE SERVICE’S CIRCULAR 230 (21 C.F.R. PART 10). ANY TAX ADVICE CONTAINED IN THIS
AGREEMENT IS INTENDED TO BE PRELIMINARY, FOR DISCUSSION PURPOSES ONLY AND NOT FINAL. ANY SUCH
ADVICE IS NOT INTENDED TO BE USED FOR MARKETING, PROMOTING OR RECOMMENDING ANY TRANSACTION OR
FOR THE USE OF ANY PERSON IN CONNECTION WITH THE PREPARATION OF ANY TAX RETURN. ACCORDINGLY, THIS
ADVICE IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, BY ANY PERSON FOR THE PURPOSE
OF AVOIDING TAX PENALTIES THAT MAY BE IMPOSED ON SUCH PERSON.
15
IN WITNESS WHEREOF, the parties have executed this Agreement on the Effective Date written above.
SYNDAX PHARMACEUTICALS, INC.
EXECUTIVE
By: /s/ Luke J. Albrecht
Briggs W. Morrison, M.D.
Name: Luke J. Albrecht
Briggs W. Morrison, M.D.
Title: Senior Vice President, General Counsel
& Secretary
Exhibit A:
Exhibit B:
Exhibit C:
Release (Individual Termination – Age 40 or Older)
Release (Individual and Group Termination – Under Age 40)
Release (Group Termination – Age 40 or Older)
By: /s/
Name:
EXHIBIT A RELEASE
(INDIVIDUAL TERMINATION – AGE 40 OR OLDER)
Certain capitalized terms used in this Release are defined in the Executive Employment Agreement (the “Agreement”) which I have
executed and of which this Release is a part.
I hereby confirm my obligations under the Confidentiality Agreement (or other comparable agreement that I have signed, if any).
Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries,
and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature, in law,
equity or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may
have as a result of any third party action against me based on my employment with the Company), arising out of or in any way related to
agreements, events, acts or conduct at any time prior to the date I execute this Release, including, but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment,
including, but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims
or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe
benefits, expense reimbursements, severance pay, or any other form of compensation; and claims pursuant to any federal, state or local law or
cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended, the federal Age Discrimination in Employment
Act of 1967, as amended (“ADEA”), the federal Employee Retirement Income Security Act of 1974, as amended, the federal Americans with
Disabilities Act of 1990, the California Fair Employment and Housing Act, as amended, the New York City Human Rights Law, as amended, the
Massachusetts Fair Employment Practices Law, as amended, the South Carolina Human Affairs Law, as amended, tort law, contract law,
wrongful discharge, discrimination, fraud, defamation, emotional distress, and breach of the implied covenant of good faith and fair dealing;
provided, however, that nothing in this paragraph shall be construed in any way to (1) release the Company from its obligation to indemnify me
pursuant to the Company’s indemnification obligation pursuant to written agreement or applicable law; (2) release any claim by me against the
Company relating to the validity or enforceability of this release or the Agreement; (3) prohibit me from exercising any non-waivable right to file
a charge with the United States Equal Employment Opportunity Commission (“EEOC”), the National Labor Relations Board (“NLRB”), or any
other government agency (provided, however, that I shall not be entitled to recover any monetary damages or to obtain non-monetary relief if the
agency were to pursue any claims relating to my employment with the Company).
I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have to assert claims for age
discrimination under applicable law, including under the ADEA. I also acknowledge that the consideration given under the Agreement for the
waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge
that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may
arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior to executing this Release; (C) I have twenty-
one (21) days to consider this Release (although I may choose to voluntarily execute this Release earlier); (D) I have seven (7) days following my
execution of this Release to revoke the Release by providing a written notice of revocation to the Company’s Chief Executive Officer; and (E)
this Release shall not be effective until the date upon which the revocation period has expired, which shall be the eighth (8th) day after I execute
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this Release (provided that I do not revoke it).
I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all the leave and leave
benefits and protections for which I am eligible, pursuant to the federal Family and Medical Leave Act, any Company policy or applicable law,
and I have not suffered any on- the-job injury or illness for which I have not already filed a workers’ compensation claim.
I agree that I will not make any disparaging statements regarding the Company or its officers, directors, shareholders, members,
agents or products jointly or severally. The foregoing shall not be violated by truthful statements in response to legal process, required
governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such
proceedings).
EXECUTIVE:
Signature
Printed Name
Date:
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EXHIBIT B
RELEASE
(INDIVIDUAL AND GROUP TERMINATION – UNDER AGE 40)
Certain capitalized terms used in this Release are defined in the Executive Employment Agreement (the “Agreement”) which I have
executed and of which this Release is a part.
I hereby confirm my obligations under the Confidentiality Agreement (or other comparable agreement that I have signed, if any).
Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries,
and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature, in law,
equity or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may
have as a result of any third party action against me based on my employment with the Company), arising out of or in any way related to
agreements, events, acts or conduct at any time prior to the date I execute this Release, including, but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment,
including, but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims
or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe
benefits, expense reimbursements, severance pay, or any other form of compensation; and claims pursuant to any federal, state or local law or
cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended, the federal Employee Retirement Income Security
Act of 1974, as amended, the federal Americans with Disabilities Act of 1990, the California Fair Employment and Housing Act, as amended,
the New York City Human Rights Law, as amended, the Massachusetts Fair Employment Practices Law, as amended, the South Carolina Human
Affairs Law, as amended, tort law, contract law, wrongful discharge, discrimination, fraud, defamation, emotional distress, and breach of the
implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to (1) release the
Company from its obligation to indemnify me pursuant to the Company’s indemnification obligation pursuant to written agreement or applicable
law; (2) release any claim by me against the Company relating to the validity or enforceability of this release or the Agreement; (3) prohibit me
from exercising any non-waivable right to file a charge with the United States Equal Employment Opportunity Commission (“EEOC”), the
National Labor Relations Board (“NLRB”), or any other government agency (provided, however, that I shall not be entitled to recover any
monetary damages or to obtain non- monetary relief if the agency were to pursue any claims relating to my employment with the Company).
I acknowledge that the consideration given under the Agreement for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the date I execute this Release; (B) I have the right to consult with an
attorney prior to executing this Release; and (C) I have twenty-one (21) days to consider this Release (although I may choose to voluntarily
execute this Release earlier).
I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all the leave and leave
benefits and protections for which I am eligible, pursuant to the federal Family and Medical Leave Act, any Company policy or applicable law,
and I have not suffered any on-
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the-job injury or illness for which I have not already filed a workers’ compensation claim.
I agree that I will not make any disparaging statements regarding the Company or its officers, directors, shareholders, members,
agents or products jointly or severally. The foregoing shall not be violated by truthful statements in response to legal process, required
governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such
proceedings).
EXECUTIVE:
Signature
Printed Name
Date:
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EXHIBIT C
RELEASE
(GROUP TERMINATION – AGE 40 OR OLDER)
Certain capitalized terms used in this Release are defined in the Executive Employment Agreement (the “Agreement”) which I have
executed and of which this Release is a part.
I hereby confirm my obligations under the Confidentiality Agreement (or other comparable agreement that I have signed, if any).
Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries,
and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature, in law,
equity or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may
have as a result of any third party action against me based on my employment with the Company), arising out of or in any way related to
agreements, events, acts or conduct at any time prior to the date I execute this Release, including, but not limited to: all such claims and demands
directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment,
including, but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims
or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe
benefits, expense reimbursements, severance pay, or any other form of compensation; and claims pursuant to any federal, state or local law or
cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended, the federal Age Discrimination in Employment
Act of 1967, as amended (“ADEA”), the federal Employee Retirement Income Security Act of 1974, as amended, the federal Americans with
Disabilities Act of 1990, the California Fair Employment and Housing Act, as amended, the New York City Human Rights Law, as amended, the
Massachusetts Fair Employment Practices Law, as amended, the South Carolina Human Affairs Law, as amended, tort law, contract law,
wrongful discharge, discrimination, fraud, defamation, emotional distress, and breach of the implied covenant of good faith and fair dealing;
provided, however, that nothing in this paragraph shall be construed in any way to (1) release the Company from its obligation to indemnify me
pursuant to the Company’s indemnification obligation pursuant to written agreement or applicable law; (2) release any claim by me against the
Company relating to the validity or enforceability of this release or the Agreement; (3) prohibit me from exercising any non-waivable right to file
a charge with the United States Equal Employment Opportunity Commission (“EEOC”), the National Labor Relations Board (“NLRB”), or any
other government agency (provided, however, that I shall not be entitled to recover any monetary damages or to obtain non-monetary relief if the
agency were to pursue any claims relating to my employment with the Company).
I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have to assert claims for age
discrimination under applicable law, including under the ADEA. I also acknowledge that the consideration given under the Agreement for the
waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge
that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may
arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior to executing this Release; (C) I have forty-
five (45) days to consider this Release (although I may choose to voluntarily execute this Release earlier); (D) I have seven (7) days following my
execution of this Release to revoke the Release by providing a written notice
C-1
of revocation to the Company’s Chief Executive Officer; (E) this Release shall not be effective until the date upon which the revocation period
has expired, which shall be the eighth day (8th) after I execute this Release; and (F) I have received with this Release the required written
disclosure for a “group termination” under the ADEA, including a detailed list of the job titles and ages of all employees who were terminated in
this group termination and the ages of all employees of the Company in the same job classification or organizational unit who were not
terminated.
I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all the leave and leave
benefits and protections for which I am eligible, pursuant to the federal Family and Medical Leave Act, any Company policy or applicable law,
and I have not suffered any on- the-job injury or illness for which I have not already filed a workers’ compensation claim.
I agree that I will not engage in any conduct that is injurious to the reputation of the Company or its parents, subsidiaries and
affiliates, including but not limited to disparagement of the Company, its officers, Board members, employees and shareholders. The foregoing
shall not be violated by a statement made in a deposition, trial or administrative proceeding in response to legal process; by any statement made
to a government agency; or whenever I make any statement to a court, administrative tribunal or government agency as required by law.
EXECUTIVE:
Signature
Printed Name
D
ate:
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AMENDED & RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.17
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as
of the 2nd day of February, 2022 (the “Effective Date”), between Michael A. Metzger (“Executive”) and SYNDAX
PHARMACEUTICALS, INC. (the “Company”). Certain capitalized terms used in this Agreement are defined in Article 7.
A.
The Company is a biopharmaceutical company.
RECITALS
B.
The Company desires to employ Executive, or to continue Executive’s employment, in the position set forth
below, and Executive wishes to be employed, or continue to be employed, by the Company in such position, upon the terms and
conditions set forth in this Agreement.
agree as follows:
NOW, THEREFORE, in consideration of the mutual promises contained herein, the Company and Executive
AGREEMENT
ARTICLE 1
PRELIMINARY MATTERS
1.1.
Prior Agreement. This Agreement, on its Effective Date, amends, restates and supersedes the
Prior Employment Agreement.
1.2.
Effectiveness of Agreement. This Agreement shall be effective and shall supersede the Prior Employment
Agreement concurrently with the Effective Date.
ARTICLE 2
TERMS OF EMPLOYMENT
2.1.
Appointment. Executive shall serve as the Chief Executive Officer, reporting to the Board. As Chief
Executive Officer, Executive will be the most senior officer of the Company and have such duties and responsibilities typically associated
with such senior officer. During Executive’s employment with the Company, Executive shall (i) devote substantially all of Executive’s
business efforts to the Company, provided, however, that Executive may (a) participate in charitable, civic, educational, professional,
community or industry affairs, (b) manage Executive’s passive personal investments, and (c) serve as a board member, advisor or a similar
position, of up to two other companies, so long as such service does not conflict with or is not detrimental to the Company’s best interests,
as determined in good faith by the Board, and (ii) faithfully and to the best of Executive’s abilities and experience, and in accordance with
the standards and ethics of the business in which the Company is engaged, perform all duties that may be required of Executive by this
Agreement, the Company’s policies and procedures, and such other duties and responsibilities as may be assigned to Executive from time
to time, as well as the directives of the Board. During Executive’s employment with the Company, Executive shall not engage in any
activity that conflicts with or is detrimental to the Company’s best interests, as determined by the Board.
2.2.
Employment Term. Executive will be employed by the Company on an “at-will” basis. This means that
either the Company or Executive may terminate Executive’s employment at any time, for any reason, with or without Cause, and with or
without advance notice (provided that Resignation for Good Reason (as defined below) requires certain advanced notice by Executive of
[Type here]
Executive’s termination of employment). It also means that Executive’s job title, duties, responsibilities, reporting level, compensation and
benefits, as well as the Company’s personnel policies and procedures, may be changed with or without notice at any time in the Company’s
sole discretion. This at-will employment relationship shall not be modified by any conflicting actions or representations of any Company
employee or other party before or during the term of Executive’s employment.
2.3.
Compensation.
a)
Annual Base Salary. Executive’s annual base salary shall be $640,000 per year (“Annual
Base Salary”), payable in equal installments, less applicable deductions and withholdings, in accordance with the Company’s standard
payroll practices. Executive’s Annual Base Salary shall be subject to review by the Company’s compensation committee and may be
increased, from time to time.
b)
Benefits. Executive will be entitled to participate in all of the employee benefits and benefit
plans that the Company generally makes available to its full-time employees and executives and for which Executive is eligible in
accordance with the Company’s policies as in effect from time to time. These benefits are subject to the terms, conditions, and eligibility
requirements that govern or apply to them. Notwithstanding the foregoing, if applicable, the Company shall make a group health plan
available to Executive, which provides applicable coverage at both Executive’s permanent residence and Executive’s principal place of
employment. From time to time and as the Board deems appropriate, Executive may be eligible to receive options to purchase the
Company’s common stock.
c)
Bonus. In addition to Annual Base Salary, Executive shall be eligible to earn an annual
performance bonus of up to sixty percent (60%) of Executive’s Annual Base Salary, which bonus shall be earned upon Executive’s
attainment of objectives to be determined by the Board (or the compensation committee thereof, as such determination may be delegated by
the Board to the compensation committee) and continued employment with the Company as described below (the “Target Performance
Bonus”). The amount of and Executive’s eligibility for the Target Performance Bonus shall be determined in the sole discretion of the
Board (or the compensation committee thereof, as such determination may be delegated by the Board to the compensation committee). If
earned, any Target Performance Bonus shall be paid to Executive, less authorized deductions and applicable withholdings, on or before the
February 15th following the calendar year during which such bonus was earned. Except as provided in Sections 3.2 and 4.2, Executive shall
be eligible to earn the Target Performance Bonus only if Executive is actively employed and in good standing with the Company on both
the determination and payment dates for the Target Performance Bonus.
2.4.
Reimbursement of Expenses. Subject to Section 5.10(c), the Company shall reimburse Executive for
Executive’s necessary and reasonable business expenses incurred in connection with Executive’s duties in accordance with the Company’s
generally applicable policies. Executive and the Company acknowledge that Executive will be required to spend a certain amount of time
each month at the Company’s Waltham headquarters. Accordingly, the Company will reimburse, or pay for, all reasonable expenses
incurred by Executive in connection with commuting between the Company’s Waltham office and Executive’s current principal residence
in New York, including Executive’s actual and reasonable living expenses incurred in the Waltham area and Executive’s actual and
reasonable commuting expenses incurred between Waltham and Executive’s current principal residence in New York. Executive will not
be required to relocate his residence to Waltham, but should Executive choose to relocate his residence to Waltham, the Company will pay
up to $50,000 for ordinary and necessary expenses incurred by Executive as a result of Executive’s relocation. The foregoing provisions of
this Section 2.4 are subject to Section 5.10(c).
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ARTICLE 3
CHANGE IN CONTROL SEVERANCE BENEFITS
3.1.
Severance Benefits. Upon a Change in Control Termination, and subject to the limitations and conditions
set forth in this Agreement, Executive shall be eligible to receive the benefits set forth in this Article 3. The receipt of any severance
payments or benefits pursuant to this Agreement is subject to Executive signing and not revoking a separation agreement and general release
of claims (the “Release”), in substantially the form attached hereto and incorporated herein as Exhibit A, Exhibit B or Exhibit C, as
appropriate, which Release must become effective and irrevocable no later than the sixtieth (60th) day following Executive’s termination of
employment (the “Release Deadline Date”). If the Release does not become effective and irrevocable by the Release Deadline Date,
Executive will forfeit any right to any severance payments or benefits under this Agreement. In no event will severance payments or
benefits be paid or provided until the Release actually becomes effective and irrevocable.
3.2.
Salary and Pro-Rata Bonus Payment. In consideration of Executive’s execution and non-revocation of
the Release by the Release Deadline Date, in a form provided by the Company and in accordance with Article 5, the Company shall pay
Executive a severance payment equal to (i) the sum of Executive’s Monthly Base Salary and Pro-Rata Bonus multiplied by (ii) the number
of months in the Change in Control Severance Period, less applicable withholdings. The severance payment shall be payable (except as set
forth in Article 5) in a lump sum on the first regularly-scheduled payroll date occurring on or after the Release Deadline Date.
3.3.
Health Continuation Coverage.
a)
Provided that Executive is eligible and has made the necessary elections for continuation
coverage pursuant to COBRA under a health, dental or vision plan sponsored by the Company, the Company shall pay the applicable
premiums (inclusive of premiums for Executive’s dependents for such health, dental or vision plan coverage as in effect immediately prior to
the date of the Change in Control Termination) for such continued health, dental or vision plan coverage following the date of the Change in
Control Termination for up to the number of months equal to the Change in Control Benefits Period (but in no event after such time as
Executive is eligible for coverage under a health, dental or vision insurance plan of a subsequent employer or as Executive and Executive’s
dependents are no longer eligible for COBRA coverage); provided that if continued payment by the Company of the applicable premiums
would result in a violation of the nondiscrimination rules of Section 105(h)(2) of the Internal Revenue Code of 1986, as amended, or any
statute or regulation of similar effect (including, without limitation, the 2010 Patient Protection and Affordable Care Act, as amended by the
2010 Health Care and Education Reconciliation Act), then in lieu of providing such continued payment, the Company will instead pay
Executive on the first day of each month a fully taxable cash payment equal to the applicable premiums for that month, subject to applicable
tax withholdings, for the remainder of the Change in Control Benefits Period. Such coverage shall be counted as coverage pursuant to
COBRA. The Company shall have no obligation in respect of any premium payments (or any other payments in respect of health, dental or
vision coverage from the Company) following the effective date of Executive’s coverage by a health, dental or vision insurance plan of a
subsequent employer. Executive shall be required to notify the Company immediately if Executive becomes covered by a health, dental or
vision insurance plan of a subsequent employer. If Executive and Executive’s dependents continue coverage pursuant to COBRA following
the conclusion of the Change in Control Benefits Period, Executive will be responsible for the entire payment of such premiums required
under COBRA for the duration of the COBRA period.
For purposes of this Section 3.3, (i) references to COBRA shall be deemed to refer also to
analogous provisions of state law, and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts
payable by Executive under a Code Section 125
b)
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health care reimbursement plan, which amounts, if any, are the sole responsibility of Executive.
3.4.
Stock Awards. Upon a Change in Control Termination, (i) the vesting and exercisability of all outstanding
options to purchase the Company’s common stock (or stock appreciation rights or other rights with respect to the stock of the Company
issued pursuant to any equity incentive plan of the Company) that are held by Executive on the Termination Date shall be accelerated in
full, (ii) any reacquisition or repurchase rights held by the Company with respect to common stock issued or issuable (or with respect to
other rights with respect to the stock of the Company issued or issuable) pursuant to any other stock award granted to Executive pursuant to
any equity incentive plan of the Company shall lapse and (iii) the time period that Executive has to exercise any outstanding options to
purchase the Company’s common stock that are held by Executive on the Termination Date shall be extended for a period equal to the
shorter of (A) twelve (12) months or (B) the remaining term of the outstanding option.
ARTICLE 4
COVERED TERMINATION SEVERANCE BENEFITS
4.1.
Severance Benefits. Upon a Covered Termination, and subject to the limitations and conditions set forth
in this Agreement, Executive shall be eligible to receive the benefits set forth in this Article 4. The receipt of any severance payments or
benefits pursuant to this Agreement is subject to Executive signing and not revoking the appropriate Release, which Release must become
effective and irrevocable no later than the Release Deadline Date. If the Release does not become effective and irrevocable by the Release
Deadline Date, Executive will forfeit any right to any severance payments or benefits under this Agreement. In no event will severance
payments or benefits be paid or provided until the Release actually becomes effective and irrevocable.
4.2.
Salary Payment. In consideration of Executive’s timely execution and non-revocation of a full release of all
claims, in a form provided by the Company and in accordance with Article 5, the Company shall pay Executive a severance payment equal
to the sum of (i) Executive’s Monthly Base Salary multiplied by the number of months in the Covered Termination Severance Period and
(ii) the Target Performance Bonus as in effect on the date of a Covered Termination multiplied by the number of days Executive was
employed in the year of the Covered Termination divided by the total number of days in such year, less applicable withholdings. The
severance payment shall be payable (except as set forth in Article 5) in a lump sum on the first regularly-scheduled payroll date occurring
on or after the Release Deadline Date.
4.3.
Health Continuation Coverage.
a)
Provided that Executive is eligible and has made the necessary elections for continuation
coverage pursuant to COBRA under a health, dental or vision plan sponsored by the Company, the Company shall pay for the applicable
premiums (inclusive of premiums for Executive’s dependents for such health, dental or vision plan coverage as in effect immediately prior
to the date of the Covered Termination) for such continued health, dental or vision plan coverage following the date of the Covered
Termination for up to the number of months equal to the Covered Termination Benefits Period (but in no event after such time as Executive
is eligible for coverage under a health, dental or vision insurance plan of a subsequent employer or as Executive and Executive’s dependents
are no longer eligible for COBRA coverage); provided that if continued payment by the Company of the applicable premiums would result
in a violation of the nondiscrimination rules of Section 105(h)(2) of the Internal Revenue Code of 1986, as amended, or any statute or
regulation of similar effect (including, without limitation, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010
Health Care and Education Reconciliation Act), then in lieu of providing such continued payment, the
4
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Company will instead pay Executive on the first day of each month a fully taxable cash payment equal to the applicable premiums for that
month, subject to applicable tax withholdings, for the remainder of the Covered Termination Benefits Period. Such coverage shall be
counted as coverage pursuant to COBRA. The Company shall have no obligation in respect of any premium payments (or any other
payments in respect of health, dental or vision coverage from the Company) following the effective date of Executive’s coverage by a
health, dental or vision insurance plan of a subsequent employer. Executive shall be required to notify the Company immediately if
Executive becomes covered by a health, dental or vision insurance plan of a subsequent employer. If Executive and Executive’s dependents
continue coverage pursuant to COBRA following the conclusion of the Covered Termination Benefits Period, Executive will be responsible
for the entire payment of such premiums required under COBRA for the duration of the COBRA period.
b)
For purposes of this Section 4.3, (i) references to COBRA shall be deemed to refer also to
analogous provisions of state law, and (ii) any applicable insurance premiums that are paid by the Company shall not include any amounts
payable by Executive under a Code Section 125 health care reimbursement plan, which amounts, if any, are the sole responsibility of
Executive.
4.4.
Stock Awards. Upon a Covered Termination:
a)
the vesting and exercisability of all outstanding options to purchase the Company’s common
stock (or stock appreciation rights or other rights with respect to the stock of the Company issued pursuant to any equity incentive plan of
the Company) that are held by Executive on the Termination Date shall be accelerated as to the number of shares of common stock issuable
upon exercise of such option (“Option Shares”) as equals the number of Option Shares as would otherwise vest during the twelve (12)
month period following the Termination Date in accordance with the applicable options’ vesting schedule were the Executive to remain an
employee of the Company during such twelve (12) month period (disregarding any other basis for acceleration of vesting of Option Shares
during such twelve (12) month period);
b)
any reacquisition or repurchase rights held by the Company with respect to common stock
issued or issuable (or with respect to other rights with respect to the stock of the Company issued or issuable) pursuant to any option to
purchase the Company’s common stock (or stock appreciation rights or other rights with respect to the stock of the Company) (“Restricted
Shares”) held by the Executive as of the Termination Date shall lapse as to the number of Restricted Shares as equals the number of
Restricted Shares as to which such reacquisition or repurchase rights would otherwise lapse during the twelve (12) month period following
the Termination Date in accordance with the option’s vesting schedule were the Executive to remain an employee of the Company during
such twelve (12) month period (disregarding any other basis for acceleration of the lapsing of such reacquisition or repurchase rights on
Restricted Shares during such twelve (12) month period); and
the time period that Executive has to exercise any outstanding options to purchase the
Company’s common stock that are held by Executive on the Termination Date shall be extended for a period equal to the shorter of (A)
twelve (12) months or (B) the remaining term of the outstanding option.
c)
ARTICLE 5
LIMITATIONS AND CONDITIONS ON BENEFITS
5.1.
Rights Conditioned on Compliance. Executive’s rights to receive all severance benefits described in
Article 3 and Article 4 shall be conditioned upon and subject to Executive’s compliance with the limitations and conditions on benefits as
described in this Article 5.
5.2.
Continuation of Service Until Date of Termination. Executive shall continue to provide service to
the Company in good faith until the Termination Date, unless such performance is otherwise excused in writing by the Company.
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5.3.
Release Prior to Payment of Benefits. Upon the occurrence of a Change in Control Termination or a
Covered Termination, as applicable, and prior to Executive earning any entitlement to any severance or separation benefits under this
Agreement on account of such Change in Control Termination or Covered Termination, as applicable, Executive must execute the
appropriate Release, and such Release must become effective in accordance with its terms, but in no event later than the Release Deadline
Date. No amount shall be paid prior to such date. Instead, on the first regularly-scheduled payroll date occurring on or after the Release
Deadline Date, the Company will pay Executive the severance amount that Executive would otherwise have received on or prior to such
date but for the delay in payment related to the effectiveness of the Release, with the balance of the severance amount being paid as
originally scheduled. The Company may modify the Release in its discretion to comply with changes in applicable law at any time prior to
Executive’s execution of such Release. Such Release shall specifically relate to all of Executive’s rights and claims in existence at the time
of such execution and shall confirm Executive’s obligations under the Confidentiality Agreement and any similar obligations under
applicable law. It is understood that, as specified in the applicable Release, Executive has a certain number of calendar days to consider
whether to execute such Release. If Executive does not execute and deliver such Release within the applicable period, no benefits shall be
provided or payable under this Agreement, and Executive shall have no further rights, title or interests in or to any severance benefits or
payments pursuant to this Agreement. It is further understood that if Executive is age 40 or older at the time of a Change in Control
Termination or a Covered Termination, as applicable, Executive may revoke the applicable Release within seven (7) calendar days after its
execution by Executive. If Executive revokes such Release within such subsequent seven (7) day period, no benefits shall be provided or
payable under this Agreement pursuant to such Change in Control Termination or Covered Termination, as applicable.
5.4.
Return of Company Property. Not later than the Termination Date, Executive shall return to the Company
all documents (and all copies thereof) and other property belonging to the Company that Executive has in his or her possession or control.
The documents and property to be returned include, but are not limited to, all files, correspondence, email, memoranda, notes, notebooks,
records, plans, forecasts, reports, studies, analyses, compilations of data, proposals, agreements, financial information, research and
development information, marketing information, operational and personnel information, databases, computer-recorded information,
tangible property and equipment (including, but not limited to, computers, facsimile machines, mobile telephones and servers), credit cards,
entry cards, identification badges and keys, and any materials of any kind which contain or embody any proprietary or confidential
information of the Company (and all reproductions thereof in whole or in part). Executive agrees to make a diligent search to locate any
such documents, property and information. If Executive has used any personally owned computer, server or e-mail system to receive, store,
review, prepare or transmit any Company confidential or proprietary data, materials or information, then within ten (10) business days after
the Termination Date, Executive shall provide the Company with a computer- useable copy of all such information and then permanently
delete and expunge such confidential or proprietary information from those systems. Executive agrees to provide the Company access to
Executive’s system as requested to verify that the necessary copying and/or deletion is done.
5.5.
Cooperation and Continued Compliance with Restrictive Covenants.
a)
From and after the Termination Date, Executive shall cooperate fully with the Company in
connection with its actual or contemplated defense, prosecution or investigation of any existing or future litigation, arbitrations, mediations,
claims, demands, audits, government or regulatory inquiries, or other matters arising from events, acts or failures to act that occurred during
the time period
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in which Executive was employed by the Company (including any period of employment with an entity acquired by the Company). Such
cooperation includes, without limitation, being available upon reasonable notice, without subpoena, to provide accurate and complete
advice, assistance and information to the Company, including offering and explaining evidence, providing truthful and accurate sworn
statements, and participating in discovery and trial preparation and testimony. Executive also agrees to promptly send the Company copies
of all correspondence (for example, but not limited to, subpoenas) received by Executive in connection with any such legal proceedings,
unless Executive is expressly prohibited by law from so doing. The Company will reimburse Executive for reasonable out-of-pocket
expenses incurred in connection with any such cooperation (excluding foregone wages, salary or other compensation) within thirty (30)
days of Executive’s timely presentation of appropriate documentation thereof, in accordance with the Company’s standard reimbursement
policies and procedures, and will make reasonable efforts to accommodate Executive’s scheduling needs.
From and after the Termination Date, Executive shall continue to abide by all of the terms
and provisions of the Confidentiality Agreement (and any other comparable agreement signed by Executive), in accordance with its
terms.
b)
c)
Executive agrees that the choice of law and choice of forum provisions in Section 10.10 of
the Confidentiality Agreement shall be amended to conform to the choice of law and choice of forum provisions in Section 8.11 of this
Agreement. No other terms of the Confidentiality Agreement are amended by this Agreement, and the Confidentiality Agreement remains
in full force and effect.
d)
Executive acknowledges and agrees that Executive’s obligations under this Section 5.5 are an
essential part of the consideration Executive is providing hereunder in exchange for which and in reliance upon which the Company has
agreed to provide the payments and benefits under this Agreement. Executive further acknowledges and agrees that Executive’s violation of
this Section 5.5 inevitably would involve use or disclosure of the Company’s proprietary and confidential information. Accordingly,
Executive agrees that Executive will forfeit, effective as of the date of any breach, any right, entitlement, claim or interest in or to any
unpaid portion of the severance payments or benefits provided in Article 3 or Article 4. If it is determined by a court of competent
jurisdiction in any state that any restriction in this Section 5.5 is excessive in duration or scope or is unreasonable or unenforceable under
the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable
to the maximum extent permitted by the law of that state.
5.6.
Parachute Payments.
a)
Parachute Payment Limitation. If any payment or benefit (including payments and
benefits pursuant to this Agreement) Executive would receive in connection with a Change in Control from the Company or otherwise
(“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this paragraph,
be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Company shall cause to be determined,
before any amounts of the Payment are paid to Executive, which of the following two alternative forms of payment shall be paid to
Executive: (A) payment in full of the entire amount of the Payment (a “Full Payment”), or (B) payment of only a part of the Payment so
that Executive receives the largest payment possible without the imposition of the Excise Tax (a “Reduced Payment”). A Full Payment
shall be made in the event that the amount received by Executive on a net after-tax basis is greater than what would be received by
Executive on a net after-tax basis if the Reduced Payment were made, otherwise a Reduced Payment shall be made. If a Reduced Payment
is made, (i) the Payment shall be paid only to the extent permitted under the Reduced Payment alternative,
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and Executive shall have no rights to any additional payments and/or benefits constituting the Payment, and (ii) reduction in payments
and/or benefits shall occur in the following order: (A) reduction of cash payments; (B) cancellation of accelerated vesting of equity awards
other than stock options; (C) cancellation of accelerated vesting of stock options; and (D) reduction of other benefits paid to Executive. In
the event that acceleration of compensation from Executive’s equity awards is to be reduced, such acceleration of vesting shall be canceled
in the reverse order of the date of grant.
b)
The independent registered public accounting firm engaged by the Company for general audit
purposes as of the day prior to the effective date of the Change in Control shall make all determinations required to be made under this
Section 5.6. If the independent registered public accounting firm so engaged by the Company is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized independent registered public
accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by
such independent registered public accounting firm required to be made hereunder.
c)
The independent registered public accounting firm engaged to make the determinations
hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and Executive within fifteen
(15) calendar days after the date on which Executive’s right to a Payment is triggered (if requested at that time by the Company or
Executive) or such other time as requested by the Company or Executive. If the independent registered public accounting firm determines
that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish the
Company and Executive with an opinion reasonably acceptable to Executive that no Excise Tax will be imposed with respect to such
Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company
and Executive.
5.7.
Certain Reductions and Offsets. To the extent that any federal, state or local laws, including, without
limitation, the Worker Adjustment and Retraining Notification Act or any other so- called “plant closing” laws, require the Company to
give advance notice or make a payment of any kind to Executive because of Executive’s involuntary termination due to a layoff,
reduction in force, plant or facility closing, sale of business, change in control or any other similar event or reason, the benefits payable
under this Agreement shall be correspondingly reduced. The benefits provided under this Agreement are intended to satisfy any and all
statutory obligations that may arise out of Executive’s involuntary termination of employment for the foregoing reasons, and the parties
shall construe and enforce the terms of this Agreement accordingly.
5.8.
Mitigation. Except as otherwise specifically provided herein, Executive shall not be required to mitigate
damages or the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount
of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by
another employer or by any retirement benefits received by Executive after the date of a Change in Control Termination or Covered
Termination (except as expressly provided in Sections 3.3 and 4.3 above).
5.9.
Indebtedness of Executive. If Executive is indebted to the Company on the effective date of a Change
in Control Termination or Covered Termination, the Company reserves the right to offset any severance payments and benefits under
this Agreement by the amount of such indebtedness.
5.10.
Application of Section 409A.
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a)
Separation from Service. Notwithstanding any provision to the contrary in this Agreement,
no amount deemed deferred compensation subject to Section 409A of the Code shall be payable pursuant to Article 3 or Article 4 unless
Executive’s termination of employment constitutes a “separation from service” with the Company within the meaning of Section 409A of
the Code and the Department of Treasury Regulations and other guidance promulgated thereunder and, except as provided under Section
5.10(b) hereof, any such amount shall not be paid, or in the case of installments, commence payment, until the first regularly-scheduled
payroll date occurring on or after the sixtieth (60th) day following Executive’s separation from service. Any installment payments that
would have been made to Executive during the sixty (60) day period immediately following Executive’s separation from service but for the
preceding sentence shall be paid to Executive on the first regularly-scheduled payroll date occurring on or after the sixtieth (60th) day after
Executive’s separation from service and the remaining payments shall be made as provided in this Agreement.
b)
Specified Executive. Notwithstanding any provision to the contrary in this Agreement, if
Executive is deemed at the time of his or her separation from service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i)
of the Code, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is
required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s benefits shall
not be provided to Executive prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of Executive’s
“separation from service” with the Company (as such term is defined in the Treasury Regulations issued under Section 409A of the Code)
or (ii) the date of Executive’s death. Upon the first business day following the expiration of the applicable Code Section 409A(a)(2)(B)(i)
period, all payments deferred pursuant to this Section 5.10(b) shall be paid in a lump sum to Executive, and any remaining payments due
under this Agreement shall be paid as otherwise provided herein.
c)
Expense Reimbursements. To the extent that any reimbursement payable pursuant to this
Agreement is subject to the provisions of Section 409A of the Code, any such reimbursement payable to Executive pursuant to this
Agreement shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred; the
amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year; and Executive’s
right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.
d)
Installments. For purposes of Section 409A of the Code (including, without limitation, for
purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive’s right to receive any installment payments under this Agreement
shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be
considered a separate and distinct payment.
5.11.
Tax Withholding. All payments under this Agreement shall be subject to applicable withholding for
federal, state and local income and employment taxes.
5.12.
No Duplication of Severance Benefits. The severance and other benefits provided in Article 3 and
Article 4 are mutually exclusive of each other, and in no event shall Executive receive any severance or other benefits pursuant to both
Article 3 and Article 4.
TERMINATION WITH CAUSE OR BY VOLUNTARY RESIGNATION; OTHER RIGHTS AND
BENEFITS
ARTICLE 6
6.1.
Termination for Cause by the Company. If the Company shall terminate the Executive’s employment
with the Company for Cause, then upon such termination, the Company shall have no further obligation to Executive hereunder except for
the payment or provision, as applicable, of (i) the portion of the Annual Base Salary for the period prior to the effective date of termination
earned but unpaid (if any), (ii) all unreimbursed expenses (if any), subject to Sections 2.4 and 5.10(c), and (iii) other payments, entitlements
or benefits, if any, in accordance with terms of the applicable plans, programs, arrangements or other agreements of the Company (other
than any severance plan or policy) as to which the Executive held rights to such payments, entitlements or benefits, whether as a participant,
beneficiary or otherwise on the date of termination (“Other Benefits”). For the avoidance of doubt, Executive shall have no right to receive
(and Other Benefits shall not include) any amounts under any Company severance plan or policy or pursuant to Article 3 or Article 4 upon
Executive’s termination for Cause.
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6.2.
Termination by Voluntary Resignation by the Executive (other than Resignation for Good Reason).
Upon any voluntary resignation by Executive that is not a Resignation for Good Reason, the Company shall have no further obligation to the
Executive hereunder except for the payment of (i) the portion of the Annual Base Salary for the period prior to the effective date of
termination earned but unpaid (if any), (ii) all unreimbursed expenses (if any), subject to Section 2.4 and Section 5.10(c), and (iii) the
payment or provision of any Other Benefits. For the avoidance of doubt, Executive shall have no right to receive (and Other Benefits shall
not include) any amounts under any Company severance plan or policy or pursuant to Article 3 or Article 4 upon any voluntary resignation
by Executive that is not a Resignation for Good Reason.
6.3.
Other Rights and Benefits. Nothing in this Agreement shall prevent or limit Executive’s continuing or
future participation in any benefit, bonus, incentive or other plans, programs, policies or practices provided by the Company and for which
Executive may otherwise qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under other
agreements with the Company except as provided in Article 1, Article 5, Section 6.1 and Section 6.2 above. Except as otherwise expressly
provided herein, amounts that are vested benefits or that Executive is otherwise entitled to receive under any plan, policy, practice or
program of the Company at or subsequent to the date of a Change in Control shall be payable in accordance with such plan, policy, practice
or program.
Unless otherwise provided, for purposes of this Agreement, the following definitions shall apply:
7.1.
“Board” means the Board of Directors of the Company.
ARTICLE 7
DEFINITIONS
7.2.
“Cause” means, upon a reasonable determination by the Company, Executive’s: (i) dishonest statements or acts with
respect to the Company, any subsidiary or any affiliate of the Company, which has the effect of materially injuring (whether financially or
otherwise) the business or reputation of the Company; (ii) conviction of or indictment for (A) a felony or (B) any misdemeanor (excluding
minor traffic violations) involving moral turpitude, deceit, dishonesty or fraud (“indictment,” for these purposes, meaning an indictment,
probable cause hearing or any other procedure pursuant to which an initial determination of probable or reasonable cause with respect to such
offense is made); (iii) gross negligence, willful misconduct or insubordination with respect to the Company or any subsidiary or any affiliate of
the Company; or (iv) material breach of any of Executive’s obligations under any agreement to which Executive and the Company or any
subsidiary are a party. With respect to clause (iv), Executive will be given notice and a 30-day period in which to cure such breach, only to the
extent such breach can be reasonably expected to be able to be cured within such period. Executive agrees that the breach of any confidentiality
obligation to the Company or any subsidiary shall not be curable to any
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extent.
7.3.
“Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of
any one or more of the following events:
a)
Any natural person, entity or group within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (“Exchange Act Person”), becomes the owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than
by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
(i) on account of the acquisition of securities of the Company by any institutional investor, any affiliate thereof or any other Exchange Act
Person that acquires the Company’s securities in a transaction or series of related transactions that are primarily a private financing
transaction for the Company or (ii) solely because the level of ownership held by any Exchange Act Person (the “Subject Person”) exceeds
the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by
the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the
owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the
then outstanding voting securities owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be
deemed to occur;
b)
There is consummated a merger, consolidation or similar transaction involving, directly or
indirectly, the Company if, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the
Company immediately prior thereto do not own, directly or indirectly, either (i) outstanding voting securities representing more than fifty
percent (50%) of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or (ii)
more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation
or similar transaction;
dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur; or
c)
The stockholders of the Company approve or the Board approves a plan of complete
d)
There is consummated a sale, lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its subsidiaries to an entity, more than fifty percent (50%) of the combined voting power of the
voting securities of which are owned by stockholders of the Company in substantially the same proportion as their ownership of the
Company immediately prior to such sale, lease, license or other disposition.
The term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of
changing the domicile of the Company. Notwithstanding the foregoing or any other provision of this Agreement, the definition of Change in
Control (or any analogous term) in an individual written agreement between the Company or any affiliate and the participant shall supersede
the foregoing definition with respect to stock awards subject to such agreement (it being understood, however, that if no definition of
Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply).
7.4.
the Termination Date.
“Change in Control Benefits Period” means the period of eighteen (18) months commencing on
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7.5.
on the Termination Date.
“Change in Control Severance Period” means the period of eighteen (18) months commencing
7.6.
“Change in Control Termination” means an “Involuntary Termination Without Cause” or “Resignation
for Good Reason,” either of which occurs on, or within three (3) months prior to, or within twelve (12) months following, the effective date
of a Change in Control, provided that any such termination is a “separation from service” within the meaning of Treasury Regulation
Section 1.409A- 1(h). Death and disability shall not be deemed Change in Control Terminations.
7.7.
7.8.
7.9.
“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company” means Syndax Pharmaceuticals, Inc. or, following a Change in Control, the surviving entity
resulting from such transaction, or any subsequent surviving entity resulting from any subsequent Change in Control.
7.10.
“Confidentiality Agreement” means Executive’s Assignment of Developments, Non- Disclosure and
Non-Solicitation Agreement with the Company, dated June 22, 2015 (or any successor agreement thereto).
7.11.
“Covered Termination” means an “Involuntary Termination Without Cause” or “Resignation for Good
Reason,” provided that any such termination is a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h).
Death and disability shall not be deemed Covered Terminations. If an Involuntary Termination Without Cause or Resignation for Good
Reason qualifies as a Change in Control Termination, it shall not constitute a Covered Termination.
7.12.
on the Termination Date.
7.13.
on the Termination Date.
“Covered Termination Benefits Period” means the period of eighteen (18) months commencing
“Covered Termination Severance Period” means the period of twelve (12) months commencing
7.14.
“Involuntary Termination Without Cause” means Executive’s dismissal or discharge by the Company for
reasons other than Cause and other than as a result of death or disability.
7.15.
“Monthly Base Salary” means 1/12th of the greater of (i) Executive’s annual base salary (excluding
incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation) as in effect on the date of a
Change in Control Termination or a Covered Termination, as applicable, or (ii) in the case of a Change in Control Termination,
Executive’s annual base salary (excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable
compensation) as in effect on the date of a Change in Control.
7.16.
“Prior Employment Agreement” means that certain offer letter agreement, between the Company and
Executive, dated September 30, 2015, as previously amended and restated on April 27, 2020.
7.17.
“Pro-Rata Bonus” means 1/12th of the greater of (i) the average Target Performance Bonus paid to
Executive for the three years preceding the date of a Change in Control Termination (or such lesser number of years during which
Executive has been employed by the Company), or (ii) the Target Performance Bonus, as in effect on the date of a Change in Control
Termination.
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7.18.
“Resignation for Good Reason” means Executive’s resignation from all employee positions Executive
then holds with the Company within sixty (60) days following any of the following events taken without Executive’s consent, provided
Executive has given the Company written notice of such event within thirty (30) days after the first occurrence of such event and the
Company has not cured such event within thirty (30) days thereafter:
a)
A decrease in Executive’s total target cash compensation (base and bonus) of more than
10% (i.e., a material reduction in Executive’s base compensation and a material breach by the Company of Executive’s employment
terms with the Company), other than in connection with a comparable decrease in compensation for all comparable executives of the
Company;
in title or reporting relationships);
b)
Executive’s duties, authority or responsibilities are materially diminished (not simply a change
c) A material breach by the Company of the terms of the Agreement;
d)
Either (i) Executive is required to establish residence in a location more than 50 miles from
Executive’s current principal personal residence or (ii) there is an increase in Executive’s round-trip driving distance of more than fifty (50)
miles from Executive’s current principal personal residence to the principal office or business location at which Executive is required to
perform services (except for required business travel to the extent consistent with Executive’s prior business travel obligations)
(“Executive’s Principal Place of Business”) as a result of a change in location by the Company of Executive’s Principal Place of Business;
provided however, that the foregoing shall not include the establishment of a secondary residence within fifty (50) miles from the
Company’s Waltham headquarters with Executive’s consent or any commute between Executive’s current principal personal residence and
the Company’s Waltham headquarters; or
materially assume and materially agree to perform under the terms of this Agreement.
e)
The failure of the Company to obtain a satisfactory agreement from any successor to
7.19.
“Termination Date” means the effective date of the Change in Control Termination, the Covered
Termination or a termination for Cause, as applicable.
ARTICLE 8
GENERAL PROVISIONS
8.1.
Employment Status. This Agreement does not constitute a contract of employment or impose upon
Executive any obligation to remain as an employee, or impose on the Company any obligation (i) to retain Executive as an employee, (ii)
to change the status of Executive as an at-will employee or (iii) to change the Company’s policies regarding termination of employment.
8.2.
Notices. Any notices provided hereunder must be in writing, and such notices or any other written
communication shall be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile) or the third
day after mailing by first class mail, to the Company at its primary office location and to Executive at Executive’s address as listed in
the Company’s payroll records. Any payments made by the Company to Executive under the terms of this Agreement shall be delivered
to Executive either in person or at the address as listed in the Company’s payroll records.
8.3.
Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any
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jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement
will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained
herein.
8.4.
Waiver. If either party should waive any breach of any provisions of this Agreement, he, she or it shall not
thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
8.5.
Complete Agreement. This Agreement, including Exhibit A, Exhibit B and Exhibit C, and the
Confidentiality Agreement constitute the entire agreement between Executive and the Company and is the complete, final and exclusive
embodiment of their agreement with regard to this subject matter, wholly superseding all written and oral agreements with respect to
payments and benefits to Executive in the event of employment termination. It is entered into without reliance on any promise or
representation other than those expressly contained herein.
8.6.
Amendment or Termination of Agreement; Continuation of Agreement. This Agreement may be
changed or terminated only upon the mutual written consent of the Company and Executive. The written consent of the Company to a
change or termination of this Agreement must be signed by an executive officer of the Company (other than Executive) after such change
or termination has been approved by the Board. Unless so terminated, this Agreement shall continue in effect for as long as Executive
continues to be employed by the Company or by any surviving entity following any Change in Control. In other words, if, following a
Change in Control, Executive continues to be employed by the surviving entity without a Change in Control Termination and the surviving
entity then undergoes a Change in Control, following which Executive is terminated by the subsequent surviving entity in a Change in
Control Termination, then Executive shall receive the benefits described in Article 3 hereof.
8.7.
Counterparts. This Agreement may be executed in separate counterparts, any one of which need not
contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.
8.8.
Headings. The headings of the Articles and Sections hereof are inserted for convenience only and shall not
be deemed to constitute a part hereof nor to affect the meaning thereof.
8.9.
Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable
by Executive, and the Company, and any surviving entity resulting from a Change in Control and upon any other person who is a successor
by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company, and their respective successors,
assigns, heirs, executors and administrators, without regard to whether or not such person actively assumes any rights or duties hereunder;
provided, however, that Executive may not assign any duties hereunder and may not assign any rights hereunder without the written
consent of the Company, which consent shall not be withheld unreasonably.
8.10.
Choice of Law. Because of the Company’s and Executive’s interests in ensuring that disputes regarding
this Agreement are resolved on a uniform basis, the parties agree that all questions concerning the construction, validity and interpretation
of this Agreement will be governed by the law of the State of New York, without regard for any conflict of law principles. Further, the
parties consent to the jurisdiction of the state and federal courts of the State of New York for all purposes in connection with this
Agreement. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which Executive or the
Company may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient
forum for the maintenance of such dispute.
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8.11.
Arbitration. To ensure the rapid and economical resolution of any disputes that may arise under or relate
to this Agreement or Executive’s employment relationship, Executive and the Company agree that any and all disputes, claims, or causes of
action, in law or equity, arising from or relating to the performance, enforcement, execution, or interpretation of this Agreement,
Executive’s employment with the Company, or the termination of Executive’s employment (collectively, “Claims”), shall be resolved to the
fullest extent permitted by law, by final, binding, and (to the extent permitted by law) confidential arbitration before a single arbitrator in the
state where Executive is employed. The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. Section 1 et seq., as amended,
and shall be administered by the Judicial Arbitration & Mediation Services, Inc. (“JAMS”), in accordance with its then-current
(the “JAMS Rules”). The JAMS Rules are also available online at
Employment Arbitration Rules & Procedures
http://www.jamsadr.com/rules-employment-arbitration/. The parties or their representatives may also call JAMS at 800.352.5267 if they
have questions about the arbitration process. If the JAMS Rules are inconsistent with the terms of this Agreement, the terms of this
Agreement shall govern. Notwithstanding the foregoing, this provision shall exclude Claims that by law are not subject to arbitration. The
arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of all Claims and to award such relief as would
otherwise be permitted by law; and (b) issue a written arbitration decision including the arbitrator’s essential findings and conclusions and a
statement of the award. The Company shall pay all JAMS fees in excess of the amount of filing and other court-related fees Executive
would have been required to pay if the Claims were asserted in a court of law. EXECUTIVE AND THE COMPANY UNDERSTAND AND
FULLY AGREE THAT BY ENTERING INTO THIS AGREEMENT, BOTH EXECUTIVE AND THE COMPANY ARE GIVING UP
THE CONSTITUTIONAL RIGHT TO HAVE A TRIAL BY JURY, AND ARE GIVING UP THE NORMAL RIGHTS OF APPEAL
FOLLOWING THE RENDERING OF A DECISION, EXCEPT AS THE FEDERAL ARBITRATION ACT AND APPLICABLE
FEDERAL LAW ALLOW FOR JUDICIAL REVIEW OF ARBITRATION PROCEEDINGS. Nothing in this Agreement shall prevent
either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such
arbitration. Any awards or final orders in such arbitrations may be entered and enforced as judgments or orders in the federal and state
courts of any competent jurisdiction in compliance with Section 8.11 of this Agreement.
8.12.
Construction of Agreement. In the event of a conflict between the text of this Agreement and any
summary, description or other information regarding this Agreement, the text of this Agreement shall control.
8.13.
Circular 230 Disclaimer. THE FOLLOWING DISCLAIMER IS PROVIDED IN ACCORDANCE
WITH THE INTERNAL REVENUE SERVICE’S CIRCULAR 230 (21 C.F.R. PART 10). ANY TAX ADVICE CONTAINED IN
THIS AGREEMENT IS INTENDED TO BE PRELIMINARY, FOR DISCUSSION PURPOSES ONLY AND NOT FINAL. ANY
SUCH ADVICE IS NOT INTENDED TO BE USED FOR MARKETING, PROMOTING OR RECOMMENDING ANY
TRANSACTION OR FOR THE USE OF ANY PERSON IN CONNECTION WITH THE PREPARATION OF ANY TAX
RETURN. ACCORDINGLY, THIS ADVICE IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED,
BY ANY PERSON FOR THE PURPOSE OF AVOIDING TAX PENALTIES THAT MAY BE IMPOSED ON SUCH PERSON.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the Effective Date written above.
SYNDAX PHARMACEUTICALS, INC.
EXECUTIVE
By: /s/ Luke J. Albrecht
Michael A. Metzger
Name: Luke J. Albrecht
Michael A. Metzger
Title: Senior Vice President, General Counsel
& Secretary
Exhibit A:
Exhibit B:
C:
Release (Individual Termination – Age 40 or Older)
Release (Individual and Group Termination – Under Age 40) Exhibit
Release (Group Termination – Age 40 or Older)
By: /s/
Name:
[Type here]
EXHIBIT A RELEASE
(INDIVIDUAL TERMINATION – AGE 40 OR OLDER)
Certain capitalized terms used in this Release are defined in the Executive Employment Agreement (the “Agreement”) which I
have executed and of which this Release is a part.
I hereby confirm my obligations under the Confidentiality Agreement (or other comparable agreement that I have signed, if any).
Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and
subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature,
in law, equity or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me based on my employment with the Company), arising out of or in
any way related to agreements, events, acts or conduct at any time prior to the date I execute this Release, including, but not limited to: all
such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the
termination of that employment, including, but not limited to, claims of intentional and negligent infliction of emotional distress, any and all
tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; and
claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as
amended, the federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”), the federal Employee Retirement Income
Security Act of 1974, as amended, the federal Americans with Disabilities Act of 1990, the California Fair Employment and Housing Act, as
amended, the New York City Human Rights Law, as amended, the Massachusetts Fair Employment Practices Law, as amended, the South
Carolina Human Affairs Law, as amended, tort law, contract law, wrongful discharge, discrimination, fraud, defamation, emotional distress,
and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any
way to (1) release the Company from its obligation to indemnify me pursuant to the Company’s indemnification obligation pursuant to written
agreement or applicable law; (2) release any claim by me against the Company relating to the validity or enforceability of this release or the
Agreement; (3) prohibit me from exercising any non-waivable right to file a charge with the United States Equal Employment Opportunity
Commission (“EEOC”), the National Labor Relations Board (“NLRB”), or any other government agency (provided, however, that I shall not
be entitled to recover any monetary damages or to obtain non-monetary relief if the agency were to pursue any claims relating to my
employment with the Company).
I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have to assert claims for age
discrimination under applicable law, including under the ADEA. I also acknowledge that the consideration given under the Agreement for the
waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge
that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that
may arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior to executing this Release; (C) I have
twenty-one (21) days to consider this Release (although I may choose to voluntarily execute this
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Release earlier); (D) I have seven (7) days following my execution of this Release to revoke the Release by providing a written notice of
revocation to the Company’s Chief Executive Officer; and (E) this Release shall not be effective until the date upon which the revocation
period has expired, which shall be the eighth (8th) day after I execute this Release (provided that I do not revoke it).
I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all the leave and leave
benefits and protections for which I am eligible, pursuant to the federal Family and Medical Leave Act, any Company policy or applicable
law, and I have not suffered any on- the-job injury or illness for which I have not already filed a workers’ compensation claim.
I agree that I will not make any disparaging statements regarding the Company or its officers, directors, shareholders, members,
agents or products jointly or severally. The foregoing shall not be violated by truthful statements in response to legal process, required
governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such
proceedings).
EXECUTIVE:
Signature
Printed Name
Date:
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EXHIBIT B
RELEASE
(INDIVIDUAL AND GROUP TERMINATION – UNDER AGE 40)
Certain capitalized terms used in this Release are defined in the Executive Employment Agreement (the “Agreement”) which I
have executed and of which this Release is a part.
I hereby confirm my obligations under the Confidentiality Agreement (or other comparable agreement that I have signed, if any).
Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and
subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature,
in law, equity or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me based on my employment with the Company), arising out of or in
any way related to agreements, events, acts or conduct at any time prior to the date I execute this Release, including, but not limited to: all
such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the
termination of that employment, including, but not limited to, claims of intentional and negligent infliction of emotional distress, any and all
tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; and
claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as
amended, the federal Employee Retirement Income Security Act of 1974, as amended, the federal Americans with Disabilities Act of 1990,
the California Fair Employment and Housing Act, as amended, the New York City Human Rights Law, as amended, the Massachusetts Fair
Employment Practices Law, as amended, the South Carolina Human Affairs Law, as amended, tort law, contract law, wrongful discharge,
discrimination, fraud, defamation, emotional distress, and breach of the implied covenant of good faith and fair dealing; provided, however,
that nothing in this paragraph shall be construed in any way to (1) release the Company from its obligation to indemnify me pursuant to the
Company’s indemnification obligation pursuant to written agreement or applicable law; (2) release any claim by me against the Company
relating to the validity or enforceability of this release or the Agreement; (3) prohibit me from exercising any non-waivable right to file a
charge with the United States Equal Employment Opportunity Commission (“EEOC”), the National Labor Relations Board (“NLRB”), or
any other government agency (provided, however, that I shall not be entitled to recover any monetary damages or to obtain non- monetary
relief if the agency were to pursue any claims relating to my employment with the Company).
I acknowledge that the consideration given under the Agreement for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing that: (A) my
waiver and release do not apply to any rights or claims that may arise on or after the date I execute this Release; (B) I have the right to consult
with an attorney prior to executing this Release; and (C) I have twenty-one (21) days to consider this Release (although I may choose to
voluntarily execute this Release earlier).
I hereby represent that I have been paid all compensation owed and for all hours worked, I
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have received all the leave and leave benefits and protections for which I am eligible, pursuant to the federal Family and Medical Leave
Act, any Company policy or applicable law, and I have not suffered any on- the-job injury or illness for which I have not already filed a
workers’ compensation claim.
I agree that I will not make any disparaging statements regarding the Company or its officers, directors, shareholders, members,
agents or products jointly or severally. The foregoing shall not be violated by truthful statements in response to legal process, required
governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such
proceedings).
EXECUTIVE:
Signature
Printed Name
Date:
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EXHIBIT C
RELEASE
(GROUP TERMINATION – AGE 40 OR OLDER)
Certain capitalized terms used in this Release are defined in the Executive Employment Agreement (the “Agreement”) which I
have executed and of which this Release is a part.
I hereby confirm my obligations under the Confidentiality Agreement (or other comparable agreement that I have signed, if any).
Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and
subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorneys’ fees, damages, indemnities and obligations of every kind and nature,
in law, equity or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for
indemnification I may have as a result of any third party action against me based on my employment with the Company), arising out of or in
any way related to agreements, events, acts or conduct at any time prior to the date I execute this Release, including, but not limited to: all
such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the
termination of that employment, including, but not limited to, claims of intentional and negligent infliction of emotional distress, any and all
tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; and
claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as
amended, the federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”), the federal Employee Retirement Income
Security Act of 1974, as amended, the federal Americans with Disabilities Act of 1990, the California Fair Employment and Housing Act, as
amended, the New York City Human Rights Law, as amended, the Massachusetts Fair Employment Practices Law, as amended, the South
Carolina Human Affairs Law, as amended, tort law, contract law, wrongful discharge, discrimination, fraud, defamation, emotional distress,
and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any
way to (1) release the Company from its obligation to indemnify me pursuant to the Company’s indemnification obligation pursuant to written
agreement or applicable law; (2) release any claim by me against the Company relating to the validity or enforceability of this release or the
Agreement; (3) prohibit me from exercising any non-waivable right to file a charge with the United States Equal Employment Opportunity
Commission (“EEOC”), the National Labor Relations Board (“NLRB”), or any other government agency (provided, however, that I shall not
be entitled to recover any monetary damages or to obtain non-monetary relief if the agency were to pursue any claims relating to my
employment with the Company).
I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have to assert claims for age
discrimination under applicable law, including under the ADEA. I also acknowledge that the consideration given under the Agreement for the
waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge
that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that
may arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior to executing this Release; (C) I have
forty-five (45) days to consider this Release (although I may choose to voluntarily execute this Release
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earlier); (D) I have seven (7) days following my execution of this Release to revoke the Release by providing a written notice of revocation to
the Company’s Chief Executive Officer; (E) this Release shall not be effective until the date upon which the revocation period has expired,
which shall be the eighth day (8th) after I execute this Release; and (F) I have received with this Release the required written disclosure for a
“group termination” under the ADEA, including a detailed list of the job titles and ages of all employees who were terminated in this group
termination and the ages of all employees of the Company in the same job classification or organizational unit who were not terminated.
I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all the leave and leave
benefits and protections for which I am eligible, pursuant to the federal Family and Medical Leave Act, any Company policy or applicable
law, and I have not suffered any on- the-job injury or illness for which I have not already filed a workers’ compensation claim.
I agree that I will not engage in any conduct that is injurious to the reputation of the Company or its parents, subsidiaries and
affiliates, including but not limited to disparagement of the Company, its officers, Board members, employees and shareholders. The
foregoing shall not be violated by a statement made in a deposition, trial or administrative proceeding in response to legal process; by any
statement made to a government agency; or whenever I make any statement to a court, administrative tribunal or government agency as
required by law.
EXECUTIVE:
Signature
Printed Name
Date:
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SYNDAX PHARMACEUTICALS, INC.
AMENDED & RESTATED
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
Effective: February 2, 2022
Exhibit 10.19
Each member of the Board of Directors (the “Board”) who is not also serving as an employee of Syndax Pharmaceuticals, Inc. (the
“Company”) or any of its subsidiaries will receive the compensation described in this Amended and Restated Non-Employee Director
Compensation Policy for his or her Board service. This policy may be amended at any time in the sole discretion of the Board.
Each non-employee director serving on the Board of the Company will receive an annual base cash fee for his or her services of
$41,400. Each non-employee director other than the non-executive chairperson of the Board (the “Chair”) shall also receive an annual award of
deferred settlement restricted stock units to purchase 16,000 shares and the Chair shall also receive an annual award of deferred settlement
restricted stock units to purchase 32,000 shares (each as adjusted for stock splits, stock dividends, recapitalization and similar events) of the
Company’s common stock on the same date that the Board awards annual stock option grants to the Company’s executive officers (each an
“Annual Option Award”). Each Annual Option Award will vest on the one-year anniversary of the date of grant, subject to the director’s
continued service to the Company.
Newly appointed non-employee directors will receive at the time of his or her appointment to the Board, a one-time initial award of
options to purchase 35,000 shares (as adjusted for stock splits, stock dividends, recapitalization and similar events) of the Company’s common
stock (the “New Director Award”). Each New Director Award will vest monthly over a three-year period.
The Chair will also receive an annual cash retainer of $72,450 for his or her service in such role.
Each non-employee director, other than the chairperson of such committee, who serves on the following committees will receive an
annual cash retainer, for each committee on which he or she serves, as listed below:
•
•
•
•
Audit committee – $10,350
Compensation committee – $7,765
Science & Technology committee – $7,765
Nominating and corporate governance committee – $5,175
Each chairperson of the audit, compensation, nominating and corporate governance and science and technology committees will
receive an additional annual cash retainer as follows:
•
•
•
•
Audit committee – $20,700
Compensation committee – $15,525
Science & Technology committee – $15,525
Nominating and corporate governance committee – $10,350
The Company will also reimburse each of the directors for his or her travel expenses incurred in connection with his or her attendance
at Board and committee meetings. All cash retainers will be paid in equal quarterly installments.
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
Exhibit 10.35
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of December 22, 2021 (the
“Amendment Effective Date”), is entered into by and among SYNDAX PHARMACEUTICALS, INC., a Delaware corporation, and each of its
Qualified Subsidiaries (hereinafter collectively referred to as the “Borrower”), the several banks and other financial institutions or entities from
time to time parties to this Agreement (collectively, referred to as the “Lenders”) and HERCULES CAPITAL, INC., a Maryland corporation, in
its capacity as administrative agent and collateral agent for itself and the Lenders (together with its successors and assigns, in such capacity, the
“Agent”).
A.
Borrower, Lenders and Agent are parties to that certain Loan and Security Agreement, dated as of February 7, 2020 (the
“Existing Loan Agreement”; and the Existing Loan Agreement, as amended by this Amendment and as further amended, restated, supplemented
or otherwise modified from time to time, the “Loan Agreement”).
B.
Borrower, Lenders and Agent desire to modify the terms of the Existing Loan Agreement as set forth in this Amendment.
SECTION 1
Definitions; Interpretation.
(a)
Terms Defined in Loan Agreement. All capitalized terms used in this Amendment (including in the recitals hereof) and
not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement.
(b)
Rules of Construction. The rules of construction that appear in the last paragraph of Section 1.1 of the Loan Agreement
shall be applicable to this Amendment and are incorporated herein by this reference.
SECTION 2
Amendments to the Loan Agreement.
(a)
Upon satisfaction of the conditions set forth in Section 3 hereof, the Existing Loan Agreement is hereby amended as
follows:
(i)
Exhibit A attached hereto sets forth a clean copy of the Loan Agreement as amended hereby;
In Exhibit B hereto, deletions of the text in the Existing Loan Agreement (including, to the extent included in
such Exhibit B, each Schedule or Exhibit to the Existing Loan Agreement) are indicated by struck-through text, and insertions of text are
indicated by bold, double-underlined text.
(ii)
(b)
References Within Existing Loan Agreement. Each reference in the Existing Loan Agreement to “this Agreement” and
the words “hereof,” “herein,” “hereunder,” or words of like import, shall mean and be a reference to the Existing Loan Agreement as amended by
this Amendment. This Amendment shall be a Loan Document.
SECTION 3
following documents, in form and substance satisfactory to Agent, or, as applicable, the following conditions being met:
Conditions of Effectiveness. The effectiveness of Section 2 of this Amendment shall be subject to Agent’s receipt of the
(a)
this Amendment, executed by Agent, each Lender and Borrower;
(b)
a duly executed certificate of an officer of Borrower certifying and attaching copies of (A) the certificate of formation,
certified as of a recent date by the jurisdiction of organization of Borrower and as in effect as of the Amendment Effective Date; (B) the bylaws,
operating agreement or similar governing document of Borrower, as in effect as of the Amendment Effective Date; (C) resolutions of Borrower’s
Board evidencing approval of this Amendment, as such resolutions remain in full force and effect as of the Amendment Effective Date; and (D) a
schedule setting forth the name, title and specimen signature of officers or other authorized signers on behalf of Borrower;
(c)
(d)
(e)
(f)
party thereto;
a perfection certificate, executed by Borrower, in form and substance reasonably satisfactory to Agent;
a certificate of good standing for Borrower from its jurisdiction of organization;
such other documents as Agent may reasonably request;
an amended and restated pledge agreement, executed by Agent, Borrower and acknowledged by Borrower’s subsidiaries
(g)
evidence, satisfactory to Agent in its sole discretion, of the effectiveness of that certain Collaboration and License
Agreement, dated as of September 24, 2021 (the “Incyte Collaboration Agreement”), by and between Borrower and Incyte Corporation, a
Delaware corporation (“Incyte”);
(h)
evidence, satisfactory to Agent in its sole discretion, that Borrower has received the initial license fee from Incyte pursuant
to Section 8.1(a) of the Incyte Collaboration Agreement;
(i)
Borrower shall have paid (i) all invoiced costs and expenses then due in accordance with Section 5(e), and (ii) all other fees,
costs and expenses, if any, due and payable as of the Amendment Effective Date under the Loan Agreement; and
(j)
On the Amendment Effective Date, after giving effect to the amendment of the Existing Loan Agreement contemplated
hereby:
The representations and warranties contained in Section 4 shall be true and correct on and as of the Amendment
Effective Date as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date,
after giving effect in all cases to any standard(s) of materiality contained in the Agreement as to such representations and warranties; and
(i)
(ii)
There exist no Events of Default or events that with the passage of time would result in an Event of Default.
Representations and Warranties. To induce Agent and Lenders to enter into this Amendment, Borrower hereby confirms,
SECTION 4
as of the date hereof, (a) that the representations and warranties made by it in Section 5 of the Loan Agreement and in the other Loan Documents
are true and correct in all material respects; 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; provided, further, that to the extent such representations and
warranties by their terms expressly relate only to a prior date such representations and warranties shall be true and correct in all material respects
as of such prior date, and that no Event of Default has occurred and is continuing and (b) that there has not been and there does not exist a
Material Adverse Effect. For the purposes of this Section 4, each reference in Section 5 of the Loan Agreement to “this Agreement,” and the
words “hereof,” “herein,” “hereunder,” or
2
words of like import in such Section, shall mean and be a reference to the Loan Agreement as amended by this Amendment.
SECTION 5
Miscellaneous.
(a)
Loan Documents Otherwise Not Affected; Reaffirmation; No Novation.
(i)
Except as expressly amended pursuant hereto or referenced herein, the Loan Agreement and the other Loan
Documents shall remain unchanged and in full force and effect and are hereby ratified and confirmed in all respects. The Lenders’ and Agent’s
execution and delivery of, or acceptance of, this Amendment shall not be deemed to create a course of dealing or otherwise create any express or
implied duty by any of them to provide any other or further amendments, consents or waivers in the future.
(ii)
Borrower hereby expressly (1) reaffirms, ratifies and confirms its Secured Obligations under the Loan
Agreement and the other Loan Documents, (2) reaffirms, ratifies and confirms the grant of security under Section 3 of the Loan Agreement,
subject to the provisions set forth in Section 3.2 of the Loan Agreement, (3) reaffirms that such grant of security in the Collateral secures all
Secured Obligations under the Loan Agreement, including without limitation any Term Loan Advances funded on or after the Amendment
Effective Date, as of the date hereof, and with effect from (and including) the Amendment Effective Date, such grant of security in the Collateral:
(x) remains in full force and effect notwithstanding the amendments expressly referenced herein; and (y) secures all Secured Obligations under
the Loan Agreement, as amended by this Amendment, and the other Loan Documents, (4) agrees that this Amendment shall be a “Loan
Document” under the Loan Agreement and (5) agrees that the Loan Agreement and each other Loan Document shall remain in full force and
effect following any action contemplated in connection herewith.
(iii)
This Amendment is not a novation and the terms and conditions of this Amendment shall be in addition to and
supplemental to all terms and conditions set forth in the Loan Documents. Nothing in this Amendment is intended, or shall be construed, to
constitute an accord and satisfaction of Borrower’s Secured Obligations under or in connection with the Loan Agreement and any other Loan
Document or to modify, affect or impair the perfection or continuity of Agent’s security interest in, (on behalf of itself and the Lenders) security
titles to or other liens on any Collateral for the Secured Obligations.
(b)
Conditions. For purposes of determining compliance with the conditions specified in Section 3, each Lender that has
signed this Amendment shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless Agent shall have received notice from
such Lender prior to the date hereof specifying its objection thereto.
(c)
Release. In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, on behalf of itself and its successors, assigns, and other
legal representatives, hereby fully, absolutely, unconditionally and irrevocably releases, remises and forever discharges Agent and each Lender, and
its successors and assigns, and its present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys,
employees, agents and other representatives (Agent, each Lender and all such other persons being hereinafter referred to collectively as the
“Releasees” and individually as a “Releasee”), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies,
agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of set-off,
demands and liabilities whatsoever of every name
3
and nature, known or unknown, suspected or unsuspected, both at law and in equity, which Borrower, or any of its successors, assigns, or other legal
representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any
circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, including, without
limitation, for or on account of, or in relation to, or in any way in connection with the Loan Agreement, or any of the other Loan Documents or
transactions thereunder or related thereto. Borrower waives the provisions of California Civil Code section 1542, which states:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE
AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
Borrower understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used
as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the
provisions of such release. Borrower agrees that no fact, event, circumstance, evidence or transaction which could now be asserted or which may
hereafter be discovered shall affect in any manner the final, absolute and unconditional nature of the release set forth above. The provisions of
this section shall survive payment in full of the Secured Obligations, full performance of all the terms of this Amendment and the other Loan
Documents.
(d)
No Reliance. Borrower hereby acknowledges and confirms to Agent and Lenders that Borrower is executing this
Amendment on the basis of its own investigation and for its own reasons without reliance upon any agreement, representation, understanding or
communication by or on behalf of any other Person.
(e)
Costs and Expenses. Borrower agrees to pay to Agent on the date hereof the reasonable and documented out-of-pocket
costs and expenses of Agent and each Lender party hereto, and the fees and disbursements of counsel to Agent and each Lender party hereto in
connection with the negotiation, preparation, execution and delivery of this Amendment and any other documents to be delivered in connection
herewith on the date hereof.
(f)
Binding Effect. This Amendment binds and is for the benefit of the successors and permitted assigns of each party.
(g)
Governing Law. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, EXCLUDING CONFLICT
OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.
(h)
Complete Agreement; Amendments. This Amendment and the Loan Documents represent the entire agreement about
this subject matter and supersede prior negotiations or agreements with respect to such subject matter. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge
into this Amendment and the Loan Documents.
(i)
Severability of Provisions. Each provision of this Amendment is severable from every other provision in determining the
enforceability of any provision.
4
(j)
Counterparts. This Amendment 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 Amendment. Delivery of an
executed counterpart of a signature page of this Amendment by facsimile, portable document format (.pdf) or other electronic transmission will
be as effective as delivery of a manually executed counterpart hereof.
(k)
Loan Documents. This Amendment and the documents related hereto shall constitute Loan Documents.
(l)
Electronic Execution of Certain Other Documents. The words “execution,” “execute”, “signed,” “signature,” and words
of like import in or related to any document to be signed in connection with this Amendment and the transactions contemplated hereby (including
without limitation assignments, assumptions, amendments, waivers and consents) shall be deemed to include electronic signatures, the electronic
matching of assignment terms and contract formations on electronic platforms approved by the Agent, or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in
Global and National Commerce Act, the California Uniform Electronic Transactions Act, or any other similar state laws based on the Uniform
Electronic Transactions Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment, as of the date first above written.
BORROWER:
SYNDAX PHARMACEUTICALS, INC.
By:
Luke J.
Albrecht
Name:
J.
Albrecht
Title:
Vice President, General Counsel
/s/
Luke
Seni
[SIGNATURES CONTINUE ON THE NEXT PAGE]
[Signature Page to First Amendment to Loan and Security Agreement]
AGENT:
HERCULES CAPITAL, INC.
Signature:
/s/ Zhuo Huang
Print Name:
Zhuo Huang
Title:
Associate General Counsel
[Signature Page to First Amendment to Loan and Security Agreement]
LENDERS:
HERCULES CAPITAL, INC.
Signature:
/s/ Zhuo Huang
Print Name:
Zhuo Huang
Title:
Associate General Counsel
[Signature Page to First Amendment to Loan and Security Agreement]
EXHIBIT A
(See Attached)
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made and dated as of February 7, 2020 and is entered into by and among
SYNDAX PHARMACEUTICALS, INC., a Delaware corporation (“Parent”), and each of its Qualified Subsidiaries (hereinafter collectively
referred to as the “Borrower”), the several banks and other financial institutions or entities from time to time parties to this Agreement
(collectively, referred to as the “Lenders”) and HERCULES CAPITAL, INC., a Maryland corporation, in its capacity as administrative agent and
collateral agent for itself and the Lenders (in such capacity, the “Agent”).
A.
B.
Borrower has requested the Lenders make available to Borrower a loan in an aggregate principal amount of up to Eighty
Million Dollars ($80,000,000.00) (the “Term Loan”); and
The Lenders are willing to make the Term Loan on the terms and conditions set forth in this Agreement.
RECITALS
NOW, THEREFORE, Borrower, Agent and the Lenders agree as follows:
AGREEMENT
SECTION 1.
DEFINITIONS AND RULES OF CONSTRUCTION
1.1
Unless otherwise defined herein, the following capitalized terms shall have the following meanings:
“Account Control Agreement(s)” means any agreement entered into by and among the Agent, Borrower and a third party
bank or other institution (including a Securities Intermediary) in which Borrower maintains a Deposit Account or an account holding Investment
Property and which perfects Agent’s first priority security interest in the subject account or accounts.
account numbers shall be redacted for security purposes if and when filed publicly by the Borrower.
“ACH Authorization” means the ACH Debit Authorization Agreement in substantially the form of Exhibit G, which
“Advance(s)” means a Term Loan Advance.
“Advance Date” means the funding date of any Advance.
which account numbers shall be redacted for security purposes if and when filed publicly by the Borrower.
“Advance Request” means a request for an Advance submitted by Borrower to Agent in substantially the form of Exhibit A,
“Affiliate” means (a) any Person that directly or indirectly controls, is controlled by, or is under common control with the
Person in question, (b) any Person directly or indirectly owning, controlling or holding with power to vote thirty percent (30%) or more of the
outstanding voting securities of another Person, or (c) any Person thirty percent (30%) or more of whose outstanding voting securities are directly
or indirectly owned, controlled or held by another Person with power to vote such securities. As used in the definition of “Affiliate,” the term
“control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract
or otherwise.
“Agreement” means this Loan and Security Agreement, as amended from time to time.
January 1, 2024.
“Amortization Date” means January 1, 2023; provided however, if the Interest Only Extension Conditions are satisfied, then
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to Borrower or any of its
Affiliates from time to time concerning or relating to bribery or corruption, including without limitation the United States Foreign Corrupt
Practices Act of 1977, as amended, the UK Bribery Act 2010 and other similar legislation in any other jurisdictions.
“Anti‑Terrorism Laws” means any laws, rules, regulations or orders relating to terrorism or money laundering, including
without limitation 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.
“Blocked Person” means 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 Products” means all products, software, service offerings, technical data or technology currently being designed,
manufactured or sold by Borrower or which Borrower intends to sell, license, or distribute in the future including any products or service offerings
under development, collectively, together with all products, software, service offerings, technical data or technology that have been sold, licensed
or distributed by Borrower since its incorporation.
“Borrower’s Books” means Borrower’s or any of its Subsidiaries’ books and records including ledgers, federal, state, local
and foreign 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.
California are closed for business.
“Business Day” means any day other than Saturday, Sunday and any other day on which banking institutions in the State of
“Cash” means all cash, cash equivalents and liquid funds.
“Change in Control” means (a) any reorganization, recapitalization, consolidation or merger (or similar transaction or
series of related transactions) of Parent, or sale or exchange of outstanding shares (or similar transaction or series of related transactions) of
Parent, in each case, in which the “beneficial owners” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act) of Parent’s outstanding
shares immediately before consummation of such transaction or series of related transactions do not, immediately after consummation of such
transaction or series of related transactions, continue to beneficially own shares representing more than fifty percent (50%) of the voting power of
the surviving entity of such transaction or series of related transactions (or the parent of such surviving entity if such surviving entity is wholly
owned by such parent), in each case without regard to whether Parent is
the surviving entity or (b) Parent ceases to own 100% of the Equity Interests of any Subsidiary. Notwithstanding the foregoing, the merger of any
Borrower into any other Borrower shall not constitute a Change in Control.
“Closing Date” means the date of this Agreement.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Stock” means the common stock of the Borrower.
“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any Indebtedness, lease, dividend, letter of credit or other obligation of another, including any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the
account of that Person; and (iii) all obligations arising under any Hedging Agreement; provided, however, that the term “Contingent Obligation”
shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is
made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith;
provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support
arrangement.
owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
“Copyright License” means any written agreement granting any right to use any Copyright or Copyright registration, now
America, any State thereof, or of any other country.
“Copyrights” means all copyrights, whether registered or unregistered, held pursuant to the laws of the United States of
savings account, or certificate of deposit.
“Deposit Accounts” means any “deposit accounts,” as such term is defined in the UCC, and includes any checking account,
the District of Columbia, or any other jurisdiction within the United States of America.
“Domestic Subsidiary” means any Subsidiary organized under the laws of the United States of America, any State thereof,
deemed fully earned on such date regardless of the early termination of this Agreement.
“Due Diligence Fee” means $25,000, which fee has been paid to the Lenders prior to the Closing Date, and shall be
other equity securities or equity ownership interests of such Person.
“Equity Interests” means, with respect to any Person, the capital stock, partnership or limited liability company interest, or
thereunder.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated
“Excluded Subsidiary” means (x) Syndax UK and (y) the MSC Subsidiary.
“FDA” means the United States Food and Drug Administration, or any successor thereto.
Effective Date, by and among Borrower, the Lenders and Agent.
“First Amendment” means that certain First Amendment to Loan and Security Agreement dated as of the First Amendment
“First Amendment Effective Date” means December 22, 2021.
“Excluded Accounts” means (i) any Deposit Account that is used solely as a payroll account for the employees of Borrower
or any of its Subsidiaries or the funds in which consist solely of funds held in trust for any director, officer or employee of such Borrower or
Subsidiary or any employee benefit plan maintained by such Borrower or Subsidiary or funds representing deferred compensation for the directors
and employees of such Borrower or Subsidiary, collectively not to exceed 150% of the amount to be paid in the ordinary course of business in the
then-next payroll cycle (ii) escrow accounts, Deposit Accounts and trust accounts, in each case holding assets that are pledged or otherwise
encumbered as set forth on Schedule 1C or pursuant to Section 7.5 and the definition of Permitted Liens (but only to the extent required to be
excluded pursuant to the underlying documents entered into in connection with such Permitted Liens in the ordinary course of business) and (iii)
foreign accounts held by Borrower not to exceed $100,000 in the aggregate at any time.
“Foreign Subsidiary” means any Subsidiary other than a Domestic Subsidiary.
“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time.
“Guaranty” means a guaranty in a form reasonably acceptable to Agent.
“Hedging Agreement” means any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest
rate collar agreement, or other agreement or arrangement designated to protect Borrower or its Subsidiaries against fluctuation in interest rates,
currency exchange rates or commodity price.
“Incyte” means Incyte Corporation, a Delaware corporation.
“Incyte Collaboration Agreement” mean the Collaboration and License Agreement, dated September 24, 2021, between
Borrower and Incyte, the effectiveness of which is conditioned on the early termination or expiration of the waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976.
“Incyte Letter Agreement” means the letter agreement, dated December 9, 2021, between Borrower and Incyte.
outstanding, plus (ii) the Qualified Cash A/P Amount.
“Incyte Minimum Cash Amount” means the sum of (i) 150% of the aggregate principal amount of Term Loans
“Incyte Termination Event” means either Borrower or Incyte (i) terminates the Incyte Collaboration Agreement, at any
time, pursuant to the Incyte Letter Agreement or otherwise or (ii) amends the Incyte Collaboration Agreement in any manner materially adverse
to the Agent or any Lender.
“Indebtedness” means indebtedness of any kind, including (a) all indebtedness for borrowed money or the deferred purchase
price of property or services (excluding trade credit entered into in the ordinary course of business), including reimbursement and other obligations
with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments,
(c) all capital lease obligations, (d) equity securities of any Person subject to repurchase or redemption other than at the sole option of such Person,
(e) “earnouts”, deferred purchase price and similar payment obligations or continuing obligations of any nature arising out of purchase and sale
contracts, and (f) all Contingent Obligations.
“Initial Facility Charge” means One Hundred Thousand Dollars ($100,000).
“Insolvency Proceeding” means 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 similar relief.
“Intellectual Property” means all of Borrower’s Copyrights; Trademarks; Patents; Licenses; trade secrets and inventions;
mask works; Borrower’s applications therefor and reissues, extensions, or renewals thereof; and Borrower’s goodwill associated with any of the
foregoing, together with Borrower’s rights to sue for past, present and future infringement of Intellectual Property and the goodwill associated
therewith.
“Interest Only Extension Conditions” shall mean satisfaction of each of the following events: (a) no default or Event of
Default shall have occurred and be continuing; and (b)(i) on or before April 30, 2022, Borrower draws the full amount of the Tranche 2-A
Advance or (ii) on or before November 30, 2022, Borrower draws the full amount of the Tranche 2-B Advance.
“Investment” means any beneficial ownership (including stock, partnership, limited liability company interests, or other
securities) of or in any Person or any loan, advance or capital contribution to any Person or the acquisition of all, or substantially all, assets of
another Person.
“IRS” means the United States Internal Revenue Service.
attached hereto as Exhibit F.
“Joinder Agreements” means for each Subsidiary, a completed and executed Joinder Agreement in substantially the form
“License” means any Copyright License, Patent License, Trademark License or other license of rights or interests.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance,
levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale
or other title retention agreement, and any lease in the nature of a security interest.
“Loan” means the Advances made under this Agreement.
“Loan Documents” means this Agreement, the promissory notes (if any), the ACH Authorization, the Account Control
Agreements, the Joinder Agreements, all UCC Financing Statements, the Pledge Agreement, and any other documents executed in connection with
the Secured Obligations or the transactions contemplated hereby, as the same may from time to time be amended, modified, supplemented or
restated.
“Material Adverse Effect” means a material adverse effect upon: (i) the business, operations, properties, assets or financial
condition of Borrower and its Subsidiaries taken as a whole; or (ii) the ability of Borrower to perform or pay the Secured Obligations in
accordance with the terms of the
Loan Documents, or the ability of Agent or the Lenders to enforce any of its rights or remedies with respect to the Secured Obligations; or (iii) the
Collateral or Agent’s Liens on the Collateral or the priority of such Liens.
“Maximum Term Loan Amount” means Eighty Million and No/100 Dollars ($80,000,000.00).
“MSC Investment Conditions” means that Borrower maintains Qualified Cash in an amount equal to or greater than the
lesser of (i) 110% of the aggregate outstanding Secured Obligations (inclusive of any Prepayment Charge and End of Term Charges that would be
due and owing if the outstanding Loans were prepaid at the time of measurement) or (ii) 100% of the consolidated Cash of Borrower and its
Subsidiaries unless compliance with the foregoing conditions are waived in writing from time to time by Agent with respect to specified periods,
in Agent’s sole discretion.
“MSC Subsidiary” means Syndax Securities Corporation, a wholly-owned Subsidiary incorporated in the Commonwealth of
Massachusetts for the purpose of holding Investments 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).
drug.
“NDA” means a new drug application, submitted to the FDA pursuant to 21 U.S.C. §355 for authorization to market a new
Hercules Capital dated as of November 27, 2018.
“Non-Disclosure Agreement” means that certain Non-Disclosure Agreement by and between Syndax Pharmaceuticals and
“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.
existence or a Patent application is pending, in which agreement Borrower now holds or hereafter acquires any interest.
“Patent License” means any written agreement granting any right with respect to any invention on which a Patent is in
“Patents” means all letters patent of, or rights corresponding thereto, in the United States of America or in any other country,
all registrations and recordings thereof, and all applications for letters patent of, or rights corresponding thereto, in the United States of America or
any other country.
“Permitted Indebtedness” means:
(i)
Indebtedness of Borrower in favor of the Lenders or Agent arising under this Agreement
or any other Loan Document;
(ii)
(iii)
Indebtedness existing on the Closing Date which is disclosed in Schedule 1A;
Indebtedness of up to $500,000 outstanding at any time secured by a Lien described in
clause (vii) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed the cost of the Equipment financed with
such Indebtedness;
(iv)
Indebtedness to trade creditors incurred in the ordinary course of business and
Indebtedness incurred in the ordinary course of business with corporate credit cards, merchant cards, purchase cards, debit cards and
other similar instruments in an amount not to exceed $600,000 at any time outstanding;
(v)
(vi)
(vii)
Indebtedness that also constitutes a Permitted Investment;
Subordinated Indebtedness;
reimbursement obligations in connection with letters of credit, including those provided
for the benefit of a landlord in connection with real property leases for office spaces in the ordinary course of business, that are
secured by Cash and issued on behalf of the Borrower or a Subsidiary thereof in an amount not to exceed $500,000 at any time
outstanding,
outstanding,
(viii)
(ix)
other unsecured Indebtedness in an amount not to exceed $250,000 at any time
intercompany Indebtedness as long as either (A) each of the Subsidiary obligor and the
Subsidiary obligee under such Indebtedness is a Subsidiary that has executed a Joinder Agreement or (B) such indebtedness
constituted a Permitted Investment pursuant to clause (x) of Permitted Investments;
(x)
obligations under any Hedging Agreement in an aggregate amount not to exceed $250,000 outstanding at
any time;
(xi)
licenses permitted pursuant to clause (ii) of the definition of Permitted Transfers or otherwise permitted
hereunder, to the extent involving the incurrence of Indebtedness;
(xii)
extensions, refinancings and renewals of any items of Permitted Indebtedness, provided that the principal
amount is not increased or the terms modified to impose materially more burdensome terms upon Borrower or its Subsidiary, as the
case may be; and
(xiii)
without duplication to the extent constituting Indebtedness, obligations of the Borrower under each of: (a)
that certain License Agreement by and between Vitae Pharmaceuticals, Inc. and Parent, dated October 17, 2017, as amended as of
March 8, 2017, and (b) that certain License Agreement by and between UCB Biopharma Sprl and Parent, dated as of July 1, 2016, as
amended as of January 25, 2019.
“Permitted Investment” means:
(i)
Investments existing on the Closing Date which are disclosed in Schedule 1B;
(ii)
Investments described in Borrower’s investment policy as approved by Agent in writing
(it being understood that the investment policy provided to Agent prior to the Closing Date shall be deemed approved in writing) from
time to time;
(iii)
repurchases of stock from former employees, directors, or consultants of Borrower under
the terms of applicable repurchase agreements at the original issuance price of such securities in an aggregate amount not to exceed
$500,000 in any fiscal year, provided that no
Event of Default has occurred, is continuing or would exist immediately after giving effect to the repurchases;
(iv)
(v)
Investments accepted or in connection with in connection with Permitted Transfers;
Investments (including debt obligations) (a) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent or doubtful obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of Borrower’s business and (b) consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of business;
(vi)
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 subparagraph (vi)
shall not apply to Investments of Borrower in any Subsidiary;
(vii)
Investments consisting of loans not involving the net transfer on a substantially
contemporaneous basis of cash proceeds to employees, officers or directors relating to the purchase of capital stock of Borrower
pursuant to employee stock purchase plans or other similar agreements approved by Borrower’s Board of Directors;
(viii)
(ix)
Investments consisting of travel advances in the ordinary course of business;
Investments in newly-formed Subsidiaries, provided that each such Subsidiary enters
into a Joinder Agreement promptly after its formation by Borrower and execute such other documents as shall be reasonably
requested by Agent;
(x)
Investments in Foreign Subsidiaries that are not co-Borrowers or Guarantors, not exceed
$500,000 in the aggregate in any fiscal year;
(xi)
joint ventures or strategic alliances in the ordinary course of Borrower’s business,
including the joint venture pursuant to the Incyte Collaboration Agreement, provided that any cash Investments by Borrower do not
exceed $2,000,000 in the aggregate during the term of this Agreement;
(xii)
Investments in the MSC Subsidiary, so long as an Event of Default does not exist at the
time of such Investment and would not exist after giving effect to such Investment and provided that Borrower is, at all times, in
compliance with the MSC Investment Conditions;
(xiii)
Indebtedness; and
Hedging Agreements permitted under clause (x) of the definition of Permitted
(xiv)
additional Investments that do not exceed $500,000 in the aggregate.
“Permitted Liens” means:
(i)
(ii)
Liens in favor of Agent or the Lenders;
Liens existing on the Closing Date which are disclosed in Schedule 1C;
(iii)
Liens for taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings; provided, that Borrower maintains adequate reserves therefor
on Borrower’s Books in accordance with GAAP (to the extent required thereby);
(iv)
Liens securing claims or demands of materialmen, artisans, mechanics, carriers,
warehousemen, landlords and other like Persons arising in the ordinary course of Borrower’s business and imposed without action of
such parties; provided, that the payment thereof is not yet sixty (60) days past due;
(v)
Liens arising from judgments, decrees or attachments in circumstances which do not
constitute an Event of Default hereunder;
(vi)
deposits to secure the performance of obligations (including by way of deposits to secure
letters of credit issued to secure the same, to the extent constituting Permitted Indebtedness) and the following deposits, to the extent
made in the ordinary course of business: deposits under worker’s compensation, unemployment insurance, social security and other
similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure
indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of
borrowed money) or to secure statutory obligations (other than Liens arising under ERISA or environmental Liens) or surety or appeal
bonds, or to secure indemnity, performance or other similar bonds;
(vii)
Liens on Equipment or software or other intellectual property constituting purchase
money Liens and Liens in connection with capital leases securing Indebtedness permitted in clause (iii) of “Permitted Indebtedness”;
(viii)
(ix)
Liens incurred in connection with Subordinated Indebtedness;
leasehold interests in leases or subleases and licenses or sublicenses granted in the
ordinary course of business and not interfering in any material respect with the business of the licensor;
(x)
Liens in favor of customs and revenue authorities arising as a matter of law to secure
payment of custom duties that are promptly paid on or before the date they become due;
(xi)
Liens on insurance proceeds securing the payment of financed insurance premiums that
are promptly paid on or before the date they become due (provided that such Liens extend only to such insurance proceeds and not to
any other property or assets);
(xii)
statutory and common law rights of set-off and other similar rights as to deposits of
cash and securities in favor of banks, other depository institutions and brokerage firms;
(xiii)
easements, zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising in the ordinary course of business so long as they do not materially impair the value or
marketability of the related property;
(xiv)
(A) Liens on Cash securing obligations permitted under clause (vii) of the definition of
Permitted Indebtedness and (B) security deposits in connection with real property
leases, the combination of (A) and (B) in an aggregate amount not to exceed $500,000 at any time;
(xv)
Liens incurred in connection with sales, transfers, licenses, sublicenses, leases, subleases
or other dispositions of assets in the ordinary course of business and permitted by Section 7.8 or Liens granted in connection with
Section 2.1 of the Incyte Collaboration Agreement;
(xvi)
of Permitted Indebtedness;
Liens on Cash securing obligations permitted under clauses (iv) and (x) of the definition
(xvii)
other Liens in an aggregate amount not to exceed $500,000 at any time provided that
such liens be limited to specific assets and not all assets or substantially all assets of Borrower; and
(xviii)
Liens incurred in connection with the extension, renewal or refinancing of the
Indebtedness secured by Liens of the type described in clauses (i) through (xvii) above; provided, that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being
extended, renewed or refinanced (as may have been reduced by any payment thereon) does not increase.
“Permitted Transfers” means:
(i)
(ii)
sales, transfers or other dispositions of Inventory in the ordinary course of business,
non-exclusive licenses, sublicenses and similar arrangements for the use of Intellectual
Property and related assets in the ordinary course of business and other licenses and sublicenses that could not result in a legal transfer
of title of the licensed property but that may be exclusive in respects other than territory and that may be exclusive as to territory only
as to discreet geographical areas outside of the United States of America in the ordinary course of business,
(iii)
dispositions of worn-out, obsolete or surplus Equipment at fair market value in the
ordinary course of business,
(iv)
(v)
transfers expressly permitted under Sections 7.5, 7.6 or 7.7,
the exclusive license granted to Incyte pursuant to Section 2.1 of the Incyte Collaboration
Agreement, the transfers pursuant to Section 3.1 of the Incyte Collaboration Agreement, and other transfers in connection therewith in
an aggregate amount not to exceed $5,000,000 per fiscal year or at Agent’s reasonable discretion; and
(vi)
other Transfers of assets having a fair market value of not more than $500,000 in the
aggregate in any fiscal year.
association, corporation, limited liability company, institution, other entity or government.
“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization,
may from time to time be amended, restated, modified or otherwise supplemented.
“Pledge Agreement” means the Pledge Agreement dated as of the Closing Date between Borrower and Agent, as the same
Agreement in favor of Agent.
“Qualified Cash” means the amount of Borrower’s Cash held in accounts in the United States subject to an Account Control
paid within ninety (90) days from the due date of the relevant account payable.
“Qualified Cash A/P Amount” means the amount of Borrower’s and its Subsidiaries’ accounts payable that have not been
“Qualified Subsidiary” means any direct or indirect Subsidiary other than an Excluded Subsidiary.
“Receivables” means (i) all of Borrower’s Accounts, Instruments, Documents, Chattel Paper, Supporting Obligations,
letters of credit, proceeds of any letter of credit, and Letter of Credit Rights, and (ii) all customer lists, software, and business records related
thereto.
of the Term Loans then outstanding.
“Required Lenders” means at any time, the holders of more than 50% of the sum of the aggregate unpaid principal amount
“Restricted License” means any material License or other agreement with respect to which Borrower is the licensee
(a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such License or agreement or any
other property, or (b) for which a default under or termination of could interfere with the Agent’s right to sell any Collateral.
“Sanctioned Country” means, at any time, a country or territory which is the subject or target of any Sanctions.
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained
by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or by the United Nations Security
Council, the European Union or any EU member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person
controlled by any such Person.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time
by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the
U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.
obligation to pay any amount now owing or later arising.
“Secured Obligations” means Borrower’s obligations under this Agreement and any Loan Document, including any
“Subordinated Indebtedness” means Indebtedness subordinated to the Secured Obligations in amounts and on terms and
conditions satisfactory to Agent in its reasonable discretion and subject to a subordination agreement in form and substance satisfactory to Agent
in its reasonable discretion.
which Borrower owns or controls 50% or more of the outstanding voting securities, including each entity listed on Schedule 1 hereto.
“Subsidiary” means an entity, whether a corporation, partnership, limited liability company, joint venture or otherwise, in
“Syndax UK” means Syndax Limited, a limited company organized under the law of England and Wales.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding),
assessments, fees or other charges imposed by any governmental authority, including any interest, additions to tax or penalties applicable thereto.
“Term Commitment” means as to any Lender, the obligation of such Lender, if any, to make a Term Loan Advance to the
Borrower in a principal amount not to exceed the amount set forth under the heading “Term Commitment” opposite such Lender’s name on
Schedule 1.1.
funds advanced under this Agreement.
“Term Loan Advance” means each Tranche 1 Advance, Tranche 2 Advance, Tranche 3 Advance and any other Term Loan
reported in The Wall Street Journal plus 6.00%, and (ii) 9.25%.
“Term Loan Interest Rate” means, for any day a per annum rate of interest equal to the greater of either (i) the prime rate as
Maturity Date shall be the immediately preceding Business Day.
“Term Loan Maturity Date” means April 1, 2024; provided further that if any such day is not a Business Day, the Term Loan
owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.
“Trademark License” means any written agreement granting any right to use any Trademark or Trademark registration, now
“Trademarks” means all trademarks (registered, common law or otherwise) and any applications in connection therewith,
including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the
United States of America, any State thereof or any other country or any political subdivision thereof.
Section 4.2(d).
“Tranche 2-A Facility Charge” means 0.5% of each Tranche 2-A Advance, which is payable to Lender in accordance with
“Tranche 2-B Draw Period” means the period beginning on the First Amendment Effective Date and ending on, as of the
applicable date of determination, (A) if the full amount of the Tranche 2-A Advance has not been drawn prior to April 30, 2022, November 30,
2022 and (B) if the full amount of Tranche 2-A Advance has been drawn prior to April 30, 2022, April 30, 2023.
“Tranche 2-B Facility Charge” means 0.5% of each Tranche 2-B Advance, which is payable to Lender in accordance with
Section 4.2(e).
Section 4.2(f).
“Tranche 3 Facility Charge” means 0.5% of each Tranche 3 Advance, which is payable to Lender in accordance with
“UCC” means the Uniform Commercial Code as the same is, from time to time, in effect in the State of California;
provided, 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, Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as the same is, from time to time, in effect in a
jurisdiction
other than the State of California, then the term “UCC” shall mean the Uniform Commercial Code as in effect, from time to time, in such other
jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions.
“U.S. Person” means any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code.
1.2
The following terms are defined in the Sections or subsections referenced opposite such terms:
Defined Term
Agent
Assignee
Borrower
Claims
Collateral
Confidential Information
End of Term Charge A
End of Term Charge B
End of Term Charges
Event of Default
Financial Statements
Indemnified Person
Lenders
Liabilities
Maximum Rate
Open Source License
Participant Register
Prepayment Charge
Publicity Materials
Register
Rights to Payment
Tranche 1 Advance
Tranche 2 Advance
Tranche 2-A Advance
Tranche 2-B Advance
Tranche 3 Advance
Section
Preamble
11.14
Preamble
11.11
3.1
11.13
2.6(a)
2.6(b)
2.6(b)
9
7.1
6.3
Preamble
6.3
2.3
5.10
11.8
2.5
11.19
11.7
3.1
2.2(a)(i)
2.2(a)(iii)
2.2(a)(ii)
2.2(a)(iii)
2.2(a)(iv)
1.3
Unless otherwise specified, all references in this Agreement or any Annex or Schedule hereto to a “Section,” “subsection,”
“Exhibit,” “Annex,” or “Schedule” shall refer to the corresponding Section, subsection, Exhibit, Annex, or Schedule in or to this
Agreement. Unless otherwise specifically provided herein, any accounting term used in this Agreement or the other Loan Documents shall have
the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance
with GAAP, consistently applied; provided that, no effect shall be given to Accounting Standards Codification 842, Leases (or any other
Accounting Standards Codification having similar result or effect) (and related interpretations) to the extent any lease (or similar
arrangement) would be required to be treated as a capital lease thereunder where such lease (or arrangement) would have been treated as an
operating lease under GAAP as in effect immediately prior to the effectiveness of such Accounting Standards Codification. Unless otherwise
defined herein or in the other Loan Documents, terms that are used herein or in the other Loan Documents and defined in the UCC shall have the
meanings given to them in the UCC. For all purposes under the Loan Documents, in connection with any division or plan of division under
Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes
the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the
subsequent Person and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its
existence by the holders of its Equity Interests at such time.
SECTION 2.
THE LOAN
2.1
2.2
[Reserved.]
Term Loan.
(a)
Advances.
(i)
Subject to the terms and conditions of this Agreement, the Lenders will severally (and not jointly) make
in an amount not to exceed its respective Term Commitment, and Borrower agrees to draw, a Term Loan Advance of Twenty Million Dollars
($20,000,000) on the Closing Date (the “Tranche 1 Advance”). Borrower acknowledges and agrees that the aggregate outstanding principal
amount of the Tranche 1 Advance as of the First Amendment Effective Date is $20,000,000.
(ii)
Subject to the terms and conditions of this Agreement, beginning on the First Amendment Effective
Date and continuing through April 30, 2022, Borrower may request and the Lenders shall severally (and not jointly) make, in an amount not to
exceed its respective Term Commitment, an additional Term Loan Advance in an aggregate principal amount of Fifteen Million Dollars
($15,000,000) (the “Tranche 2-A Advance”).
(iii)
Subject to the terms and conditions of this Agreement, during the Tranche 2-B Draw Period, Borrower
may request and the Lenders shall severally (and not jointly) make, in an amount not to exceed its respective Term Commitment, an additional
Term Loan Advance in an aggregate principal amount of Fifteen Million Dollars ($15,000,000) (the “Tranche 2-B Advance” and together with
the Tranche 2-A Advance, each a “Tranche 2 Advance”).
(iv)
Subject to the terms and conditions of this Agreement, beginning on the First Amendment Effective
Date and continuing through the Amortization Date, and conditioned on approval by the Lenders’ investment committee in its sole and unfettered
discretion, Borrower may request additional Term Loan Advances in an aggregate principal amount up to Thirty Million Dollars ($30,000,000),
in minimum increments of Ten Million Dollars ($10,000,000) (each, a “Tranche 3 Advance”).
(v)
The aggregate outstanding Term Loan Advances may be up to the Maximum Term Loan Amount.
(b)
Advance Request. To obtain a Term Loan Advance, Borrower shall complete, sign and deliver an Advance Request
(at least three (3) Business Days before the Advance Date other than the Closing Date, which shall be at least one (1) Business Day) to
Agent. The Lenders shall fund the
Term Loan Advance in the manner requested by the Advance Request provided that each of the conditions precedent to such Term Loan
Advance is satisfied as of the requested Advance Date.
(c)
Interest. Term Loan Interest Rate. The principal balance of the Term Loan shall bear interest thereon from such
Advance Date at the Term Loan Interest Rate based on a year consisting of 360 days, with interest computed daily based on the actual number of
days elapsed. The Term Loan Interest Rate will float and change on the day the prime rate changes from time to time.
(d)
Payment. Borrower will pay accrued but unpaid interest on each outstanding Term Loan Advance on the first
Business Day of each month, beginning the month after the Advance Date. Borrower shall repay the aggregate Term Loan principal balance that
is outstanding on the day immediately preceding the Amortization Date, in equal monthly installments of principal and interest (mortgage style)
beginning on the Amortization Date and continuing on the first Business Day of each month thereafter until the Secured Obligations (other than
inchoate indemnity obligations) are repaid. The entire Term Loan principal balance and all accrued but unpaid interest hereunder, shall be due
and payable on the Term Loan Maturity Date. Borrower shall make all payments under this Agreement without setoff, recoupment or deduction
and regardless of any counterclaim or defense. If a payment hereunder becomes due and payable on a day that is not a Business Day, the due
date thereof shall be the immediately preceding Business Day. The Lenders will initiate debit entries to the Borrower’s account as authorized on
the ACH Authorization (i) on each payment date of all periodic obligations payable to the Lenders under each Term Loan Advance and (ii)
reasonable and documented out-of-pocket legal fees and costs incurred by Agent or the Lenders in connection with Section 11.12 of this
Agreement; provided that, with respect to clause (i) above, in the event that the Lenders or Agent informs Borrower that the Lenders will not
initiate a debit entry to Borrower’s account for a certain amount of the periodic obligations due on a specific payment date, Borrower shall pay to
the Lenders such amount of periodic obligations in full in immediately available funds on such payment date; provided, further, that, with respect
to clause (i) above, if the Lenders or Agent informs Borrower that the Lenders will not initiate a debit entry as described above later than the date
that is three (3) Business Days prior to such payment date, Borrower shall pay to the Lenders such amount of periodic obligations in full in
immediately available funds on the date that is three (3) Business Days after the date on which the Lenders or Agent notifies Borrower of such;
provided, further, that, with respect to clause (ii) above, in the event that the Lenders or Agent informs Borrower that the Lenders will not initiate
a debit entry to Borrower’s account for certain amount of such out-of-pocket legal fees and costs incurred by Agent or the Lenders, Borrower
shall pay to the Lenders such amount in full in immediately available funds within three (3) Business Days.
2.3 Maximum Interest. Notwithstanding any provision in this Agreement or any other Loan Document, it is the parties’ intent not
to contract for, charge or receive interest at a rate that is greater than the maximum rate permissible by law that a court of competent jurisdiction
shall deem applicable hereto (which under the laws of the State of California shall be deemed to be the laws relating to permissible rates of
interest on commercial loans) (the “Maximum Rate”). If a court of competent jurisdiction shall finally determine that Borrower has actually paid
to the Lenders an amount of interest in excess of the amount that would have been payable if all of the Secured Obligations had at all times borne
interest at the Maximum Rate, then such excess interest actually paid by Borrower shall be applied as follows: first, to the payment of the
Secured Obligations consisting of the outstanding principal; second, after all principal is repaid, to the payment of the Lenders’ accrued interest,
costs, expenses, professional fees and any other Secured Obligations; and third, after all Secured Obligations are repaid, the excess (if any) shall
be refunded to Borrower.
2.4
Default Interest. In the event any payment is not paid on the scheduled payment date (other than a failure to pay due solely to
an administrative or operational error of Agent or the Lenders or Borrower’s bank if Borrower had the funds to make the payment when due and
makes the payment within
three (3) Business Days following Borrower’s knowledge of such failure to pay), an amount equal to five percent (5%) of the past due amount
shall be payable on demand. In addition, upon the occurrence and during the continuation of an Event of Default hereunder, all Secured
Obligations, including principal, interest, compounded interest, and professional fees, shall bear interest at a rate per annum equal to the rate set
forth in Section 2.2(c) plus five percent (5%) per annum. In the event any interest is not paid when due hereunder, delinquent interest shall be
added to principal and shall bear interest on interest, compounded at the rate set forth in Section 2.2(c) or Section 2.4, as applicable.
2.5
Prepayment. At its option upon at least five (5) Business Days prior written notice to Agent, Borrower may prepay all, but not
less than all, of the outstanding Advances by paying the entire principal balance, all accrued and unpaid interest thereon, together with a
prepayment charge equal to the following percentage of the Advance amount being prepaid: with respect to each Advance, if such Advance
amounts are prepaid in any of the first twelve (12) months following the First Amendment Effective Date, 2.00%; after twelve (12) months but
prior to twenty four (24) months, 1.50%; after twenty four (24) months but prior to thirty six (36) months, 1.00%; and thereafter, 0.00% (each, a
“Prepayment Charge”). Borrower agrees that the Prepayment Charge is a reasonable calculation of the Lenders’ lost profits in view of the
difficulties and impracticality of determining actual damages resulting from an early repayment of the Advances. Borrower shall prepay the
outstanding amount of all principal and accrued interest through the prepayment date and the Prepayment Charge upon the occurrence of a
Change in Control or any other prepayment hereunder. Notwithstanding the foregoing, Agent and the Lenders agree to waive the Prepayment
Charge if Agent, the Lenders or any Affiliate thereof (in their sole and absolute discretion) agree in writing to refinance the Advances prior to the
Term Loan Maturity Date. Any amounts paid under this Section shall be applied by Agent to the then unpaid amount of any Secured Obligations
(including principal and interest) in such order and priority as Agent may choose in its sole discretion. In connection with any prepayment of all
outstanding Secured Obligations in accordance with the terms herein, Borrowers may request to terminate this Agreement and the Term
Commitments upon such repayment of all outstanding Secured Obligations by written notice to Agent and Lenders. For the avoidance of doubt, if
a payment hereunder becomes due and payable on a day that is not a Business Day, the due date thereof shall be the immediately preceding
Business Day.
2.6
End of Term Charges.
(a)
On the earliest to occur of (i) September 1, 2023, (ii) the date that Borrower prepays the outstanding Secured
Obligations (other than any inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this
Agreement) in full, or (iii) the date that the Secured Obligations become due and payable, Borrower shall pay the Lenders a charge equal to Nine
Hundred Ninety-Eight Thousand Dollars ($998,000) (the “End of Term Charge A”). Notwithstanding the required payment date of such End of
Term Charge A, it shall be deemed earned by the Lenders as of the Closing Date. For the avoidance of doubt, if a payment hereunder becomes
due and payable on a day that is not a Business Day, the due date thereof shall be the immediately preceding Business Day.
(b)
On the earliest to occur of (i) the Term Loan Maturity Date, (ii) the date that Borrower prepays the outstanding
Secured Obligations (other than any inchoate indemnity obligations and any other obligations which, by their terms, are to survive the
termination of this Agreement) in full, or (iii) the date that the Secured Obligations become due and payable, Borrower shall pay the Lenders a
charge equal to 4.99% of the aggregate principal amount of the Term Loan Advances funded on or after the First Amendment Effective Date (the
“End of Term Charge B”; together with the End of Term Charge A, the “End of Term Charges”). Notwithstanding the required payment date of
such End of Term Charge B, it shall be deemed earned by the Lenders as of the First Amendment Effective Date. For the avoidance
of doubt, if a payment hereunder becomes due and payable on a day that is not a Business Day, the due date thereof shall be the immediately
preceding Business Day.
2.7
Pro Rata Treatment. Each payment (including prepayment) on account of any fee and any reduction of the Term Loans shall be
made pro rata according to the Term Commitments of the relevant Lender.
2.8
Taxes; Increased Costs. The Borrower, the Agent and the Lenders each hereby agree to the terms and conditions set forth on
Addendum 1 attached hereto.
2.9
Treatment of Prepayment Charge and End of Term Charges. Borrower agrees that any Prepayment Charge and any End of
Term Charges payable shall be presumed to be the liquidated damages sustained by each Lender as the result of the early termination, and
Borrower agrees that it is reasonable under the circumstances currently existing and existing as of the Closing Date and the First Amendment
Effective Date. The Prepayment Charge and the End of Term Charges shall also be payable in the event the Secured Obligations (and/or this
Agreement) are satisfied or released by foreclosure (whether by power of judicial proceeding), deed in lieu of foreclosure, or by any other
means. Borrower expressly waives (to the fullest extent it may lawfully do so) the provisions of any present or future statute or law that prohibits
or may prohibit the collection of the foregoing Prepayment Charge and End of Term Charges in connection with any such
acceleration. Borrower agrees (to the fullest extent that each may lawfully do so): (a) each of the Prepayment Charge and the End of Term
Charges is reasonable and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel; (b)
each of the Prepayment Charge and the End of Term Charges shall be payable notwithstanding the then prevailing market rates at the time
payment is made; (c) there has been a course of conduct between the Lenders and Borrower giving specific consideration in this transaction for
such agreement to pay the Prepayment Charge and the End of Term Charges as a charge (and not interest) in the event of prepayment or
acceleration; (d) Borrower shall be estopped from claiming differently than as agreed to in this paragraph. Borrower expressly acknowledges
that their agreement to pay each of the Prepayment Charge and the End of Term Charges to the Lenders as herein described was on the Closing
Date and the First Amendment Effective Date and continues to be a material inducement to the Lenders to provide the Term Loans.
SECTION 3.
SECURITY INTEREST
3.1
As security for the prompt and complete payment when due (whether on the payment dates or otherwise) of all the Secured
Obligations, Borrower grants to Agent a security interest in all of Borrower’s right, title, and interest in, to and under all of Borrower’s personal
property and other assets including without limitation the following (except as set forth herein) whether now owned or hereafter acquired
(collectively, the “Collateral”): (a) Receivables; (b) Equipment; (c) Fixtures; (d) General Intangibles (other than Intellectual Property); (e)
Inventory; (f) Investment Property; (g) Deposit Accounts; (h) Cash; (i) Goods; and all other tangible and intangible personal property of
Borrower whether now or hereafter owned or existing, leased, consigned by or to, or acquired by, Borrower and wherever located, and any of
Borrower’s property in the possession or under the control of Agent; and, to the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing; provided, however,
that the Collateral shall include all Accounts and General Intangibles that consist of rights to payment and proceeds from the sale, licensing or
disposition of all or any part, or rights in, the Intellectual Property (the “Rights to Payment”). Notwithstanding the foregoing, if a judicial
authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security
interest in the Rights to Payment, then the Collateral shall automatically, and effective as
of the date of this Agreement, include the Intellectual Property to the extent necessary to permit perfection of Agent’s security interest in the
Rights to Payment.
Notwithstanding the broad grant of the security interest set forth in Section 3.1, above, the Collateral shall not include (a)
Excluded Accounts, (b) nonassignable licenses or contracts, which by their terms require the consent of the licensor thereof or another party (but
only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, Sections 9406, 9407 and 9408 of
the UCC), (c) the Incyte Collaboration Agreement and any Intellectual Property relating thereto, or (d) more than 65% of the issued and
outstanding shares of capital stock of any Foreign Subsidiary which shares entitle the holder thereof to vote for directors or any other matter,
solely to the extent Borrower has provided Agent with evidence satisfactory to Agent that the pledge of more than 65% of such voting stock of
such Subsidiary would reasonably be expected to result in a material adverse tax consequence to Borrower, and solely for as long as such
consequence may result, such portion of such voting stock of such Subsidiary, if excluded from the Collateral, would avoid such material adverse
tax consequence (it being understood that in the case of any Foreign Subsidiary whose ownership does not satisfy the holding period requirement
set forth in Section 246(c)(5) of the Code, not more than 65% of such Foreign Subsidiary’s stock shall be required to be pledged until the holding
period is satisfied).
3.2
If this Agreement is terminated in accordance with its terms, Agent’s Lien in the Collateral shall continue until the Secured
Obligations (other than inchoate indemnity obligations) are paid in full in accordance with the terms of this Agreement. At such time, the
Collateral shall be released from the Liens created hereby, this Agreement and all obligations (other than those expressly stated to survive such
termination) of the Agent, Lender and each Borrower hereunder shall terminate. Agent agrees to execute such documents, return any Collateral
held by Agent hereunder and take such other steps as are reasonably necessary to accomplish the foregoing, all at the Borrower’s sole cost and
expense.
SECTION 4.
CONDITIONS PRECEDENT TO LOAN
The obligations of the Lenders to make the Loan hereunder are subject to the satisfaction by Borrower of the following conditions:
4.1
Initial Advance. On or prior to the Closing Date, Borrower shall have delivered to Agent the following:
executed copies of the Loan Documents, Account Control Agreements, and all other documents and instruments
reasonably required by Agent to effectuate the transactions contemplated hereby or to create and perfect the Liens of Agent with respect to all
Collateral, in all cases in form and substance reasonably acceptable to Agent;
(a)
(b)
a legal opinion of Borrower’s counsel, in form and substance reasonably acceptable to Agent;
(c)
transactions evidenced by the Loan Documents;
certified copy of resolutions of Borrower’s board of directors evidencing approval of the Loan and other
Borrower;
(d)
certified copies of the Certificate of Incorporation and the Bylaws, as amended through the Closing Date, of
jurisdictions in which it does business and where the failure to be qualified could have a Material Adverse Effect;
(e)
a certificate of good standing for Borrower from its state of incorporation and similar certificates from all other
(f)
evidence reasonably satisfactory to Agent that Borrower has received at least Twenty Million Dollars
($20,000,000.00) in unrestricted (including, not subject to any redemption, clawback, escrow or similar encumbrance or restriction) net cash
proceeds from one or more bona fide equity financings, in each case after December 16, 2019 and prior to the Closing Date, in each case subject
to verification by Agent (including supporting documentation reasonably requested by Agent);
expenses reimbursable pursuant to this Agreement, which amounts may be deducted from the initial Advance;
(g)
payment of the Due Diligence Fee, Initial Facility Charge and reimbursement of Agent’s and Lender’s current
(h)
all certificates of insurance and copies of each insurance policy required hereunder; and
(i)
such other documents as Agent may reasonably request.
4.2
All Advances. On or prior to each Advance Date:
(a)
Agent shall have received (i) an Advance Request for the relevant Advance as required by Section 2.2(b), each duly
executed by Borrower’s Chief Executive Officer, Chief Financial Officer or Chief Operating Officer, and (ii) any other documents Agent may
reasonably request.
(b)
The representations and warranties set forth in this Agreement shall be true and correct in all material respects on
and as of the Advance Date with the same effect as though made on and as of such date, except to the extent such representations and warranties
expressly relate to an earlier date.
(c)
Borrower shall be in compliance with all the terms and provisions set forth herein and in each other Loan Document
on its part to be observed or performed, and at the time of and immediately after such Advance no Event of Default shall have occurred and be
continuing.
(d)
with respect to any Tranche 2-A Advance, Borrower shall have paid the applicable Tranche 2-A Facility Charge.
(e)
(f)
with respect to any Tranche 2-B Advance, Borrower shall have paid the applicable Tranche 2-B Facility Charge.
with respect to any Tranche 3 Advance, Borrower shall have paid the applicable Tranche 3 Facility Charge.
Each Advance Request shall be deemed to constitute a representation and warranty by Borrower on the relevant
Advance Date as to the matters specified in paragraphs (b) and (c) of this Section 4.2 and as to the matters set forth in the Advance Request.
(g)
4.3
No Default. As of the Closing Date and each Advance Date, (i) no fact or condition exists that could (or could, with the
passage of time, the giving of notice, or both) constitute an Event of Default and (ii) no event that has had or could reasonably be expected to
have a Material Adverse Effect has occurred and is continuing.
SECTION 5.
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower represents and warrants that:
5.1
Corporate Status. Borrower is a corporation duly organized, legally existing and in good standing under the laws of the State
of Delaware, and is duly qualified as a foreign corporation in all jurisdictions in which the nature of its business or location of its properties
require such qualifications and where the failure to be qualified would reasonably be expected to have a Material Adverse Effect. Borrower’s
present name, former names (if any), locations, place of formation, Tax identification number, organizational identification number and other
information are correctly set forth in Exhibit B, as may be updated by Borrower in a written notice (including any Compliance Certificate)
provided to Agent after the Closing Date.
5.2
Collateral. Borrower owns the Collateral and the Intellectual Property, free of all Liens, except for Permitted Liens. Borrower
has the power and authority to grant to Agent a Lien in the Collateral as security for the Secured Obligations.
5.3
Consents. Borrower’s execution, delivery and performance of this Agreement and all other Loan Documents (i) have been
duly authorized by all necessary corporate action of Borrower, (ii) will not result in the creation or imposition of any Lien upon the Collateral,
other than Permitted Liens and the Liens created by this Agreement and the other Loan Documents, (iii) do not violate any provisions of
Borrower’s Certificate or Articles of Incorporation (as applicable), bylaws, or any, law, regulation, order, injunction, judgment, decree or writ to
which Borrower is subject and (iv) except as described on Schedule 5.3, do not violate any material contract or material agreement or require the
consent or approval of any other Person which has not already been obtained. The individual or individuals executing the Loan Documents are
duly authorized to do so.
5.4 Material Adverse Effect. No event that has had or could reasonably be expected to have a Material Adverse Effect has
occurred and is continuing. Borrower is not aware of any event likely to occur that is reasonably expected to result in a Material Adverse Effect.
5.5
Actions Before Governmental Authorities. There are no actions, suits or proceedings at law or in equity or by or before any
governmental authority now pending or, to the knowledge of Borrower, threatened in writing against or affecting Borrower or its property, that is
reasonably expected to result in a Material Adverse Effect.
5.6
Laws. Neither Borrower nor any of its Subsidiaries is in violation of any law, rule or regulation, or in default with respect to
any judgment, writ, injunction or decree of any governmental authority, where such violation or default is reasonably expected to result in a
Material Adverse Effect. Borrower is not in default in any manner under any provision of any agreement or instrument evidencing material
Indebtedness, or any other material agreement to which it is a party or by which it is bound.
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’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 consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.
None of Borrower, any of its Subsidiaries, or, to Borrower’s knowledge, 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 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 its 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. None of the funds to be
provided under this Agreement will be used, directly or indirectly, (a) for any activities in violation of any applicable anti-money laundering,
economic sanctions and anti-bribery laws and regulations laws and regulations or (b) for any payment to any governmental official or employee,
political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or
direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
5.7
Information Correct and Current. No information, report, Advance Request, financial statement, exhibit or schedule furnished
(in each case, other than forecasts, projections and other forward looking statements and information of a general economic or industry nature),
by or on behalf of Borrower to Agent in connection with any Loan Document or included therein or delivered pursuant thereto contained, or,
when taken as a whole, contains or will contain any material misstatement of fact or, when taken together with all other such information or
documents, omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under
which they were, are or will be made, not materially misleading at the time such statement was made or deemed made. Additionally, any and all
financial or business projections provided by Borrower to Agent, whether prior to or after the Closing Date, shall be (i) provided in good faith
and based on the most current data and information available to Borrower at the time delivered, and (ii) the most current of such projections
provided to Borrower’s Board of Directors (it being understood that such projections are subject to significant uncertainties and contingencies,
many of which are beyond the control of the Borrower, that no assurance is given that any particular projections will be realized, and that actual
results may differ).
5.8
Tax Matters. Except as described on Schedule 5.8 and as otherwise being contested in good faith with adequate reserves under
GAAP, (a) Borrower and its Subsidiaries have filed all material federal and state income Tax returns and other material Tax returns that they are
required to file, (b) Borrower and its Subsidiaries have duly paid or fully reserved for all federal and state income Taxes and other material Taxes
or installments thereof that they are required to pay as and when due, except Taxes being contested in good faith by appropriate proceedings and
for which Borrower and its Subsidiaries maintain adequate reserves in accordance with GAAP, and (c) to the best of Borrower’s knowledge, no
proposed or pending Tax assessments, deficiencies, audits or other proceedings with respect to Borrower or any Subsidiary have had, or could
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
5.9
Intellectual Property Claims. Borrower is the sole owner of, or otherwise has the right to use, the Intellectual Property material
to Borrower’s business. Except as described on Schedule 5.9, (i) each of the material Copyrights, Trademarks and Patents is valid and
enforceable, (ii) no material part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and (iii) no claim has
been made to Borrower that any material part of the Intellectual Property violates the rights of any third party. Exhibit C is a true, correct and
complete list of each of Borrower’s Patents, registered Trademarks, registered Copyrights, and material agreements under which Borrower
licenses Intellectual Property from third parties (other than shrink-wrap software licenses), together with application or registration numbers, as
applicable, owned by Borrower or any Subsidiary, in each case as of the Closing Date. Borrower is not in material breach of, nor has Borrower
failed to perform any material obligations under, any of the foregoing contracts, licenses or agreements and, to Borrower’s knowledge, no third
party to any such contract, license or agreement is in material breach thereof or has failed to perform any material obligations thereunder.
5.10
Intellectual Property. Except as described on Schedule 5.10, Borrower has all material rights with respect to Intellectual
Property necessary or material in the operation or conduct of Borrower’s business as currently conducted and proposed to be conducted by
Borrower. Without limiting the generality of the foregoing, and in the case of Licenses, except for restrictions that are unenforceable under
Division 9 of the UCC, Borrower has the right, to the extent required to operate Borrower’s business, to freely transfer, license or assign
Intellectual Property necessary or material in the operation or conduct of Borrower’s business as currently conducted and proposed to be
conducted by Borrower, without condition, restriction or payment of any kind (other than license payments in the ordinary course of business) to
any third party, and Borrower owns or has the right to use, pursuant to valid licenses, all software development tools, library functions, compilers
and all other third-party software and other items that are material to Borrower’s business and used in the design, development, promotion, sale,
license, manufacture, import, export, use or distribution of Borrower Products except customary covenants in inbound license agreements and
equipment leases where Borrower is the licensee or lessee. Except as described in Schedule 5.10 or disclosed in the Compliance Certificate,
Borrower is not a party to, nor is it bound by, any Restricted License.
No material software or other materials used by Borrower or any of its Subsidiaries (or used in any Borrower Products or any
Subsidiaries’ products) are subject to an open-source or similar license (including but not limited to the General Public License, Lesser General
Public License, Mozilla Public License, or Affero License) (collectively, “Open Source Licenses”) in a manner that would cause such software or
other materials to have to be (i) distributed to third parties at no charge or a minimal charge (royalty-free basis); (ii) licensed to third parties to
modify, make derivative works based on, decompile, disassemble, or reverse engineer; or (iii) used in a manner that does could require disclosure
or distribution in source code form.
5.11
Borrower Products. Except as described on Schedule 5.11, no material Intellectual Property owned by Borrower or Borrower
Product has been or is subject to any actual or, to the knowledge of Borrower, threatened litigation in writing, proceeding (including any
proceeding in the United States Patent and Trademark Office or any corresponding foreign office or agency) or outstanding decree, order,
judgment, settlement agreement or stipulation that restricts in any material manner Borrower’s use, transfer or licensing thereof or that may affect
the validity, use or enforceability thereof. There is no decree, order, judgment, agreement, stipulation, arbitral award or other provision entered
into in connection with any litigation or proceeding that obligates Borrower to grant licenses or ownership interest in any material future
Intellectual Property related to the operation or conduct of the business of Borrower or Borrower Products. Borrower has not received any
written notice or claim, or, to the knowledge of Borrower, oral notice or claim, challenging or questioning Borrower’s ownership in any material
Intellectual Property (or written notice of any claim challenging or questioning the ownership in
any licensed Intellectual Property of the owner thereof) or suggesting that any third party has any claim of legal or beneficial ownership with
respect thereto nor, to Borrower’s knowledge, is there a reasonable basis for any such claim. Neither Borrower’s use of its Intellectual Property
nor the production and sale of Borrower Products infringes the Intellectual Property or other rights of others.
5.12
Financial Accounts. Exhibit D, as may be updated by the Borrower in a written notice provided to Agent after the Closing
Date, is a true, correct and complete list of (a) all banks and other financial institutions at which Borrower or any Subsidiary (other than the MSC
Subsidiary) maintains Deposit Accounts and (b) all institutions at which Borrower or any Subsidiary maintains an account holding Investment
Property, and such exhibit correctly identifies the name, address and telephone number of each bank or other institution, the name in which the
account is held, a description of the purpose of the account, and the complete account number therefor.
5.13
Employee Loans. Except as permitted hereunder, Borrower has no outstanding loans to any employee, officer or director of
the Borrower nor has Borrower guaranteed the payment of any loan made to an employee, officer or director of the Borrower by a third party.
5.14
Subsidiaries. Borrower does not own any stock, partnership interest or other securities of any Person, except for Permitted
Investments. Attached as Schedule 1, as may be updated by Borrower in a written notice provided after the Closing Date, is a true, correct and
complete list of each direct and indirect Subsidiary of Parent.
5.15
Foreign Subsidiary Voting Rights. No decision or action in any governing document of any Foreign Subsidiary requires a
vote of greater than 50.1% of the Equity Interests or voting rights of such Foreign Subsidiary.
SECTION 6.
INSURANCE; INDEMNIFICATION
6.1
Coverage. Borrower shall cause to be carried and maintained commercial general liability insurance, on an occurrence form,
against risks customarily insured against in Borrower’s line of business. Such risks shall include the risks of bodily injury, including death,
property damage, personal injury, advertising injury, and limited contractual liability per the terms of the indemnification agreement found in
Section 6.3. Borrower must maintain a minimum of $2,000,000 of commercial general liability insurance for each occurrence. Borrower has
and agrees to maintain a minimum of $2,000,000 of directors’ and officers’ insurance for each occurrence and $5,000,000 in the aggregate. So
long as there are any Secured Obligations outstanding (other than inchoate indemnity obligations), Borrower shall also cause to be carried and
maintained insurance upon the Collateral, insuring against special risks of physical loss or damage howsoever caused, in an amount not less than
the full replacement cost of the Collateral, provided that such insurance may be subject to standard exceptions and deductibles. If Borrower fails
to obtain the insurance called for by this Section 6.1 or fails to pay any premium thereon or fails to pay any other amount which Borrower is
obligated to pay under this Agreement or any other Loan Document or which may be required to preserve the Collateral, Agent may obtain such
insurance or make such payment, and all amounts so paid by Agent are immediately due and payable, bearing interest at the then highest rate
applicable to the Secured Obligations, and secured by the Collateral. Agent will make reasonable efforts to provide Borrower with notice of
Agent obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Agent are deemed an agreement
to make similar payments in the future or Agent’s waiver of any Event of Default.
6.2
Certificates. Borrower shall deliver to Agent certificates of insurance that evidence Borrower’s compliance with its insurance
obligations in Section 6.1 and the obligations contained in this Section 6.2. Borrower’s insurance certificate shall state Agent (shown as
“Hercules Capital, Inc., as
Agent”) is an additional insured for commercial general liability, a lenders loss payable for all risk property damage insurance, subject to the
insurer’s approval, and a lenders loss payable for property insurance and additional insured for liability insurance for any future insurance that
Borrower may acquire from such insurer. Attached to the certificates of insurance will be additional insured endorsements for liability and
lender’s loss payable endorsements for all risk property damage insurance. All certificates of insurance will provide for a minimum of thirty (30)
days advance written notice to Agent of cancellation (other than cancellation for non-payment of premiums, for which ten (10) days’ advance
written notice shall be sufficient). Any failure of Agent to scrutinize such insurance certificates for compliance is not a waiver of any of Agent’s
rights, all of which are reserved. Borrower shall provide Agent with copies of each insurance policy, and upon entering or amending any
insurance policy required hereunder, Borrower shall provide Agent with copies of such policies and shall promptly deliver to Agent updated
insurance certificates with respect to such policies.
6.3
Indemnity. Borrower agrees to indemnify and hold Agent, the Lenders and their officers, directors, employees, agents, in-
house attorneys, representatives and shareholders (each, an “Indemnified Person”) harmless from and against any and all claims, costs, expenses,
damages and liabilities (including such claims, costs, expenses, damages and liabilities based on liability in tort, including strict liability in tort),
including reasonable and documented attorneys’ fees and disbursements and other costs of investigation or defense (including those incurred
upon any appeal) (collectively, “Liabilities”), that may be instituted or asserted against or incurred by such Indemnified Person as the result of
credit having been extended, suspended or terminated under this Agreement and the other Loan Documents or the administration of such credit,
or in connection with or arising out of the transactions contemplated hereunder and thereunder, or any actions or failures to act in connection
therewith, or arising out of the disposition or utilization of the Collateral, excluding in all cases Liabilities to the extent resulting solely from any
Indemnified Person’s gross negligence or willful misconduct. This Section 6.3 shall not apply with respect to Taxes other than any Taxes that
represent losses, claims, damages, etc. arising from any non-Tax claim. In no event shall Borrower or any Indemnified Person be liable on any
theory of liability for any special, indirect, consequential or punitive damages (including any loss of profits, business or anticipated
savings). This Section 6.3 shall survive the repayment of indebtedness under, and otherwise shall survive the expiration or other termination of,
the Loan Agreement.
SECTION 7.
COVENANTS OF BORROWER
Borrower agrees as follows:
7.1
Statements”):
Financial Reports. Borrower shall furnish to Agent the financial statements and reports listed hereinafter (the “Financial
(a)
as soon as practicable (and in any event within 30 days) after the end of each month, unaudited interim and year-to-
date financial statements of Parent and its Subsidiaries as of the end of such month (prepared on a consolidated basis), including balance sheet
and related statements of income and cash flows accompanied by a report detailing any material contingencies (including the commencement of
any material litigation by or against Borrower) or any other occurrence that could reasonably be expected to have a Material Adverse Effect, all
certified by Borrower’s Chief Executive Officer, Chief Financial Officer or Chief Operating Officer to the effect that they have been prepared in
accordance with GAAP, except (i) for the absence of footnotes, (ii) that they are subject to normal year-end adjustments, and (iii) they do not
contain certain non-cash items that are customarily included in quarterly and annual financial statements;
and year-to-date financial statements of Parent and its Subsidiaries as
(b)
as soon as practicable (and in any event within 45 days) after the end of each calendar quarter, unaudited interim
of the end of such calendar quarter (prepared on a consolidated basis), including balance sheet and related statements of income and cash flows
accompanied by a report detailing any material contingencies (including the commencement of any material litigation by or against Borrower) or
any other occurrence that could reasonably be expected to have a Material Adverse Effect, certified by Borrower’s Chief Executive Officer,
Chief Financial Officer or Chief Operating Officer to the effect that they have been prepared in accordance with GAAP, except (i) for the absence
of footnotes, and (ii) that they are subject to normal year-end adjustments;
(c)
as soon as practicable (and in any event within ninety (90) days) after the end of each fiscal year, unqualified
audited financial statements of Parent and its Subsidiaries as of the end of such year (prepared on a consolidated basis), including balance sheet
and related statements of income and cash flows, and setting forth in comparative form the corresponding figures for the preceding fiscal year,
certified by a firm of independent certified public accountants selected by Borrower and reasonably acceptable to Agent, accompanied by any
management report from such accountants (it being understood that Deloitte Touche Tohmatsu Limited and any other accounting firm of national
standing are reasonably acceptable to Agent);
(d)
in the form of Exhibit E;
together with each set of financial statements delivered pursuant to Section 7.1(a) or (c), a Compliance Certificate
accounts receivable and accounts payable;
(e)
as soon as practicable (and in any event within 30 days) after the end of each month, a report showing agings of
(f)
promptly after the sending or filing thereof, as the case may be, copies of any proxy statements, financial statements
or reports that Borrower has made available to holders of its preferred stock and copies of any regular, periodic and special reports or registration
statements that Borrower files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or
any national securities exchange;
(g)
copies of all minutes approved by the Board of Director within 30 days after each such approval, provided that in
all cases Borrower may exclude confidential compensation information, information subject to attorney client privilege and information that
would raise a direct conflict of interest with Agent or Lender;
(h)
financial and business projections promptly following their approval by Borrower’s Board of Directors, and in any
event, within 60 days after the end of Borrower’s fiscal year, as well as budgets, operating plans and other financial information reasonably
requested by Agent; and
(i)
prompt notice if Borrower or any 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.
Borrower shall not make any change in its (a) accounting policies or reporting practices other than to the extent required or otherwise
contemplated by GAAP or other applicable regulatory requirements, or as approved by Agent, with such approval not to be unreasonably
withheld, or (b) fiscal years or fiscal quarters. The fiscal year of Borrower shall end on December 31.
The executed Compliance Certificate and all Financial Statements required to be delivered pursuant to clauses (a), (b), (c) and (d) shall be sent via
e-mail to Agent at XXXXX with a copy to XXXXX and
XXXXX; provided, that if e-mail is not available or sending such Financial Statements via e-mail is not possible, they shall be faxed to Agent at:
XXXXX, attention Account Manager: XXXXX.
Notwithstanding the foregoing, documents required to be delivered under Sections 7.1(a), (b), (c) or (f) (to the extent any such documents are
included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on
the date on which Borrower emails a link thereto to Agent; provided that Borrower shall directly provide Agent all Financial Statements required
to be delivered pursuant to Section 7.1(b) and (c) hereunder.
7.2 Management Rights. Borrower shall permit any representative that Agent or the Lenders authorizes, including its attorneys
and accountants, to inspect the Collateral and examine and make copies and abstracts of the books of account and records of Borrower at
reasonable times and upon reasonable notice during normal business hours; provided, however, that so long as no Event of Default has occurred
and is continuing, such examinations shall be limited to no more often than once per fiscal year. In addition, any such representative shall have
the right to meet with management and officers of Borrower to discuss such books of account and records. In addition, Agent or the Lenders
shall be entitled at reasonable times and intervals to consult with and advise the management and officers of Borrower concerning significant
business issues affecting Borrower. Such consultations shall not unreasonably interfere with Borrower’s business operations. The parties intend
that the rights granted Agent and the Lenders shall constitute “management rights” within the meaning of 29 C.F.R. Section 2510.3-101(d)(3)(ii),
but that any advice, recommendations or participation by Agent or the Lenders with respect to any business issues shall not be deemed to give
Agent or the Lenders, nor be deemed an exercise by Agent or the Lenders of, control over Borrower’s management or policies.
7.3
Further Assurances. Borrower shall from time to time execute, deliver and file, alone or with Agent, any financing statements,
security agreements, collateral assignments, notices, control agreements, promissory notes or other documents to perfect, give the highest priority
to Agent’s Lien on the Collateral, subject only to Permitted Liens, or otherwise evidence Agent’s rights herein. Borrower shall from time to time
procure any instruments or documents as may be reasonably requested by Agent, and take all further action that may be necessary, or that Agent
may reasonably request, to perfect and protect the Liens granted hereby and thereby. In addition, and for such purposes only, Borrower hereby
authorizes Agent to execute and deliver on behalf of Borrower and to file such financing statements (including in accordance with Section 9-504
of the UCC), collateral assignments, notices, control agreements, security agreements and other documents without the signature of Borrower
either in Agent’s name or in the name of Agent as agent and attorney-in-fact for Borrower. Borrower shall protect and defend Borrower’s title to
the Collateral and Agent’s Lien thereon against all Persons claiming any interest adverse to Borrower or Agent other than Permitted Liens.
7.4
Indebtedness. Borrower shall not create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or
permit any Subsidiary so to do, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on Borrower an
obligation to prepay any Indebtedness, except for (a) the conversion of Indebtedness into equity securities and the payment of cash in lieu of
fractional shares in connection with such conversion, (b) purchase money Indebtedness pursuant to its then applicable payment schedule, (c)
prepayment by any Subsidiary of (i) inter-company Indebtedness owed by such Subsidiary to any Borrower, or (ii) if such Subsidiary is not a
Borrower, intercompany Indebtedness owed by such Subsidiary to another Subsidiary that is not a Borrower, extensions, refinancings and
renewals of any items of Permitted Indebtedness, provided that the principal amount is not increased or the terms modified to impose materially
more burdensome terms upon Borrower or its Subsidiary, as the case may be, (e) Indebtedness owed under corporate credit cards constituting
“Permitted Indebtedness” and prepaid in the ordinary course of business, (f) trade debt
incurred in the ordinary course of business to the extent permitted under subsection (iv) of the definition of “Permitted Indebtedness”, or (g) as
otherwise permitted hereunder or approved in writing by Agent.
7.5
Collateral. Borrower shall at all times keep the Collateral, the Intellectual Property and all other property and assets used in
Borrower’s business or in which Borrower now or hereafter holds any interest free and clear from any legal process or Liens whatsoever (except
for Permitted Liens), and shall give Agent prompt written notice of any legal process affecting the Collateral, the Intellectual Property, such other
property and assets, or any Liens thereon, provided however, that the Collateral and such other property and assets may be subject to Permitted
Liens except that there shall be no Liens whatsoever on Intellectual Property. Borrower shall not agree with any Person other than Agent or the
Lenders not to encumber its property other than pursuant to (a) any agreements governing any purchase money Liens or capital lease obligations
otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby), (b) customary
restrictions on assets subject to Liens permitted under subsection (xiv) of the definition of “Permitted Liens” (in which case, any prohibition or
limitation shall only be effective against the cash collateral provided thereto) and (c) the Incyte Collaboration Agreement. Borrower shall not enter
into or suffer to exist or become effective any agreement that prohibits or limits the ability of any Borrower to create, incur, assume or suffer to
exist any Lien upon any of its property (including Intellectual Property), whether now owned or hereafter acquired, to secure its obligations
under the Loan Documents to which it is a party other than pursuant to (a) this Agreement and the other Loan Documents, (b) any agreements
governing any purchase money Liens or capital lease obligations otherwise permitted hereby (in which case, any prohibition or limitation shall
only be effective against the assets financed thereby), (c) customary restrictions on the assignment, sublicense or sublease of leases, licenses and
other agreements, and (d) any restrictions set forth in the Incyte Collaboration Agreement. Borrower shall cause its Subsidiaries to protect and
defend such Subsidiary’s title to its assets from and against all Persons claiming any interest adverse to such Subsidiary, and Borrower shall
cause its Subsidiaries at all times to keep such Subsidiary’s property and assets free and clear from any Liens whatsoever (except for Permitted
Liens, provided however, that there shall be no Liens whatsoever on Intellectual Property other than pursuant to the Incyte Collaboration
Agreement), and shall give Agent prompt written notice of any legal process affecting such Subsidiary’s assets in an amount greater than
$500,000.
7.6
Investments. Borrower shall not directly or indirectly acquire or own, or make any Investment in or to any Person, or permit
any of its Subsidiaries so to do, other than Permitted Investments.
7.7
Distributions. Borrower shall not, and shall not allow any Subsidiary to, (a) repurchase or redeem any class of stock or other
Equity Interest other than pursuant to employee, director or consultant repurchase plans or other similar agreements, provided, however, in each
case the repurchase or redemption price does not exceed the original consideration paid for such stock or Equity Interest, or (b) declare or pay
any cash dividend or make any other cash distribution on any class of stock or other Equity Interest, except that a Subsidiary may pay dividends
or make other distributions to Borrower or any Subsidiary of Borrower, or (c) lend money to any employees, officers or directors or guarantee the
payment of any such loans granted by a third party in excess of $500,000 in the aggregate or (d) waive, release or forgive any Indebtedness (other
than Indebtedness represented by a Permitted Investment made pursuant to clause (viii) of the definition of “Permitted Investment”) owed by any
employees, officers or directors in excess of $500,000 in the aggregate in any fiscal year.
7.8
Transfers. Except for Permitted Transfers, Borrower shall not, and shall not allow any Subsidiary to, voluntarily or
involuntarily transfer, sell, lease, license, lend or in any other manner convey any equitable, beneficial or legal interest in any material portion of
its assets.
7.9 Mergers or Acquisitions. Borrower shall not merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with or into any other business organization (other than mergers or consolidations of (a) a Subsidiary which is not a Borrower into another
Subsidiary or into Borrower or (b) a Borrower into another Borrower), or acquire, or permit any of its Subsidiaries to acquire, in each case
including for the avoidance of doubt through a merger, purchase, in-licensing arrangement or any similar transaction, all or substantially all of the
capital stock or any property of another Person.
7.10
Taxes. Borrower shall, and shall cause each of its Subsidiaries to, pay when due all material Taxes of any nature whatsoever
now or hereafter imposed or assessed against Borrower or the Collateral or upon Borrower’s ownership, possession, use, operation or disposition
thereof or upon Borrower’s rents, receipts or earnings arising therefrom. Borrower shall, and shall cause each of its Subsidiaries to, accurately
file on or before the due date therefor (taking into account proper extensions) all federal and state income Tax returns and other material Tax
returns required to be filed. Notwithstanding the foregoing, Borrower and its Subsidiaries may contest, in good faith and by appropriate
proceedings, Taxes for which Borrower and its Subsidiaries maintain adequate reserves in accordance with GAAP.
7.11
Corporate Changes. Neither Borrower nor any Subsidiary shall change its corporate name, legal form or jurisdiction of
formation without twenty (20) days’ prior written notice to Agent. Neither Borrower nor any Subsidiary shall suffer a Change in
Control. Neither Borrower nor any Subsidiary shall relocate its chief executive office or its principal place of business unless: (i) it has provided
prior written notice to Agent; and (ii) such relocation shall be within the continental United States of America with respect to Borrower. Neither
Borrower nor any Subsidiary shall relocate any item of Collateral (other than (x) sales of Inventory in the ordinary course of business, (y)
relocations of Equipment having an aggregate value of up to $500,000 in any fiscal year, and (z) relocations of Collateral from a location
described on Exhibit B to another location described on Exhibit B) unless (a) it has provided prompt written notice to Agent, (b) such relocation
is within the continental United States of America with respect to Borrower and, (c) if such relocation is to a third party bailee, it has delivered a
bailee agreement in form and substance reasonably acceptable to Agent.
7.12
Deposit Accounts. Other than Excluded Accounts, neither Borrower nor any Subsidiary (other than Excluded Subsidiaries)
shall maintain any Deposit Accounts, or accounts holding Investment Property, except with respect to which Agent has an Account Control
Agreement.
7.13
Borrower shall notify Agent of each Subsidiary formed subsequent to the Closing Date and, within 15 days of formation,
shall cause any such Subsidiary that is a Qualified Subsidiary to execute and deliver to Agent a Joinder Agreement. With respect to any
Subsidiary that is not a Qualified Subsidiary at such time, immediately upon any change in the U.S. tax laws that would result in such Subsidiary
ceasing to be an Excluded Subsidiary, Borrower shall cause such Subsidiary to execute and deliver to Agent a Joinder Agreement.
7.14 MSC Investment Conditions. At any time that the MSC Subsidiary has any assets or liabilities, Borrower shall satisfy the
MSC Investment Conditions at all times.
7.15
Notification of Event of Default. Borrower shall notify Agent promptly, and in any event within two (2) Business Days, upon
becoming aware of the occurrence of any Event of Default.
7.16
Foreign Subsidiary Voting Rights. Borrower shall not, and shall not permit any Subsidiary, to amend or modify any governing
document of any Foreign Subsidiary of Borrower, the effect of which is to require a vote of greater than 50.1% of the Equity Interests or voting
rights of such entity for any decision or action of such entity.
7.17
Use of Proceeds. Borrower agrees that the proceeds of the Loans shall be used solely to pay related fees and expenses in
connection with this Agreement and for working capital and general corporate purposes. The proceeds of the Loans will not be used in violation
of Anti-Corruption Laws or applicable Sanctions.
7.18
Incyte Minimum Cash Amount. Immediately upon the occurrence and continuation of the Incyte Termination Event and as
of each subsequent Advance Date, Borrower shall maintain Qualified Cash in an amount greater than or equal to the Incyte Minimum Cash
Amount at all times.
7.19
Compliance with Laws.
Borrower shall maintain, and shall cause its Subsidiaries to maintain, compliance in all material respects with all
applicable laws, rules or regulations (including any law, rule or regulation with respect to the making or brokering of loans or financial
accommodations), and shall, or cause its Subsidiaries to, obtain and maintain all required governmental authorizations, approvals, licenses,
franchises, permits or registrations reasonably necessary in connection with the conduct of Borrower’s business.
Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries permit any Affiliate under
Parent’s direct or indirect control to, directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any
Person listed on the OFAC Lists. Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries, permit any
Affiliate under Parent’s direct or indirect control 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 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.
Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by the
Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions,
and Borrower, its Subsidiaries and their respective officers and employees and to the knowledge of Borrower its directors and agents, are in
compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.
None of Borrower, any of its Subsidiaries or any of their respective directors, officers or employees, or to the knowledge of
Borrower, any agent for Borrower or its Subsidiaries that will act in any capacity in connection with or benefit from the credit facility established
hereby, is a Sanctioned Person. No Loan, use of proceeds or other transaction contemplated by this Agreement will violate Anti-Corruption
Laws or applicable Sanctions.
7.20
[Reserved].
7.21
Transactions with Affiliates. Borrower shall not and shall not permit any Subsidiary to, directly or indirectly, enter into or
permit to exist any transaction of any kind with any Affiliate of Borrower or such Subsidiary on terms that are less favorable to Borrower or such
Subsidiary, as the case may be, than those that might be obtained in an arm’s length transaction from a Person who is not an Affiliate of Borrower
or such Subsidiary other than (i) Permitted Investments, (ii) reasonable and
customary fees paid to members of the Board, (iii) board-approved compensation arrangements for officers and other employees and (iv)
transactions permitted hereunder between Borrowers.
7.22
Post-Closing Obligations. Notwithstanding any provision herein or in any other Loan Document to the contrary, to the extent
not actually delivered on or prior to the Closing Date, Borrower shall deliver to Agent (or its designated agent), no later than sixty (60) days after
the Closing Date, an executed copy of a bailee agreement, in form and substance reasonably acceptable to Agent, by and among EPL Archives,
Borrower and Agent.
SECTION 8.
[RESERVED]
SECTION 9.
EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall be an Event of Default:
9.1
Payments. Borrower fails to pay any amount due under this Agreement or any of the other Loan Documents on the due date;
provided, however, that an Event of Default shall not occur on account of a failure to pay due solely to an administrative or operational error of
Agent or the Lenders or Borrower’s bank if Borrower had the funds to make the payment when due and makes the payment within three (3)
Business Days following Borrower’s knowledge of such failure to pay; or
9.2
Covenants. Borrower breaches or defaults in the performance of any covenant or Secured Obligation under this Agreement, or
any of the other Loan Documents and (a) with respect to a default under any covenant under this Agreement (other than under Sections 6, 7.4,
7.5, 7.6, 7.7, 7.8, 7.9, 7.13, 7.14, 7.15, 7.16 7.17, 7.18, 7.19 and 7.21), any other Loan Document, or any other agreement among Borrower,
Agent and the Lenders, such default continues for more than fifteen (15) days after the earlier of the date on which (i) Agent or the Lenders has
given notice of such default to Borrower and (ii) Borrower has actual knowledge of such default or (b) with respect to a default under any of
Sections 6, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.13, 7.14, 7.15, 7.16, 7.17, 7.18, 7.19 and 7.21, the occurrence of such default; or
9.3 Material Adverse Effect. A circumstance has occurred that has a Material Adverse Effect; provided that the occurrence of any
of the following, in and of itself, shall not constitute a Material Adverse Effect: adverse results or delays in any nonclinical or clinical trial
including without limitation, the failure to demonstrate the desired safety or efficacy of any drug or companion diagnostic; provided that, in
determining whether a Material Adverse Effect has occurred, Agent’s primary, though not sole, consideration will be whether Borrower has or
will have sufficient cash resources to repay the Secured Obligations as and when due and the clear intention of Borrower’s investors to continue
to fund Borrower in the amounts and timeframe necessary, in Agent’s good faith judgment, to enable Borrower to satisfy the Secured Obligations
as they become due and payable is the most significant criterion Agent shall consider in making any such determination; or
9.4
Representations. Any representation or warranty made by Borrower in any Loan Document shall have been false or
misleading in any material respect when made or when deemed made; or
9.5
Insolvency. Borrower (A) (i) shall make an assignment for the benefit of creditors; or (ii) shall be unable to pay its debts as
they become due, or be unable to pay or perform under the Loan Documents, or shall become insolvent; or (iii) shall file a voluntary petition in
bankruptcy; or (iv) shall file any petition, answer, or document seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute, law or regulation pertinent to such circumstances; or (v) shall seek or
consent to or acquiesce in the appointment of any trustee, receiver, or liquidator of Borrower or of all or any substantial part (i.e., 33-1/3% or
more) of the assets or property of Borrower; or (vi) shall cease operations of its business as its business has normally been conducted, or
terminate substantially all of its employees; or (vii) Borrower or its directors or majority shareholders shall take any action initiating any of the
foregoing actions described in clauses (i) through (vi); or (B) either (i) forty-five (45) days shall have expired after the commencement of an
involuntary action against Borrower seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or
regulation, without such action being dismissed or all orders or proceedings thereunder affecting the operations or the business of Borrower being
stayed; or (ii) a stay of any such order or proceedings shall thereafter be set aside and the action setting it aside shall not be timely appealed; or
(iii) Borrower shall file any answer admitting or not contesting the material allegations of a petition filed against Borrower in any such
proceedings; or (iv) the court in which such proceedings are pending shall enter a decree or order granting the relief sought in any such
proceedings; or (v) forty-five (45) days shall have expired after the appointment, without the consent or acquiescence of Borrower, of any trustee,
receiver or liquidator of Borrower or of all or any substantial part of the properties of Borrower without such appointment being vacated; or
9.6
Attachments; Judgments. Any portion of Borrower’s assets is attached or seized, or a levy is filed against any such assets, or a
judgment or judgments is/are entered for the payment of money (not covered by independent third party insurance as to which liability has not
been rejected by such insurance carrier), individually or in the aggregate, of at least $750,000 and such judgment remains unsatisfied, unvacated
or unstayed for a period of forty-five (45) days after the entry thereof, or Borrower is enjoined or in any way prevented by court order from
conducting any material part of its business; or
9.7
Other Obligations. The occurrence of any default which has resulted in a right by the holder of such Indebtedness, whether or
not exercised to accelerate the maturity of such Indebtedness under any agreement or obligation of Borrower involving any Indebtedness in
excess of $500,000, or any other material agreement or obligation, if a Material Adverse Effect could reasonably be expected to result from such
default; or
9.8
Stop Trade. At any time, an SEC stop trade order or NASDAQ market trading suspension of the Common Stock shall be in
effect for five (5) consecutive days or five (5) days during a period of ten (10) consecutive days, excluding in all cases a suspension of all trading
on a public market, provided that Borrower shall not have been able to cure such trading suspension within thirty (30) days of the notice thereof
or list the Common Stock on another public market within sixty (60) days of such notice.
SECTION 10.
REMEDIES
10.1
General. Upon the occurrence of any one or more Events of Default, Agent may, and at the direction of the Required Lenders
shall, accelerate and demand payment of all or any part of the Secured Obligations together with a Prepayment Charge and declare them to be
immediately due and payable (provided, that upon the occurrence of an Event of Default of the type described in Section 9.5, all of the Secured
Obligations (including, without limitation, the Prepayment Charge and the End of Term Charges) shall automatically be accelerated and made
due and payable, in each case without any further notice or act). Borrower hereby irrevocably appoints Agent as its lawful attorney-in-fact to,
exercisable following the occurrence of an Event of Default, (i) sign Borrower’s name on any invoice or bill of lading for any account or drafts
against account debtors; (ii) demand, collect, sue, and give releases to any account debtor for monies due, settle and adjust disputes and claims
about the accounts directly with account debtors, and compromise, prosecute, or defend any action, claim, case, or proceeding about any
Collateral (including filing a claim or voting a claim in any bankruptcy case in Agent’s or Borrower’s name, as Agent may elect); (iii) make,
settle, and adjust all claims under Borrower’s insurance policies; (iv) pay, contest or settle any Lien, charge, encumbrance, security interest, or
other claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (v) transfer
the Collateral into the name of Agent or a third party as the UCC permits; (vi) receive, open and dispose of mail addressed to Borrower; (vii)
endorse Borrower’s name on any checks, payment instruments, or other forms of payment or security; and (viii) notify all account debtors to pay
Agent directly. Borrower hereby appoints Agent as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or
continue the perfection of Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Secured
Obligations have been satisfied in full and the Loan Documents have been terminated. Agent’s foregoing appointment as Borrower’s attorney in
fact, and all of Agent’s rights and powers, coupled with an interest, are irrevocable until all Secured Obligations have been fully repaid and
performed and the Loan Documents have been terminated. Upon the occurrence of any one or more Events of Default, Agent may, and at the
direction of the Required Lenders shall, exercise all rights and remedies with respect to the Collateral under the Loan Documents or otherwise
available to it under the UCC and other applicable law, including the right to release, hold, sell, lease, liquidate, collect, realize upon, or
otherwise dispose of all or any part of the Collateral and the right to occupy, utilize, process and commingle the Collateral. All Agent’s rights
and remedies shall be cumulative and not exclusive.
10.2
Collection; Foreclosure. Upon the occurrence and during the continuance of any Event of Default, Agent may, and at the
direction of the Required Lenders shall, at any time or from time to time, apply, collect, liquidate, sell in one or more sales, lease or otherwise
dispose of, any or all of the Collateral, in its then condition or following any commercially reasonable preparation or processing, in such order as
Agent may elect. Any such sale may be made either at public or private sale at its place of business or elsewhere. Borrower agrees that any such
public or private sale may occur upon ten (10) calendar days’ prior written notice to Borrower. Agent may require Borrower to assemble the
Collateral and make it available to Agent at a place designated by Agent that is reasonably convenient to Agent and Borrower. The proceeds of
any sale, disposition or other realization upon all or any part of the Collateral shall be applied by Agent in the following order of priorities:
First, to Agent and the Lenders in an amount sufficient to pay in full Agent’s and the Lenders’ reasonable costs and
professionals’ and advisors’ fees and expenses as described in Section 11.12;
Second, to the Lenders in an amount equal to the then unpaid amount of the Secured Obligations (including principal,
interest, and the Default Rate interest), in such order and priority as Agent may choose in its sole discretion; and
Finally, after the full and final payment in Cash of all of the Secured Obligations (other than inchoate obligations), to any
creditor holding a junior Lien on the Collateral, or to Borrower or its representatives or as a court of competent jurisdiction
may direct.
Agent shall be deemed to have acted reasonably in the custody, preservation and disposition of any of the Collateral if it complies with the
obligations of a secured party under the UCC.
10.3
No Waiver. Agent shall be under no obligation to marshal any of the Collateral for the benefit of Borrower or any other
Person, and Borrower expressly waives all rights, if any, to require Agent to marshal any Collateral.
10.4
Cumulative Remedies. The rights, powers and remedies of Agent hereunder shall be in addition to all rights, powers and
remedies given by statute or rule of law and are cumulative. The
exercise of any one or more of the rights, powers and remedies provided herein shall not be construed as a waiver of or election of remedies with
respect to any other rights, powers and remedies of Agent.
SECTION 11.
MISCELLANEOUS
11.1
Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be
ineffective only to the extent and duration of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
11.2
Notice. Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process
or other communication (including the delivery of Financial Statements) that is required, contemplated, or permitted under the Loan Documents
or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered, and received
upon the earlier of: (i) the day of transmission by electronic mail or hand delivery or delivery by an overnight express service or overnight mail
delivery service; or (ii) the third calendar day after deposit in the United States of America mails, with proper first class postage prepaid, in each
case addressed to the party to be notified as follows:
(a)
If to Agent:
HERCULES CAPITAL, INC.
Legal Department
Attention: Chief Legal Officer and Janice Bourque
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
email: XXXXX
Telephone: XXXXX
(b)
If to the Lenders:
HERCULES CAPITAL, INC.
Legal Department
Attention: Chief Legal Officer and Janice Bourque
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
email: XXXXX
Telephone: XXXXX
(c)
If to Borrower:
SYNDAX PHARMACEUTICALS, INC.
Attention: General Counsel
35 Gatehouse Drive
Building D, Floor 3
Waltham, MA 02451
email: XXXXX
Telephone: XXXXX
or to such other address as each party may designate for itself by like notice.
11.3
Entire Agreement; Amendments.
(a)
This Agreement and the other Loan Documents constitute the entire agreement and understanding of the parties
hereto in respect of the subject matter hereof and thereof, and supersede and replace in their entirety any prior proposals, term sheets, non-
disclosure or confidentiality agreements, letters, negotiations or other documents or agreements, whether written or oral, with respect to the
subject matter hereof or thereof (including Agent’s revised proposal letter dated December 6, 2019 and the Non-Disclosure Agreement).
(b)
Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented
or modified except in accordance with the provisions of this Section 11.3(b). The Required Lenders and Borrower party to the relevant Loan
Document may, or, with the written consent of the Required Lenders, the Agent and the Borrower party to the relevant Loan Document may,
from time to time, (i) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of
adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrower
hereunder or thereunder or (ii) waive, on such terms and conditions as the Required Lenders or the Agent, as the case may be, may specify in
such instrument, any of the requirements of this Agreement or the other Loan Documents or any default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (A) forgive the principal
amount or extend the final scheduled date of maturity of any Loan, extend the scheduled date of any amortization payment in respect of any Term
Loan, reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, in each case without
the written consent of each Lender directly affected thereby; (B) eliminate or reduce the voting rights of any Lender under this Section 11.3(b)
without the written consent of such Lender; (C) reduce any percentage specified in the definition of Required Lenders, consent to the assignment
or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially
all of the Collateral or release a Borrower from its obligations under the Loan Documents, in each case without the written consent of all
Lenders; or (D) amend, modify or waive any provision of Section 11.18 or Addendum 3 without the written consent of the Agent. Any such
waiver and any such amendment, supplement or modification shall apply equally to each Lender and shall be binding upon Borrower, the Lender,
the Agent and all future holders of the Loans.
11.4
No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and
no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
11.5
No Waiver. The powers conferred upon Agent and the Lenders by this Agreement are solely to protect its rights hereunder
and under the other Loan Documents and its interest in the Collateral and shall not impose any duty upon Agent or the Lenders to exercise any
such powers. No omission or delay by Agent or the Lenders at any time to enforce any right or remedy reserved to it, or to require performance
of any of the terms, covenants or provisions hereof by Borrower at any time designated, shall be a waiver of any such right or remedy to which
Agent or the Lenders is entitled, nor shall it in any way affect the right of Agent or the Lenders to enforce such provisions thereafter.
11.6
Survival. All agreements, representations and warranties contained in this Agreement and the other Loan Documents or in
any document delivered pursuant hereto or thereto shall be for the benefit of Agent and the Lenders and shall survive the execution and delivery
of this Agreement. Sections 6.3, 11.14, 11.15 and 11.17 shall survive the termination of this Agreement.
11.7
Successors and Assigns. The provisions of this Agreement and the other Loan Documents shall inure to the benefit of and be
binding on Borrower and its permitted assigns (if any). Borrower shall not assign its obligations under this Agreement or any of the other Loan
Documents without Agent’s express prior written consent, and any such attempted assignment shall be void and of no effect. Agent and the
Lenders may assign, transfer, or endorse its rights hereunder and under the other Loan Documents without prior notice to Borrower, and all of
such rights shall inure to the benefit of Agent’s and the Lenders’ successors and assigns; provided that as long as no Event of Default has
occurred and is continuing, neither Agent nor any Lender may assign, transfer or endorse its rights hereunder or under the Loan Documents to
any party that is a direct competitor of Borrower (as reasonably determined by Agent), it being acknowledged that in all cases, any transfer to an
Affiliate of any Lender or Agent shall be allowed. Notwithstanding the foregoing, (x) in connection with any assignment by a Lender as a result
of a forced divestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Agent and the Lenders may
assign, transfer or indorse its rights hereunder and under the other Loan Documents to any Person or party and (y) in connection with a Lender’s
own financing or securitization transactions, the restrictions set forth herein shall not apply and Agent and the Lenders may assign, transfer or
indorse its rights hereunder and under the other Loan Documents to 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 Agent
shall have received and accepted an effective assignment agreement from such Person or party in form satisfactory to Agent executed, delivered
and fully completed by the applicable parties thereto, and shall have received such other information regarding such assignee as Agent
reasonably shall require. The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in the United
States a register for the recordation of the names and addresses of the Lender(s), and the Term Commitments of, and principal amounts (and
stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register
shall be conclusive absent manifest error, and the Borrower, the Agent and the Lender(s) 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
the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
11.8
Participations. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the
Borrower, 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 Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have
any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a
participant’s interest in any commitments, loans, its other obligations under any Loan Document) to any Person except to the extent that such
disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c)
of the United States Treasury Regulations. 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. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for
maintaining a Participant Register. Borrower agrees that each participant shall be entitled to the benefits of the provisions in Addendum 1
attached hereto (subject to the requirements and limitations therein, including the requirements under Section 7 of Addendum 1 attached hereto
(it being understood that the documentation required under Section 7 of Addendum 1 attached hereto shall be delivered to the participating
Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.7; provided that such
participant shall not be
entitled to receive any greater payment under Addendum 1 attached hereto, with respect to any participation, than its participating Lender would
have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a change in law that occurs after the
participant acquired the applicable participation.
11.9
Governing Law. This Agreement and the other Loan Documents have been negotiated and delivered to Agent and the
Lenders in the State of California, and shall have been accepted by Agent and the Lenders in the State of California. Payment to Agent and the
Lenders by Borrower of the Secured Obligations is due in the State of California. This Agreement and the other Loan Documents shall be
governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would
cause the application of laws of any other jurisdiction.
11.10
Consent to Jurisdiction and Venue. All judicial proceedings (to the extent that the reference requirement of Section 11.10 is
not applicable) arising in or under or related to this Agreement or any of the other Loan Documents may be brought in any state or federal court
located in the State of California. By execution and delivery of this Agreement, each party hereto generally and unconditionally: (a) consents to
nonexclusive personal jurisdiction in Santa Clara County, State of California; (b) waives any objection as to jurisdiction or venue in Santa Clara
County, State of California; (c) agrees not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably
agrees to be bound by any judgment rendered thereby in connection with this Agreement or the other Loan Documents. Service of process on
any party hereto in any action arising out of or relating to this Agreement shall be effective if given in accordance with the requirements for
notice set forth in Section 11.2, and shall be deemed effective and received as set forth in Section 11.2. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other
jurisdiction.
11.11 Mutual Waiver of Jury Trial / Judicial Reference.
(a)
Because disputes arising in connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert Person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the
parties desire that their disputes be resolved by a judge applying such applicable laws. EACH OF BORROWER, AGENT AND THE
LENDERS SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-
CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY
BORROWER AGAINST AGENT, THE LENDERS OR THEIR RESPECTIVE ASSIGNEE OR BY AGENT, THE LENDERS OR THEIR
RESPECTIVE ASSIGNEE AGAINST BORROWER. This waiver extends to all such Claims, including Claims that involve Persons other than
Agent, Borrower and the Lenders; Claims that arise out of or are in any way connected to the relationship among Borrower, Agent and the
Lenders; and any Claims for damages, breach of contract, tort, specific performance, or any equitable or legal relief of any kind, arising out of
this Agreement, any other Loan Document.
(b)
If the waiver of jury trial set forth in Section 11.10(a) is ineffective or unenforceable, the parties agree that all
Claims shall be resolved by reference to a private judge sitting without a jury, pursuant to Code of Civil Procedure Section 638, before a mutually
acceptable referee or, if the parties cannot agree, a referee selected by the Presiding Judge of the Santa Clara County, California. Such
proceeding shall be conducted in Santa Clara County, California, with California rules of evidence and discovery applicable to such proceeding.
11.11, any prejudgment order, writ or other relief and have such
(c)
In the event Claims are to be resolved by judicial reference, either party may seek from a court identified in Section
prejudgment order, writ or other relief enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise subject to
resolution by judicial reference.
11.12
Professional Fees. Borrower promises to pay Agent’s and the Lenders’ reasonable and documented out-of-pocket fees and
expenses necessary to finalize the loan documentation, including but not limited to reasonable and documented attorneys’ fees, UCC searches,
filing costs, and other miscellaneous expenses. In addition, Borrower promises to pay any and all reasonable and documented out-of-pocket
attorneys’ and other professionals’ fees and expenses incurred by Agent and the Lenders after the Closing Date in connection with or related
to: (a) the Loan; (b) the administration, collection, or enforcement of the Loan; (c) the amendment or modification of the Loan Documents;
(d) any waiver, consent, release, or termination under the Loan Documents; (e) the protection, preservation, audit, field exam, sale, lease,
liquidation, or disposition of Collateral or the exercise of remedies with respect to the Collateral; (f) any legal, litigation, administrative,
arbitration, or out of court proceeding in connection with or related to Borrower or the Collateral, and any appeal or review thereof; and (g) any
bankruptcy, restructuring, reorganization, assignment for the benefit of creditors, workout, foreclosure, or other action related to Borrower, the
Collateral, the Loan Documents, including representing Agent or the Lenders in any adversary proceeding or contested matter commenced or
continued by or on behalf of Borrower’s estate, and any appeal or review thereof.
11.13
Confidentiality. Agent and the Lenders acknowledge that certain items of Collateral and information provided to Agent and
the Lenders by Borrower are confidential and proprietary information of Borrower, if and to the extent such information either (x) is marked as
confidential by Borrower at the time of disclosure, or (y) should reasonably be understood to be confidential (the “Confidential
Information”). Accordingly, Agent and the Lenders agree that any Confidential Information it may obtain in the course of acquiring,
administering, or perfecting Agent’s security interest in the Collateral shall not be disclosed to any other Person or entity in any manner
whatsoever, in whole or in part, without the prior written consent of Borrower, except that Agent and the Lenders may disclose any such
information: (a) to its Affiliates and its partners, investors, lenders, directors, officers, employees, agents, advisors, counsel, accountants,
counsel, representative and other professional advisors if Agent or the Lenders in their sole discretion determines that any such party should
have access to such information in connection with such party’s responsibilities in connection with the Loan or this Agreement and, provided that
such recipient of such Confidential Information either (i) agrees to be bound by the confidentiality provisions of this paragraph or (ii) is
otherwise subject to confidentiality restrictions that reasonably protect against the disclosure of Confidential Information and, at a minimum, are
at least as protective as those set forth in this Agreement; (b) if such information is generally available to the public at the time it was disclosed or
to the extent such information becomes publicly available other than as a result of a breach of this Section or becomes available to Agent or any
Lender, or any of their respective Affiliates on a non-confidential basis from a source other than the Borrower; (c) if required or appropriate in
any report, statement or testimony submitted to any governmental authority having or claiming to have jurisdiction over Agent or the Lenders
and any rating agency; (d) if required or appropriate in response to any summons or subpoena or in connection with any litigation, to the extent
permitted or deemed advisable by Agent’s or the Lenders’ counsel; (e) to comply with any legal requirement or law applicable to Agent or the
Lenders or demanded by any governmental authority; (f) to the extent reasonably necessary in connection with the exercise of, or preparing to
exercise, or the enforcement of, or preparing to enforce, any right or remedy under any Loan Document (including Agent’s sale, lease, or other
disposition of Collateral after default), or any action or proceeding relating to any Loan Document; (g) to any participant or assignee of Agent or
the Lenders or any prospective participant or assignee, provided, that such participant or assignee or prospective participant or assignee is subject
to confidentiality restrictions that reasonably protect against the disclosure of Confidential Information; (h) otherwise to the extent consisting of
general portfolio information that does not identify Borrower; (i) to any investor or potential investor (and each of their respective Affiliates or
clients) in the Agent or Lender (or each of their
respective Affiliates); provided that such investor, potential investor, Affiliate or client either (i) agrees to be bound by the confidentiality
provisions of this paragraph or (ii) is otherwise subject to confidentiality restrictions that reasonably protect against the disclosure of Confidential
Information and, at a minimum, are at least as protective as those set forth in this Agreements; or (j) otherwise with the prior consent of
Borrower; provided, that any disclosure made in violation of this Agreement shall not affect the obligations of Borrower or any of its Affiliates or
any guarantor under this Agreement or the other Loan Documents. Agent’s and the Lenders’ obligations under this Section 11.13 shall supersede
all of their respective obligations under the Non-Disclosure Agreement.
11.14
Assignment of Rights. Borrower acknowledges and understands that Agent or the Lenders may, subject to Section 11.7, sell
and assign all or part of its interest hereunder and under the Loan Documents to any Person or entity (an “Assignee”). After such assignment the
term “Agent” or “Lender” as used in the Loan Documents shall mean and include such Assignee, and such Assignee shall be vested with all
rights, powers and remedies of Agent and the Lenders hereunder with respect to the interest so assigned; but with respect to any such interest not
so transferred, Agent and the Lenders shall retain all rights, powers and remedies hereby given. No such assignment by Agent or the Lenders
shall relieve Borrower of any of its obligations hereunder. the Lenders agrees that in the event of any transfer by it of the promissory note(s) (if
any), it will endorse thereon a notation as to the portion of the principal of the promissory note(s), which shall have been paid at the time of such
transfer and as to the date to which interest shall have been last paid thereon.
11.15
Revival of Secured Obligations. This Agreement and the Loan Documents shall remain in full force and effect and continue
to be effective if any petition is filed by or against Borrower for liquidation or reorganization, if Borrower becomes insolvent or makes an
assignment for the benefit of creditors, if a receiver or trustee is appointed for all or any significant part of Borrower’s assets, or if any payment
or transfer of Collateral is recovered from Agent or the Lenders. The Loan Documents and the Secured Obligations and Collateral security shall
continue to be effective, or shall be revived or reinstated, as the case may be, if at any time payment and performance of the Secured Obligations
or any transfer of Collateral to Agent, or any part thereof is rescinded, avoided or avoidable, reduced in amount, or must otherwise be restored or
returned by, or is recovered from, Agent, the Lenders or by any obligee of the Secured Obligations, whether as a “voidable preference,”
“fraudulent conveyance,” or otherwise, all as though such payment, performance, or transfer of Collateral had not been made. In the event that
any payment, or any part thereof, is rescinded, reduced, avoided, avoidable, restored, returned, or recovered, the Loan Documents and the
Secured Obligations shall be deemed, without any further action or documentation, to have been revived and reinstated except to the extent of the
full, final, and indefeasible payment to Agent or the Lenders in Cash.
11.16
Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but
all of which counterparts shall constitute but one and the same instrument.
11.17
No Third Party Beneficiaries. No provisions of the Loan Documents are intended, nor will be interpreted, to provide or
create any third-party beneficiary rights or any other rights of any kind in any Person other than Agent, the Lenders and Borrower unless
specifically provided otherwise herein, and, except as otherwise so provided, all provisions of the Loan Documents will be personal and solely
among Agent, the Lenders and the Borrower.
11.18
Agency. Agent and each Lender hereby agree to the terms and conditions set forth on Addendum 3 attached
hereto. Borrower acknowledges and agrees to the terms and conditions set forth on Addendum 3 attached hereto.
11.19
Publicity. None of the parties hereto nor any of its respective member businesses and Affiliates shall, without the other
parties’ prior written consent (which shall not be unreasonably withheld or delayed), publicize or use (a) the other party’s name (including a brief
description of the relationship among the parties hereto), logo or hyperlink to such other parties’ website, separately or together, in written and
oral presentations, advertising, promotional and marketing materials, client lists, public relations materials or on its website (together, the
“Publicity Materials”); (b) the names of officers of such other parties in the Publicity Materials; and (c) such other parties’ name, trademarks,
servicemarks in any news or press release concerning such party; provided however, notwithstanding anything to the contrary herein, no such
consent shall be required (i) to the extent necessary to comply with the requests of any regulators, legal requirements or laws applicable to such
party, pursuant to any listing agreement with any national securities exchange (so long as such party provides prior notice to the other party
hereto to the extent reasonably practicable) and (ii) to comply with Section 11.13.
11.20 Multiple Borrowers. Each Borrower hereby agrees to the terms and conditions set forth on Addendum 4 attached hereto.
11.21
Electronic Execution of Certain Other Documents. The words “execution,” “execute”, “signed,” “signature,” and words of
like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby (including
without limitation assignments, assumptions, amendments, waivers and consents) shall be deemed to include electronic signatures, the electronic
matching of assignment terms and contract formations on electronic platforms approved by the Agent, or the keeping of records in electronic form,
each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in
Global and National Commerce Act, the California Uniform Electronic Transaction Act, or any other similar state laws based on the Uniform
Electronic Transactions Act.
(SIGNATURES TO FOLLOW)
IN WITNESS WHEREOF, Borrower, Agent and the Lenders have duly executed and delivered this Loan and Security Agreement as of the day
and year first above written.
BORROWER:
SYNDAX PHARMACEUTICALS, INC.
Signature:
Print Name:
Title:
_______________________
_______________________
_______________________
(SIGNATURES CONTINUE ON THE FOLLOWING PAGE)
Accepted in Palo Alto, California:
AGENT:
HERCULES CAPITAL, INC.
Signature:
Print Name:
Title:
LENDER:
HERCULES CAPITAL, INC.
Signature:
Print Name:
Title:
_______________________
_______________________
_______________________
_______________________
_______________________
_______________________
Table of Addenda, Exhibits and Schedules
Addendum 1: Taxes; Increased Costs
Addendum 2:
Addendum 3:
Addendum 4:
[Reserved]
Agent and Lender Terms
Multiple Borrower Terms
Exhibit A:
Advance Request
Attachment to Advance Request
Exhibit B:
Exhibit C:
Exhibit D:
Exhibit E:
Exhibit F:
Exhibit G:
Exhibit H-1:
Exhibit H-2:
Exhibit H-3:
Exhibit H-4:
Schedule 1.1
Schedule 1
Schedule 1A
Schedule 1B
Schedule 1C
Schedule 5.3
Schedule 5.8
Schedule 5.9
Schedule 5.10
Schedule 5.11
Name, Locations, and Other Information for Borrower
Borrower’s Patents, Trademarks, Copyrights and Licenses
Borrower’s Deposit Accounts and Investment Accounts
Compliance Certificate
Joinder Agreement
ACH Debit Authorization Agreement
Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)
Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)
Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)
Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax
Purposes)
Commitments
Subsidiaries
Existing Permitted Indebtedness
Existing Permitted Investments
Existing Permitted Liens
Consents, Etc.
Tax Matters
Intellectual Property Claims
Intellectual Property
Borrower Products
SUBSIDIARIES OF SYNDAX PHARMACEUTICALS, INC.
Exhibit 21.1
Name
Jurisdiction of Incorporation
Syndax Pharmaceuticals, Inc
Delaware
Syndax United Kingdom
United Kingdom
Syndax Europe B.V.
The Netherlands
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.1
We consent to the incorporation by reference in Registration Statement No. 333-254661 on Form S-3 and Registration Statement Nos. 333-210412, 333-
220172, 333-226678, 333-233083, 333-241654, and 333-258628 on Form S-8 of our reports dated March 1, 2022, relating to the financial statements of
Syndax Pharmaceuticals, Inc. and subsidiaries and the effectiveness of Syndax Pharmaceuticals, Inc. and subsidiaries’ internal control over financial reporting
appearing in this Annual Report on Form 10-K for the year ended December 31, 2021.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
March 1, 2022
Exhibit 31.1
I, Michael A. Metzger, certify that:
1. I have reviewed this Annual Report on Form 10-K of Syndax Pharmaceuticals, Inc.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in exchange act rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 1, 2022
By: /s/ Michael A. Metzger
Michael A. Metzger
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
I, Alexander Nolte, certify that:
1. I have reviewed this Annual Report on Form 10-K of Syndax Pharmaceuticals, Inc.;
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in exchange act rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 1, 2022
By: /s/ Alexander Nolte
Alexander Nolte
Chief Accounting Officer
(Interim Principal Financial Officer and Principal
Accounting Officer)
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
*
Exhibit 32.1
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of
Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), Michael A. Metzger, Chief Executive Officer and Director of Syndax Pharmaceuticals,
Inc. (the “Company”), and Alexander Nolte, Chief Accounting Officer and Interim Principal Financial Officer of the Company, each hereby certifies that, to the
best of his knowledge:
(1) The Company’s Annual Report on Form 10-K, for the year ended December 31, 2021, to which this Certification is attached as Exhibit 32.1 (the
“Annual Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the
Company for the period covered by the Annual Report.
Date: March 1, 2022
Date: March 1, 2022
_______
By
/s/ Michael A. Metzger
Michael A. Metzger
Chief Executive Officer
By
/s/ Alexander Nolte
Alexander Nolte
Chief Accounting Officer and Interim Principal
Financial Officer
* This certification accompanies the Annual Report, to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be
incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended
(whether made before or after the date of the Annual Report), irrespective of any general incorporation language contained in such
filing.