84,826,632
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, 2023
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)
Name of each exchange on which registered
SNDX
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements.☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒
The aggregate market value of the voting and non-voting of common equity held by non-affiliates of the registrant was $1,452,441,662 as of June 30, 2023 based on the closing
price of $20.93 as reported on the Nasdaq Global Select Market on such date. Shares of the registrant's common stock held by executive officers, directors, and their affiliates have
been excluded from this calculation. The determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of February 19, 2024, there were 84,965,486 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2024 Annual Meeting of Stockholders, which the registrant intends to file pursuant to Regulation 14A with the
Securities and Exchange Commission not later than 120 days after the registrant’s fiscal year ended December 31, 2023, 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 1C.
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
Cybersecurity
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
[Reserved]
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
PART III
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
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, or Annual Report, 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. 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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our estimates regarding our expenses, future revenues, anticipated capital requirements and our needs for additional financing;
the initiation, cost, timing, progress and results of our research and development activities, clinical trials and preclinical studies;
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 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
the impact of geo-political actions, including war or the perception that hostilities may be imminent (such as the ongoing war between Russia
and Ukraine and the war in Israel), adverse global economic conditions, terrorism, public health crises or natural disasters 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.
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. Any forward-looking statement in this Annual Report 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 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
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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, 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 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.
iii
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
revumenib, and axatilimab. We are developing revumenib, a potent, selective, small molecule inhibitor of the menin-MLL binding interaction for the
treatment of KMT2A rearranged, or KMT2Ar, also known as mixed lineage leukemia rearranged or MLLr, acute leukemias including acute lymphoblastic
leukemia, or ALL, and acute myeloid leukemia, or AML, and necleophosmin 1, also known as NPM1, mutant AML. We are also exploring the use of
revumenib as a treatment in solid tumors, specifically its activity in metastatic colorectal cancer. We are developing axatilimab, a monoclonal antibody that
blocks the colony stimulating factor 1 receptor, or CSF-1R, in chronic graft-versus-host disease, or cGVHD, as well as idiopathic pulmonary fibrosis, or
IPF. 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
We are developing revumenib for the treatment of acute leukemias and as a treatment for solid tumors, and axatilimab for use in cGVHD and other
fibrotic-macrophage driven diseases, such as IPF, as single agents and in combination with approved drugs. Key elements of our strategy include:
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Develop and commercialize revumenib for the treatment of genetically defined leukemias. We believe that revumenib has the potential to
treat at least two genetically defined acute leukemias: (i) KMT2Ar and (ii) mutations in NPM1, or mNPM1, AML. Our Phase 1/2 open-label
AUGMENT-101 trial is nearing completion. The pivotal Phase 2 portion of the trial enrolled relapsed/refractory, or R/R, patients in three
indication-specific expansion cohorts to determine the efficacy, short- and long-term safety, and tolerability of revumenib in KMT2Ar ALL,
KMT2Ar AML and mNPM1 AML. We have submitted a New Drug Application, or NDA, for revumenib for the treatment of R/R KMT2Ar
acute leukemia under the U.S. Food and Drug Administration’s, or FDA, Real-Time Oncology Review, or RTOR, program and we continue
to enroll patients in the mNPM1 AML cohort. We are also concurrently expanding into the frontline and maintenance settings in AML with
new clinical trials as well as in solid tumors.
Develop and commercialize axatilimab for the treatment of cGVHD. We completed enrollment in the pivotal AGAVE-201 trial for the
treatment of patients with cGVHD and, together with Incyte, have submitted a Biologics License Application, or BLA to the FDA. Also, our
partner Incyte plans to initiate two combination trials with axatilimab in cGVHD in mid-2024, including a Phase 2 combination trial with
ruxolitinib and a Phase 3 combination trial with steroids. We are further exploring the use of axatilimab to treat other fibrotic diseases where
monocyte-derived macrophages have been shown to play a role, and have initiated a Phase 2 trial to assess the efficacy, safety and tolerability
of axatilimab in patients with IPF.
Leverage the technical, clinical, regulatory and business expertise of our management team and scientific collaborators to license, acquire and
develop additional cancer therapies to expand our pipeline. We licensed the global rights to axatilimab and revumenib and are working
closely with our collaboration partner, Incyte, on the development and commercialization of axatilimab. 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
Revumenib
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Our first clinical-stage product candidate, revumenib, 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) KMT2Ar and (ii) mNPM1 AML. The R/R settings of both
diseases have a poor prognosis. In preclinical testing, revumenib has demonstrated benefit in leukemic models of disease. Clinical evidence with revumenib
also supports the hypothesis that disruption of the menin-MLL interaction can lead to responses in acute leukemias.
In 2019, we commenced AUGMENT-101, a global 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 revumenib in patients with R/R KMT2Ar or mNPM1 acute leukemia. As discussed below, we
completed the Phase 1 portion of the trial. The three cohorts of the pivotal Phase 2 portion of the trial, enrolled R/R patients across each of three distinct
trial populations: patients with NPM1 mutant AML, patients with KMT2Ar AML, and patients with KMT2Ar ALL to determine the efficacy, safety, and
tolerability of revumenib. We completed enrollment of the KMT2Ar cohorts and the NPM1 cohort continues to accrue patients.
In October 2023, we announced data that the trial met its primary endpoint at the protocol-defined interim analysis stage with a complete remission,
or a CR, with partial hematological recovery, or a CRh rate of 23% (13/57; 95% confidence interval [CI]: [12.7, 35.8, one-sided p-value = 0.0036]) in the
pooled KMT2Ar acute leukemia cohort. The CR/CRh rate in patients with KMT2Ar AML was 24.5% (12/49). 39% (14/36) of patients who achieved a
CR/CRh underwent hematopoietic stem cell transplant, or HSCT; with eight of fourteen proceeding to transplant prior to achieving CR/CRh and could not
be included in the reported CR/CRh rate. The CR/CRh responses in both the overall population and the AML subset were durable with a 6.4-month (95%
CI: 3.4, NR) median duration of response and 46% (6/13) remaining in response, as of July 2023 data cut-off. Minimal residual disease, or MRD, status
was assessed in 10 of the 13 patients who achieved a CR/CRh, 70% (7/10) of whom were MRD negative. Revumenib was well tolerated, and the overall
safety profile was consistent with our previously reported data. Treatment-related adverse events, or TREAs, leading to dose reductions and treatment
discontinuation were low. Grade 3 differentiation syndrome, DS, was observed in 15% (14/94) of patients while one patient (1%) experienced Grade 4 DS
and no patients experienced a Grade 5. Grade 3 QTc prolongation was observed in 14% (13/94) of patients, with no Grade 4 or 5 events. There were no
discontinuations related to DS or QTc prolongation on the trial. Further accrual in the KMT2Ar cohorts was halted based on the Independent Data
Monitoring Committee recommendation.
We submitted an NDA to the FDA for revumenib for the treatment of adult and pediatric R/R KMT2Ar acute leukemia. The NDA submission is
being reviewed under the FDA's RTOR program, and expects to receive a PDUFA action date from the FDA in the first quarter of 2024. RTOR allows for
close engagement between the sponsor and the FDA throughout the submission process and enables the FDA to review individual modules of a drug
application rather than requiring a complete application prior to initiating its review. We expect to complete
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enrollment in the AUGMENT-101 pivotal trial cohort of patients with R/R mNPM1 AML late in the first quarter or early in the second quarter of 2024. We
expect to report topline data for this cohort in the fourth quarter of 2024, which could support a supplemental NDA regulatory filing for revumenib in an
additional indication of treatment of R/R mNPM1 AML.
In November 2023, we announced updated results from the R/R mNPM1 AML patients enrolled in the Phase 1 portion of the AUGMENT-101 trial,
who met the RP2D criteria. The final dataset includes three additional patients, for a total of 14, that were enrolled in the Phase 1 trial to complete the
pharmacokinetic characterization of revumenib. In this analysis, the overall response rate, or ORR, was 50% (7/14) with a CR/CRh rate of 36% (5/14);
100% (5/5) of CR/CRh patients were MRD negative. 43% (3/7) of responders proceeded to transplant, all after achieving a CR or CRh. 60% (3/5) of
CR/CRh patients maintained a response beyond six months. At the time of the analysis, four patients remained in response, with two patients in response
over 22 months, at the time of data cut-off. Revumenib was well tolerated, and the safety profile was consistent with what was previously reported in the
AUGMENT-101 trial. There were no Grade 4 or 5 QTc prolongation or differentiation syndrome events, greater than Grade 2, and no patients discontinued
due to TREAs.
We also announced data from patients in the AUGMENT-101 Phase 1 trial who received revumenib maintenance therapy, including some ongoing
for more than one year after HSCT, that demonstrated revumenib duration of treatment in the maintenance setting at the time of this analysis ranged from 1
to 701 days, with treatment ongoing for nine of the 16 patients. CRc (CR + CRh + CRp + CRi + MLFS) was maintained in 12 patients after HSCT and
maintenance revumenib. MRD negative remissions were maintained in 6 patients as of the data cutoff with one patient converting from an MRD+ to MRD-
response. Three patients remain on revumenib maintenance therapy for more than one-year post-transplant.
At the 65th American Society of Hematology (ASH) Annual Meeting in December 2023 and during the our accompanying investor event,
investigators presented compelling data from multiple Phase 1 combination trials of revumenib in mNPM1 and KMT2Ar acute leukemia across the
treatment landscape. The trials are expanding to validate recommended Phase 2 doses, with additional data expected in the second half of 2024. These trials
include:
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BEAT-AML: Evaluating the combination of revumenib with venetoclax and azacitidine in front-line AML patients. This trial is being
conducted as part of the Leukemia & Lymphoma Society's Beat AML® Master Clinical Trial.
SAVE: Evaluating the all-oral combination of revumenib with venetoclax and decitabine/cedazuridine in R/R AML or mixed phenotype acute
leukemias. The trial is being conducted by investigators from the MD Anderson Cancer Center and continues to add patients.
AUGMENT-102: Evaluating the combination of revumenib with fludarabine and cytarabine in patients with R/R acute leukemias.
We have initiated a Phase 1 trial of revumenib in combination with 7+3 chemotherapy followed by maintenance treatment in newly diagnosed
patients with mNPM1 or KMT2Ar acute leukemias. We also plan to initiate a pivotal trial of revumenib in combination with venetoclax and azacitidine in
newly diagnosed mNPM1 or KMT2Ar acute leukemia patients unable to tolerate intensive induction chemotherapy by year-end 2024. Additionally,
enrollment is ongoing in a Phase 1 proof-of-concept clinical trial of revumenib in patients with unresectable metastatic microsatellite stable colorectal
cancer. We expect to provide an update on the trial in the second quarter of 2024.
Rationale for Targeting MLLr
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
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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. Recent preclinical research has demonstrated that mNPM1 works directly with the menin-MLL complex to induce a leukemic transcription
program. As a result, mNPM1 harboring cells are sensitive to menin-MLL interaction inhibitors. In mNPM1 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 mNPM1 xenografts. Based on these findings,
blocking the menin-MLL1 interaction represents a novel targeted strategy for the treatment of mNPM1 AML.
Like MLLr, NPM1 is readily diagnosed as part of the standard AML patient work-up today, and yet there are no targeted therapies specifically
approved to treat patients with mNPM1 AML. There are several additional clinical stage agents currently advancing as potential treatments for mNPM1
AML.
Rational for Targeting CRC
CRC is the second most lethal cancer, the third most prevalent malignant tumor worldwide, and the fourth most common cancer diagnosed in the
United States each year. In 2023, over 153,000 new CRC estimated cases arose, resulting in 52,500 estimated deaths, accounting for nearly 8% of new
cancer cases and 9% of cancer deaths in the U.S. Meanwhile, the five-year survival rate for CRC is approximately 65% and drops to 15% for metastatic
CRC.
Today, physicians can choose from a number of approved chemotherapies (Stivarga,® Lonsurf®), immunotherapies (Yervoy®, Keytruda®,
Opdivo®) and targeted agents (Avastin®, Cyramza®, Zaltrap®, Erbitux®, Vectibix®, Braftovi®, FRUZAQLATM)) to treat CRC. Despite these
advancements, there remains a critical need for more effective therapies to address metastatic CRC.
Nearly all colorectal tumors, harbor genetic mutations that lead to the hyperactivation of b-catenin signaling, which in turn initiate the expression of
various downstream targets that promote proliferation and maintain a stem cell state, highlighting the potential value of developing treatments that target b-
catenin signaling in cancer. b-catenin itself, however, is an intractable drug target and the mechanisms underlying b-catenin–driven transcription remains
largely elusive, underscoring the need to identify therapeutically tractable components of b-catenin transcriptional output. Recently, several researchers
have utilized functional genomic screens to uncover new targets of high relevance to the oncogenic property of b-catenin. Through this process they have
validated the selective dependence of KMT2A for growth of b-catenin–active CRC cells and showed KMT2A expression to be associated with malignant
CRC growth in vivo and shortened survival in patients with CRC. Targeting KMT2A using menin
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inhibitors has been shown to selectively reduce the viability of b-catenin–active cells and CRC organoids, but not b-catenin–inactive cells and normal
organoids.
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 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.
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.
In July 2023, we and our partner, Incyte, announced positive topline data from the pivotal AGAVE-201 trial of axatilimab in patients with cGVHD
following two or more prior lines of therapy. All three dose cohorts, 0.3 mg/kg every two weeks, 1.0 mg/kg every two weeks and 3.0 mg/kg every four
weeks, met the primary endpoint. The ORR within the first six months of treatment at the 0.3 mg/kg dose was 74%, and 60% of these patients were still
responding at one year. Furthermore, axatilimab was generally well tolerated, and the most common adverse events were consistent with on-target effects
and prior trials. Results from the trial were featured in the Plenary Scientific Session at the 65th ASH Annual Meeting in December 2023. The FDA has
accepted the BLA filing for axatilimab in adult and pediatric patients six years or older with cGVHD after failure of at least two prior lines of systemic
therapy. The application has been granted Priority Review and assigned a PDUFA action date of August 28, 2024.
In January 2024, we announced that we exercised our option under the collaboration agreement and license agreement with Incyte described below
under the heading "Collaborations - Incyte Collaboration and License Agreement" to co-commercialize axatilimab in the United States. We also announced
the randomized, double-blind and placebo-controlled Phase 2 trial to assess the efficacy, safety and tolerability of axatilimab in patients with idiopathic
pulmonary fibrosis, or IPF, is open for enrollment. Additionally, Incyte plans to initiate two combination trials with axatilimab in cGVHD in mid-2024,
including both a Phase 2 combination trial with ruxolitinib and a Phase 3 combination trial with steroids.
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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 immunomodulators 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. The FDA has approved two additional drugs, Rezurock® (belomosidil) and Jakafi®
(ruxolitinib), for use in patients with cGVHD after failure of one or more lines of systemic therapy. 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.
Axatilimab in IPF
IPF is a specific form of chronic, fibrosing, interstitial pneumonia limited to the lungs with a median survival of approximately three to five years
after diagnosis. IPF is a rare disease, with an estimated prevalence of 281,000 people among the seven major market countries. IPF incidence and
prevalence increase with age and are higher among males. Although rare, the incidence of IPF is increasing, likely due to an increasing understanding of
the disease and the recent development of uniform diagnostic criteria.
There are currently two approved therapies for IPF, nintedanib and pirfenidone. Despite these recent advances, the unmet medical need in IPF
remains high, with a five-year mortality rate of 50% to 70% with deaths occurring mainly due to respiratory failure. Lung transplantation remains the only
curative treatment option, but less than five percent of IPF patients undergo lung transplantation. There is an urgent need for new and more effective
treatments for IPF that can address the limitations of current treatment options, improve mortality, and quality of life.
Growing evidence suggests macrophages are critical regulators of lung fibrosis. Recent work has established a role for monocyte-derived macrophages as
the pathogenic population of cells required for the development of fibrosis and that drive the fibrotic process. Reducing the circulating levels of pathogenic
monocyte-derived macrophage precursors or inhibiting their activation in tissues provides an opportunity to therapeutically intervene and directly inhibit
fibrosis. Recent experiments have demonstrated that the monocyte-derived, pro-fibrotic macrophages are CSF-1-dependent and CSF-1R inhibition through
anti-CSF-1R antibody can block fibrosis in fibrotic disease models. We believe that using axatilimab to inhibit the work of monocyte-derived macrophages
may provide a differentiated way to treat IPF, and could result in a more pronounced impact on the fibrotic process.
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. We have deprioritized the development of entinostat, but maintain 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.
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Collaborations
Incyte Collaboration and License Agreement
In September 2021, we entered into a collaboration and license agreement, or the Incyte Collaboration Agreement, with Incyte for the development
and commercialization of axatilimab. Additionally, in September 2021 we entered into a share purchase agreement with Incyte, or the Incyte Share
Purchase Agreement. Under the terms of the Incyte Collaboration 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.
We are eligible to receive up to $220 million in future contingent development and regulatory milestones and up to $230 million in
commercialization milestones under the Incyte Collaboration Agreement. In addition, we are eligible to receive tiered royalties on potential net sales of the
licensed product comprising axatilimab ranging from the low to mid double-digit percentages. In December 2021, we received an upfront cash payment 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.
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, sublicensable, 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 $99.0 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. Since the inception of the agreement, we achieved certain development and regulatory milestones resulting in $8.0 million in
milestone payments to Vitae, which includes $2.0 million paid in the first quarter of 2023.
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, sublicensable, exclusive license
to UCB6352, which we refer to as axatilimab. The UCB license agreement permits us to use axatilimab or other licensed products for all human uses,
including treatment,
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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 our collaboration with Incyte.
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. Additionally, in connection with its most recent amendment of the UCB license agreement, in the second quarter of
2022 we paid UCB $5.8 million, which was recognized as a milestone expense. In the fourth quarter of 2023, we achieved certain development and
regulatory milestones, resulting in a $10.0 million expense, which has been recorded in accrued expenses as of December 31, 2023.
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.
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Sales and Marketing
Given our stage of development, we have recently started building a commercial infrastructure to support sales of our product candidates in the
United States. We expect that our targeted sales force will focus on a well-defined group of medical oncologists, and transplant physicians, primarily in the
non-hospital and academic settings, who are responsible for the care and treatment of cancer patients. For revumenib, we expect to manage sales, marketing
and distribution through internal resources and third-party relationships. In accordance with our agreement, Incyte will lead the commercialization of
axatilimab globally and we have elected to co-promote axatilimab in the United States. 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 development as well as
sales and marketing activities.
Manufacturing
We do not own or operate manufacturing facilities for the production of axatilimab, revumenib 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 as well as Incyte for all of our required
raw materials, active pharmaceutical ingredients and finished product for our preclinical research, clinical trials, and anticipated commercial supply.
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.
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, 2023, the in-licensed axatilimab composition-of-matter
patent portfolio included two granted U.S. patents, 27 granted non-U.S. patents, including a granted Eurasian patent which has been validated in 3 countries
and two granted EP patent which have been validated in 37 countries each, and 22 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 patents and 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. As of December 31, 2023, the in-
licensed method of use patent family included 11 granted non-U.S. patents, including a granted EP patent which has been validated in 7 countries, and
another granted EP patent which has been validated in 8 countries, and 3 non-U.S.
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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. As of December 31, 2023, the in-licensed liquid pharmaceutical compositions of anti-CSF-
1R antibodies patent family included 1 granted U.S. patent, 13 granted non-U.S. patents including a granted EP patent which has been validated in 33
countries, and 5 non-U.S. pending patent applications. These in-licensed granted patents covering axatilimab, and any non-U.S. pending applications
should they issue, will expire between November 2024 and February 2036 or later should patent term extension be granted.
Our owned axatilimab patent portfolio includes one pending U.S. patent application and six non-U.S. patent applications 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 patent applications directed to the treatment regimens and methods
of using axatilimab includes one pending U.S. patent application and 18 non-U.S. patent applications. If any one of these applications 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, LLC (formerly Vitae Pharmaceuticals, Inc., "Vitae") a subsidiary of AbbVie Inc., a patent portfolio
directed to a series of selective preclinical inhibitors targeting the binding interaction of menin with MLL-r. As of December 31, 2023, the in-licensed
portfolio includes four granted U.S. patents, U.S. Patent Nos. 11,479,557, 10,683,302, 11,739,085 and 10,899,758, 20 granted non-U.S patents, including a
granted European patent, which was validated in 30 member states and another granted European patent which was validated in 15 member states, two
pending U.S. applications and 25 non-U.S. pending patent applications covering composition of matter and methods of treating, e.g., MLL. The in-licensed
granted patents, and any pending application should they issue, are expected to expire between June 2037 and September 2037 or later should patent term
extension be granted.
Our owned menin patent portfolio consists of twelve pending non-U.S. patent applications and one pending U.S. patent application, 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 one U.S.
provisional applications directed to the salts and polymorphic forms of menin inhibitors and pharmaceutical combinations thereof and one pending PCT
patent application directed to methods of treating colorectal cancer in a subject in need thereof with a menin-MLL inhibitor. If any of these pending
applications were to issue as one or more patents, these patents would expire between April 2041 and November 20244 or later should patent term
extension be granted.
We co-own with Vitae and/or Syngene International Limited seventeen pending non-U.S. patent applications, two pending U.S. patent application,
and two pending U.S. provisional applications, covering composition of matter and methods of treating cancer and other diseases mediated by the menin-
MLL interaction. Syngene International Limited is obligated to assign their rights to us.
We also co-own with Board of Regents, The University of Texas System six pending non-U.S. patent applications, one pending U.S. patent
application, covering methods of treating cancer with combinations, including menin inhibitors and Bcl-2 inhibitors.
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Entinostat Patent Portfolio
We strive to protect entinostat with multiple layers of patents. As of December 31, 2023, our portfolio included four owned pending U.S. non-
provisional patent applications, three owned granted U.S. patents, U.S. Patent Nos. 10,226,472, 11,324,822, and 11,397,184 which expire in August 2032,
March 2036 and October 2036, respectively, or later should patent term extension be granted, directed to methods of treating a patient with combinations of
entinostat and pembrolizumab or other therapeutic agents, 19 granted non-U.S. patents (including one European patent validated in countries), and 39
owned non-U.S. pending patent applications. Our owned entinostat patent portfolio includes pending U.S. and non-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. The granted patents, and any pending applications should they issue as one or more patents, these patents would expire between
August 2032 and May 2039 or later should patent term extension be granted.
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, 2023, 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.
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 covered methods of
treatment by administration of entinostat.
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
U.S. Patent and Trademark Office, or 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
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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 Investigational New Drug, or 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;
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;
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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.
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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 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 may 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 judgment, a company can only make claims relating to safety and efficacy of a drug that are
consistent with FDA approval, and a company is allowed to actively market a drug only for the particular use and treatment approved by the FDA. In
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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.
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. Further, on August 16, 2022, President Biden signed the Inflation Reduction Act
of 2022, or IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Affordable Care
Act marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly
lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. 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.
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, 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. Further, the IRA, among other things (i) directs HHS to
negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare and (ii) imposes rebates under Medicare Part B
and Medicare Part D to penalize price increases that outpace inflation. These provisions take effect progressively starting in fiscal year 2023. On August 29,
2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the Medicare drug price negotiation program is
currently subject to legal challenges. In response to the Biden administration’s October 2022 executive order, on February 14, 2023, HHS released a report
outlining three new models for testing by the CMS Innovation Center which will be evaluated on their ability to lower the cost of drugs, promote
accessibility, and improve quality of care. It is unclear whether the models will be utilized in any health reform measures in the future. Further, on
December 7, 2023, the Biden administration announced an initiative to control the price of prescription drugs through the use of march-in rights under the
Bayh-Dole Act. On December 8, 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance
Framework for Considering the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use when
deciding to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue under the new
framework. 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. For example, on
January 5, 2024, the FDA approved Florida’s Section 804 Importation Program, or SIP, proposal to import certain drugs from Canada for specific state
healthcare programs. It is unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to legal
challenges in the United States or Canada. Other states have also submitted SIP proposals that are pending review by the FDA. Any such approved
importation plans, when implemented, may result in lower drug prices for products covered by those programs.
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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 19, 2024, we had 184 full-time employees. Of the full-time employees, 112 were primarily engaged in research and development
activities and 44 have an M.D., Ph.D., or PharmD 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. To allow us flexibility in meeting varying workflow demands, we also engage
consultants and temporary workers when needed.
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 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 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
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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.
Environmental, Social and Governance Commitment
We are highly committed to policies and practices focused on environmental, social and governance, or ESG, positively impacting our social
community and maintaining and cultivating good corporate governance. By focusing on ESG policies and practices, we believe that we can affect a
meaningful and positive change in our communities and continue to cultivate our open and inclusive collaborative culture. Some of the initiatives that we
were most proud of in 2023 included continuing support for the scientific, medical, patient and local communities in which we operate, including disease
awareness and supporting community needs through participation in events within the community at large. We are committed to reducing our
environmental footprint. Electric car charging stations are available to employees at our Massachusetts office location. We have been methodically
minimizing our use of paper records in favor of electronic records and have a robust recycling program in each office for paper, batteries and electronic
equipment. We enable our employees to participate in various charity events, including walks, races and other events that impact change in the communities
of the patients that we serve. This allows our employees to support causes that are meaningful to them and their families and aligns with our mission, goals
and vision.
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 office is located in Waltham, Massachusetts, where we lease approximately 12,000 square feet of office space pursuant to a lease that
expires in February 2025. We also lease approximately 16,000 square feet of office space in New York, New York pursuant to leases that expires in August
2025. We believe our facilities are adequate to meet our current needs, although we may seek to negotiate new leases or evaluate additional or alternate
space for our operations. We believe appropriate alternative space will be readily available on commercially reasonable terms.
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.
Item 1A. Risk Factors
This Annual Report 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 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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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.
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Revumenib and axatilimab has undergone limited clinical testing and we may fail to show that it is well tolerated and provides 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 to the final data.
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.
Incyte may fail to perform its obligations as expected under the collaboration or may deprioritize its investment 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 would harm our business.
Our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical
community to be commercially successful.
We rely on third-party suppliers as well as Incyte 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.
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
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
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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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the initiation, cost, timing, progress and results of our research and development activities, clinical trials and preclinical studies;
timely completion of any future clinical trials of revumenib and axatilimab;
interruption of key clinical trial activities, in connection with public health threats or any future geopolitical tensions, such as the ongoing war
between Russia and Ukraine and the war in Israel;
whether we are required by the FDA or foreign regulatory authorities to conduct additional clinical trials prior to receiving marketing
approval;
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 collaboration partner and of 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;
our ability to prevent any significant disruptions of our information technology systems and protect the security of our data; and
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.
Revumenib has undergone limited clinical testing and we may fail to show that it is well tolerated and provides sufficient clinical benefit for patients.
Research suggests that certain acute leukemias, such as lysine methyltransferase 2A rearranged, or KMT2Ar, acute myeloid or lymphoid leukemia,
AML or ALL, and nucleophosmin 1, or NPM1, mutant AML, are driven by the interaction of menin, a nuclear protein involved in transcription, with the
N-terminus of KMT2A protein. In NPM1 mutant AML the interaction with menin occurs via the wild type KMT2A protein, and in KMT2Ar acute
leukemia, the interaction occurs via a mutant form of KMT2A, a fusion protein known as KMT2Ar. KMT2Ar results from a rare, spontaneous fusion
between the N-terminus of the KMT2A gene 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-KMT2Ar interaction, such
as revumenib, which bind to, and block the interaction of menin with either KMT2A rearranged or wildtype, have demonstrated deep and durable single
agent treatment effects in multiple leukemic xenograft models harboring KMT2A fusions or NPM1 mutations. Our strategy for developing revumenib is to
conduct a Phase 1/2 clinical trial in r/r patients with KMT2Ar 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
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pharmacokinetics of revumenib, 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 revumenib across three expansion cohorts enrolling pediatric and adult R/R patients with
KMT2Ar ALL, KMT2Ar AML, and NPM1 mutant AML. In October 2023, we announced positive topline data in patients with R/R KMT2Ar acute
leukemia and that we have submitted an NDA under the FDA’s RTOR program. Neither breakthrough therapy designation nor RTOR review change the
standards for approval and may not ultimately expedite the approval process or lead to approval. While we believe that we have established sufficient
efficacy to warrant an NDA submission and continued development in these indications, we may not yet have sufficiently demonstrated a favorable risk-
benefit of revumenib in patients.
Axatilimab has undergone limited clinical testing and we may fail to show that it is well tolerated and provides sufficient 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. In 2018, we commenced a Phase 1/2 clinical trial with axatilimab in subjects with active cGVHD who had failed at least two prior lines of
therapy. Following our end of Phase 1 meeting with the FDA, we aligned on a regulatory path for axatilimab for the treatment of cGVHD and commenced
a pivotal Phase 2 clinical trial, AGAVE-201, to assess the safety and efficacy of different doses and schedules of axatilimab for the treatment of patients
with cGVHD. In July 2023, we announced that AGAVE-201 met its primary endpoint across all three doses in the trial. In January 2024, we announced
that, along with Incyte, we have submitted a BLA, the previous December. While we believe that we have established sufficient efficacy to warrant a BLA
submission and continued development in this indication, we may not yet have 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 to the final data.
From time to time, we may publish interim top-line or preliminary data from our clinical trials. For example, in each of November 2022 and 2023,
we announced interim data from our Phase 1/2 clinical trial of revumenib. 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
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.
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We are dependent upon our collaboration with Incyte to further develop and commercialize axatilimab. If we or Incyte fail to perform as expected the
potential for us to generate future revenues under the collaboration could be significantly reduced, the development and/or commercialization of
axatilimab may be terminated or substantially delayed, and our business could be adversely affected.
We are subject to numerous risks related to the Incyte Collaboration 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. 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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the impact of public health crises, or geopolitical tensions, such as the ongoing war between Russia and Ukraine and the war in Israel;
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.
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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.
Our collaborations, including any future strategic collaborations we enter into, could subject us to a number of risks, including:
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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, sales 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;
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.
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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 would harm our business.
The FDA and comparable foreign regulatory authorities extensively and rigorously regulate and evaluate the manufacture, testing, distribution,
advertising and marketing of drug products prior to granting marketing approvals with respect to such products. This approval process generally requires, at
minimum, testing of any product candidate in preclinical studies and clinical trials to establish its safety and effectiveness, and confirmation by the FDA
and comparable foreign regulatory authorities that any such product candidate, and any parties involved in its manufacturing, testing and development,
complied with current Good Manufacturing Practices, or cGMP, current Good Laboratory Practices and current Good Clinical Practices, regulations,
standards and guidelines during such manufacturing, testing and development. 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.
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 effective for their proposed indication and have an acceptable safety profile;
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, size, conduct 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, BLA 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; or
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. Moreover, if adopted in the form proposed, the recent European Commission proposals to revise the existing
European Union, or EU, laws governing authorization of medicinal products may result in a decrease in data and market exclusivity for our product
candidates in the EU.
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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 as well as Incyte 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 and Incyte for the foreseeable future, we do not have direct control over the ability of these parties to maintain adequate manufacturing
capacity and capabilities to serve our needs, including quality control, quality assurance and qualified personnel. In addition, public health crises, may
impact the ability of our existing or future manufacturers to perform their obligations to us.
We are dependent on our third-party manufacturers and Incyte for compliance with cGMPs and for manufacture of both active drug substances and
finished drug products. Facilities used by our third-party manufacturers and Incyte 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 or Incyte 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,
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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.
Advertising and promotion of any product candidate that obtains approval in the United States is heavily scrutinized by the FDA’s Office of
Prescription Drug Promotion, 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
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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 or 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;
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
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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 several
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.
Revumenib is being developed for the treatment of R/R adult and pediatric patients with KMT2Ar ALL, KMT2Ar 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, revumenib has the potential to be the
first defined therapy for patients with KMT2Ar ALL, KMT2Ar AML and/or NPM1 mutant AML.
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.
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;
our ability to manufacture commercial quantities of our product candidates if they receive regulatory approval; and
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our ability to negotiate preferential formulary status for our product candidates.
Even if we obtain regulatory approval of our product candidates, the availability, commercial formulary placement, 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.
Certain of our investigational products may require companion diagnostics in certain indications. Failure to successfully develop, validate and obtain
regulatory clearance or approval for such tests could harm our product development strategy or prevent us from realizing the full commercial potential
of our investigational products.
Companion diagnostics are subject to regulation by the FDA and comparable foreign regulatory authorities as a medical device and may require
separate regulatory authorization prior to commercialization. Certain of our revumenib clinical trials include the use of an investigational or laboratory
developed diagnostic test to help identify eligible patients. We currently do not have any plans to develop diagnostic tests internally. We are therefore
dependent on the sustained cooperation and effort of third-party collaborators in developing and, if our investigational products are approved for use only
with an approved companion diagnostic test, obtaining approval and commercializing these tests. If these parties are unable to successfully develop
companion diagnostics for our investigational products, or experience delays in doing so, the development of our investigational products may be adversely
affected and we may not be able to obtain marketing authorization for these investigational products. Furthermore, our ability to market and sell, as well as
the commercial success, of any of our investigational products that require a companion diagnostic will be tied to, and dependent upon, the receipt of
required regulatory authorization and the continued ability of such third parties to make the companion diagnostic commercially available on reasonable
terms in the relevant geographies. Any failure to develop, validate, obtain and maintain marketing authorization and supply for a companion diagnostic we
need may harm our business prospects.
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. We have a worldwide, sublicensable,
exclusive license to axatilimab pursuant to a license agreement with UCB. 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
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
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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, commercial 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 and biopharmaceutical industries 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, pharmacy benefit managers, 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 rebates and 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 adequate 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 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, marketing, 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 Center 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
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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. Even if favorable coverage status and adequate reimbursement rates are attained, less favorable coverage policies and reimbursement
rates may be implemented in the future.
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. On August 16, 2022,
President Biden signed the Inflation Reduction Act of 2022 or IRA, into law, which among other things, extends enhanced subsidies for individuals
purchasing health insurance coverage in Affordable Care Act marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the
Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket costs through a newly established
manufacturer discount program. 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. These changes include aggregate reductions
to Medicare payments to providers of up to 2% per fiscal year, which began in
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2013, and due to subsequent legislative amendments to the statute, will remain in effect through 2032 unless additional Congressional action is taken.
Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for
physicians under the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, which ended the use of the statutory formula and established a
quality payment program, also referred to as the Quality Payment Program. Under both APMs and MIPS, performance data collected each performance
year will affect Medicare payments in later years, including potentially reducing payments.
Also, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed
products, which have resulted in several, Presidential executive orders, Congressional inquiries and proposed and enacted federal and state legislation
designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs,
and reform government program reimbursement methodologies for drug products. At the federal level, in July 2021, the Biden administration released an
executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to President
Biden’s executive order, on September 9, 2021, 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. In addition, the IRA, among other things, (i) directs the
Secretary of HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare Part B and Medicare Part D,
and subjects drug manufacturers to civil monetary penalties and a potential excise tax by offering a price that is not equal to or less than the negotiated
“maximum fair price” under the law, and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.
These provisions take effect progressively starting in fiscal year 2023. On August 29, 2023, HHS announced the list of the first ten drugs that will be
subject to price negotiations, although the Medicare drug price negotiation program is currently subject to legal challenges. In response to the Biden
administration’s October 2022 executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the CMS Innovation
Center which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the
models will be utilized in any health reform measures in the future. Further, on December 7, 2023, the Biden administration announced an initiative to
control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act. On December 8, 2023, the National Institute of
Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the
first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights. While march-in rights have not
previously been exercised, it is uncertain if that will continue under the new framework. At the state level, legislatures have increasingly passed and
implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts,
restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from
other countries and bulk purchasing. For example, on January 5, 2024, the FDA approved Florida’s Section 804 Importation Program, or SIP, proposal to
import certain drugs from Canada for specific state healthcare programs. It is unclear how this program will be implemented, including which drugs will be
chosen, and whether it will be subject to legal challenges in the United States or Canada. Other states have also submitted SIP proposals that are pending
review by the FDA. Any such approved importation plans, when implemented, may result in lower drug prices for products covered by those programs.
We expect these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in
additional downward pressure on the price that we receive for any approved drug. For example, based on a recent executive order, the Biden administration
expressed its intent to pursue certain policy initiatives to reduce drug prices. 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 are in the process of building our sales, marketing and distribution infrastructure.
In order to market any approved product candidate in the future, we must build our sales, marketing, distribution, 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
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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 organization;
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 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,
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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 Anti-Kickback 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 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;
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.
We are subject to stringent and evolving U.S. and foreign laws, regulations, and rules, contractual obligations, industry standards, policies and other
obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations
or actions; litigation (including class claims) and mass arbitration demands; fines and penalties; disruptions of our business operations; reputational
harm; loss of revenue or profits; and other adverse business consequences.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of,
transmit, and share, or collectively, process, personal data and other sensitive information, including proprietary and confidential business data, trade
secrets, intellectual property, sensitive third-party data, business plans, transactions, clinical trial data and financial information or collectively, sensitive
data.
Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry
standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification
laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping
laws). For example, the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology
for Economic and Clinical Health Act, or HITECH, imposes specific requirements relating to the privacy, security, and transmission of individually
identifiable protected health information. For more information regarding risks associated with HIPAA, please refer to the section above that discusses risks
associated with healthcare laws and regulations.
In the past few years, numerous U.S. states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive
privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with
certain rights concerning their personal data. As applicable, such rights may include the right to access, correct, or delete certain personal data, and to
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opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may
impact our business and ability to provide our products and services. Certain states also impose stricter requirements for processing certain personal data,
including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For
example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020, or CPRA and collectively, CCPA,
applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific
disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights. The CCPA provides for fines of up to $7,500 per
intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages. Although there are limited
exemptions for clinical trial data under the CCPA, the CCPA and other similar laws may impact (possibly significantly) our business activities depending
on how it is interpreted, should we become subject to the CCPA in the future. Similar laws are being considered in several other states, as well as at the
federal and local levels, and we expect more states to pass similar laws in the future. These developments may further complicate compliance efforts and
increase legal risk and compliance costs for us and the third parties upon whom we rely.
Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security. For example,
the European Union’s General Data Protection Regulation, or EU GDPR, and the United Kingdom’s GDPR, or UK GDPR, impose strict requirements for
processing personal data. For example, under GDPR, companies may face temporary or definitive bans on data processing and other corrective actions;
fines of up to 20 million Euros under the EU GDPR, 17.5 million pounds sterling under the UK GDPR or, in each case, 4% of annual global revenue,
whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations
authorized at law to represent their interests.
We may be subject to new laws governing the privacy of consumer health data, including reproductive, sexual orientation, and gender identity
privacy rights. For example, Washington’s My Health My Data Act, or MHMD, broadly defines consumer health data, places restrictions on processing
consumer health data (including imposing stringent requirements for consents), provides consumers certain rights with respect to their health data, and
creates a private right of action to allow individuals to sue for violations of the law. Other states are considering and may adopt similar laws.
Our employees and personnel may occasionally use generative artificial intelligence, or AI, technologies to perform their work, and the disclosure
and use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are
likely to pass additional laws regulating generative AI. Our use of this technology could result in additional compliance costs, regulatory investigations and
actions, and lawsuits. If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.
In addition, we may be unable to transfer personal data from Europe and other jurisdictions to the United States or other countries due to data
localization requirements or limitations on cross-border data flows. Europe and other jurisdictions have enacted laws requiring data to be localized or
limiting the transfer of personal data to other countries. In particular, the European Economic Area, or EEA, and the United Kingdom, or UK, have
significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate. Other
jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws. Although there are currently various
mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA’s standard
contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework and the UK extension thereto
(which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are
subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. If
there is no lawful manner for us to transfer personal data from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a
legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the
need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure
to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions
against our processing or transferring of personal data necessary to operate our business. Additionally, companies that transfer personal data out of the EEA
and UK to other
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jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activities groups. Some European
regulators have ordered certain companies to suspend or permanently cease certain transfers of personal data out of Europe for allegedly violating the
GDPR’s cross-border data transfer limitations.
In addition to data privacy and security laws, we are bound by other contractual obligations related to data privacy and security, and our efforts to
comply with such obligations may not be successful. We also publish privacy policies, marketing materials, and other statements regarding data privacy and
security and if these policies, materials, or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our
practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.
Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent,
and creating uncertainty. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict
among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources and may necessitate changes to our
services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.
We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our
efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations. If
we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we
could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections,
and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing
personal data (including clinical trial data); and orders to destroy or not use personal data. In particular, plaintiffs have become increasingly more active in
bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of
statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the
number of violations. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited
to: loss of customers; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products;
expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
If our information technology systems, or our data are or were compromised, we could experience adverse consequences resulting from such
compromise, including but not limited to regulatory investigations or actions; fines and penalties; disruptions of our business operations; reputational
harm; loss of revenue or profits; and other adverse consequences.
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 data, and, as a result, we and the third parties upon which
we rely face a variety of evolving threats that could cause security incidents. 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 and our sensitive data. 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 data stored on those systems, make such
systems vulnerable to unintentional or malicious, internal and external attacks on our technology environment. Furthermore, our ability to monitor the
aforementioned third parties’ information security practices is limited, and these third parties may not have adequate information security measures in
place. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. While we may be
entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to
cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity, and we cannot
guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised.
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In addition, we currently offer a hybrid-work environment, which may make us more vulnerable to cyberattacks as more of our employees utilize
network connections, computers, and devices outside our premises or network, including working at home, while in transit and in public locations.
Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities,
as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may
discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into
our information technology environment and security program.
Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by
malicious third parties. We take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or
software, including that of third parties upon which we rely); however, we may not detect and remediate all such vulnerabilities including on a timely basis.
Further, we may experience delays in deploying remedial measures and patches designed to address identified vulnerabilities. Vulnerabilities could be
exploited and result in a security incident.
Cyberattacks, malicious internet-based activity, online and offline fraud, and other similar activities are increasing in their frequency, levels of
persistence, sophistication and intensity, and are also 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. Such attacks
could include the deployment of harmful malware (including as a result of advanced persistent threat intrusions), ransomware attacks, denial-of-service
attacks, credential stuffing and/or harvesting, social engineering (including through deep fakes, which may be increasingly more difficult to identify as fake,
and phishing attacks), supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of sensitive data or other information
technology assets, adware, attacks enhanced or facilitated by AI, telecommunications failures, earthquakes, fires, floods and other means to affect service
reliability and threaten the confidentiality, integrity and availability of our information systems and sensitive data. In particular, severe ransomware attacks
are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive
data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be
unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
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 data, 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.
We may expend significant resources or modify our business activities to try to protect against security incidents. Additionally, certain data privacy
and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to
protect our information technology systems and sensitive data.
Applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers,
regulators, and investors, of security incidents. Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to
adverse consequences.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, including but not
limited to a security incident involving personal information regarding employees or clinical trial patients, we may experience adverse consequences, such
as disruptions to our business, harm to our reputation, government enforcement actions (for example, investigations, fines, penalties, audits, and
inspections), additional reporting requirements and/or oversight, or we may otherwise be subject 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
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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 data, 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 and 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 be effective. Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of
liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. We cannot be
sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices,
that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.
In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive data about us from public sources, data brokers, or
other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market
position. Additionally, sensitive data of the Company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our
employees’, personnel’s, or vendors’ potential use of generative AI technologies.
Social media platforms and AI-based platforms present new risks and challenges to our business.
As social media continues to expand, it also presents us with new risks and challenges. Social media is increasingly being used to communicate
information about us, our programs and the diseases our product candidates are being developed to treat. Social media practices in the biopharmaceutical
industry are evolving, creating uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients may use social
media platforms to comment on the effectiveness of, or adverse experiences with, a product or a product candidate, which could result in reporting
obligations or other consequences. Further, the accidental or intentional disclosure of non-public information by our workforce or others through media
channels could lead to information loss. In addition, there is a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or
comments about us, our products, or our product candidates on any social media platform. The nature of social media prevents us from having real-time
control over postings about us on social media. We may not be able to reverse damage to our reputation from negative publicity or adverse information
posted on social media platforms or similar mediums. If any of these events were to occur or we otherwise fail to comply with application regulations, we
could incur liability, face restrictive regulatory actions or incur other harm to our business including quick and irreversible damage to our reputation, brand
image and goodwill. Additionally, AI-based platforms are increasingly being used in the biopharmaceutical industry. The use of AI platforms by people,
including our vendors, suppliers and contractors, with access to our proprietary and confidential information, including trade secrets, may continue to
increase and may lead to the release of such information, which may negatively impact our company, including our ability to realize the benefit of our
intellectual property.
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, except in 2021.
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For the year ended December 31, 2023, we reported a net loss of $209.4 million. As of December 31, 2023, we had an accumulated deficit of $902.4
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
growth of our 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
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months. Unexpected circumstances may cause us to consume capital more rapidly than we currently anticipate, including as a result of the global economic
slowdown, including any recessions that have occurred or may occur in the future. In addition, 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 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.
While the long-term economic impacts associated with public health crises and global geopolitical tensions, like the ongoing war between Russia
and Ukraine and the war in Israel, are difficult to assess or predict, each of these events has caused significant disruptions to the global financial markets
and contributed to a general global economic slowdown. Furthermore, inflation rates have increased recently to levels not seen in decades. Increased
inflation may result in increased operating costs (including labor costs) and may affect our operating budgets. In addition, the U.S. Federal Reserve has
raised and is expected to further raise, interest rates in response to concerns about inflation. Increases in interest rates, especially if coupled with reduced
government spending and volatility in financial markets, may further increase economic uncertainty and heighten these risks. If the disruptions and
slowdown deepen or persist, we may not be able to access additional capital on favorable terms, or at all, which could in the future negatively affect our
financial condition and our ability to pursue our business strategy. 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;
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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 geo-political actions, including war or the perception that hostilities may be imminent (such as the
ongoing war between Russia and Ukraine and the war in Israel), terrorism, natural disasters, including earthquakes, typhoons, floods and
fires, or public health crises.
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.
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. For example, legislation enacted in 2017, informally titled the Tax
Cuts and Jobs Act, or the Tax Act, enacted many significant changes to the U.S. tax laws, including changes in corporate tax rates, which collectively may
impact the utilization of our NOLs and other deferred tax assets, the deductibility of expenses, and the taxation of foreign earnings. Future guidance from
the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or
modified in future legislation. For example, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, modified certain provisions of the
Tax Act. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act, or any newly enacted federal tax
legislation. Most recently, the IRA included a number of significant drug pricing reforms, including the establishment of a drug price negotiation program
within the U.S. Department of Health and Human Services that would require pharmaceutical manufacturers to charge a negotiated “maximum fair price”
for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers under Medicare Parts
B and D to penalize price increases that outpace inflation, and a redesign of the Part D benefit, as part of which manufacturers are required to provide
discounts on Part D drugs and Part D beneficiaries’ annual out-of-pocket spending will be capped at $2,000 beginning in 2025. The impact of changes
under the Tax Act, the CARES Act, the IRA, or future reform legislation could increase our future U.S. 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 last completed an analysis from January 1, 2021 through December 31, 2022 and
determined that no ownership changes had occurred in that period. Prior analyses 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.
Risks Related to Intellectual Property
If we are unable to obtain or protect intellectual property rights in and to our product candidates, 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
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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.
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, methods of using axatilimab, or formulations of 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
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expire in 2036. The actual term of any patents granted based on the pending applications we licensed from UCB can only be determined after such patents
are granted.
The portfolio that we licensed from Vitae Pharmaceuticals, which is now a subsidiary of AbbVie Inc., or 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 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’ 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.
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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 $250.0 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.
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.
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. In addition, our collaboration with Incyte to further
develop and commercialize axatilimab is dependent upon the effectiveness of the UCB license agreement. If the UCB license agreement is terminated,
Incyte may terminate our collaboration and our business could be adversely affected.
If we breach the license agreement related to revumenib or if the license agreement is otherwise terminated, we could lose the ability to continue the
development and commercialization of revumenib.
Our commercial success depends upon our ability to develop, manufacture, market and sell revumenib. Subject to the achievement of certain
milestone events, we may be required to pay Vitae, which is now a subsidiary of AbbVie, up to $99.0 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 revumenib,
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 $70.0 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 AbbVie.
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 revumenib have occurred and the last-to-expire relevant patent
covering revumenib in a given country may change in the future.
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If the license agreement is terminated, we would not be able to develop, manufacture, market or sell revumenib 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 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 America 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 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
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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 pre-issuance submission of prior art to the USPTO, or opposition, derivation, reexamination, inter partes review or interference
proceedings, or other pre-issuance 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.
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.
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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 Annual Report, these factors include:
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the success of competitive products or technologies;
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;
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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 new or ongoing public health crises and the war
between Russia and Ukraine and the war in Israel.
In addition, the stock market in general, and the Nasdaq Global Select Market, or Nasdaq, 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. Broad market and industry factors, including potentially worsening economic conditions and other adverse effects or developments 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
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished
liquidity and credit availability, bank failures, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in
inflation rates and uncertainty about economic stability. For example, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown
and extreme volatility in the global capital markets. Similarly, the current Russia-Ukraine war exacerbated volatility in the global capital markets and
continues to disrupt the global supply chain and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third
parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or
equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Inflation can adversely affect us by
increasing our costs, including personnel costs (wages). Any significant increases in inflation and related increase in interest rates could have a material
adverse effect on our business, results of operations and financial condition.
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 profit 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, in December 2023, we sold a total of 12,432,431 shares of our common stock in a
public offering. The issuance of these shares of our common stock resulted, and any future issuance pursuant to sales under the 2023 ATM Program will
result, in dilution to our stockholders.
The shares of common stock into which the warrants may be exercised are considered outstanding for the purposes of computing earnings per
share. Additionally, in November 2023, we sold 2,719,744 common shares under the 2023 ATM Program, with net proceeds of approximately $42.1
million. The issuance of these shares of
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our common stock resulted, and any future issuance pursuant to the exercise of the outstanding pre-funded warrants or sales under the 2023 ATM Program
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 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.
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, 2023, our executive officers, directors, and holders of 5% or more of our capital stock and their respective affiliates beneficially
owned approximately 37.3% 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.
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
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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.
We are required to get 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 may 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 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
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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 1C. Cyber Security
Risk Management and Strategy
We have implemented and maintain various information security processes designed to identify, assess and manage material risks from cybersecurity
threats to our critical computer networks, third party hosted services, communications systems, hardware and software, and our critical data, including
intellectual property, confidential information that is proprietary, strategic or competitive in nature, and our clinical trial and related data, or Information
Systems and Data.
Our information security function, which is led by our Vice President of Information Technology, or VP of IT, helps identify, assess and manage our
cybersecurity threats and risks. The information security function identifies and assesses cybersecurity threats and risks by monitoring and evaluating our
threat environment and the our risk profile using various methods including, for example manual and automated tools, subscribing to reports and services
that identify cybersecurity threats, analyzing reports of threats, evaluating threats reported to us, internal and external audits, leveraging third party threat
assessments, conducting vulnerability identification assessments, and leveraging external threat intelligence.
Depending on the environment or system, we implement and maintain various technical, physical, and organizational measures, processes, standards
and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example:
incident detection and response, disaster recovery and business continuity plans, encryption of certain data, network security controls, data segregation for
certain data, access controls, physical controls, systems monitoring, penetration testing, and cybersecurity insurance. Certain information about our
assessment and management of material risks from cybersecurity threats is included in risk management reports as applicable to senior leadership and the
audit committee.
We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including
for example cybersecurity consultants, managed cybersecurity service providers, professional service firms, including legal counsel, forensic investigators,
and penetration testing service providers.
We use third-party service providers to perform a variety of functions throughout our business, such as software-as-a-service providers, hosting
companies, supply chain resources, contract research organizations, and contract manufacturing organizations. Depending on the nature of the services
provided, the sensitivity of the critical systems, information and assets at issue, and the identity of the provider, we may conduct a review of security
assessments provided by the vendor.
For a description of the risks from cybersecurity threats that may materially affect the Company and how they may do so, see our risk factors under
Part 1. Item 1A. “Risk Factors” in this Annual Report, including “If our information technology systems, or our data are or were compromised, we could
experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; fines and penalties;
disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.”
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Governance
Our board of directors addresses the Company’s cybersecurity risk management as part of its general oversight function. Our board of directors’
audit committee is responsible for overseeing the Company’s cybersecurity risk management processes.
Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company management, including our VP
of IT, who has 25 years of experience in information technology including IT leadership in Department of Defense Research, who reports to our Chief
Financial Officer, or CFO, who has over 20 years of experience as a CFO, including supervisory responsibility over IT and cybersecurity functions.
Our VP of IT is responsible for hiring appropriate personnel, helping to integrate cybersecurity risk considerations into the Company’s overall risk
management strategy, and communicating key priorities to relevant personnel. Our VP of IT is also responsible for approving budgets, helping prepare for
cybersecurity incidents, approving cybersecurity processes, and reviewing security assessments and other security-related reports.
Our cybersecurity incident processes are designed to escalate certain cybersecurity incidents to members of management depending on the
circumstances, including our CFO, General Counsel, or GC, and Chief Executive Officer, or CEO. Our GC, CFO, and other leadership personnel work with
our incident response team to help assess impact and mitigate and remediate cybersecurity incidents of which they are notified, in addition to notifying the
audit committee of our board of directors, as appropriate.
Our board of directors’ audit committee receives annual reports from our CFO, concerning our significant cybersecurity threats and risk and the
processes the Company has implemented to address them. Our audit committee also has access to various reports, summaries or presentations related to
cybersecurity threats, risk and mitigation.
Item 2. Properties
Our headquarters is located in Waltham, Massachusetts, and consists of 12,000 square feet of leased office space under a lease that expires on
February 28, 2025. We also have 16,000 square feet of leased office space in New York, New York, under a lease that expires on August 31, 2025. 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 appropriate alternative space 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
PART II
no public market for our common stock.
Holders of Record
As of February 19, 2024, we had approximately 20 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 stockholder return on our common shares with the Nasdaq
Composite Index and the Nasdaq Biotechnology Index from December 31, 2018, through the year ended December 31, 2023. The graph assumes an
investment of $100 on December 31, 2018 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 our consolidated financial statements and related notes included
elsewhere in this Annual Report. This discussion and analysis and other parts of this Annual Report 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. You should carefully read the
“Risk Factors” section of this Annual Report 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, 2022 compared to the year ended December
31, 2021, 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 February 28, 2023.
Overview
We are a clinical-stage biopharmaceutical company developing an innovative pipeline of cancer therapies. Our two lead product candidates are
revumenib, and axatilimab. We are developing revumenib, a potent, selective, small molecule inhibitor of the menin-MLL binding interaction for the
treatment of KMT2A rearranged, or KMT2Ar, also known as mixed lineage leukemia rearranged or MLLr, acute leukemias including acute lymphoblastic
leukemia, or ALL, and acute myeloid leukemia, or AML, and necleophosmin 1, also known as NPM1, mutant AML. We are also exploring the use of
revumenib as a treatment in solid tumors, specifically its activity in metastatic colorectal cancer. We are developing axatilimab, a monoclonal antibody that
blocks the colony stimulating factor 1 receptor, or CSF-1, in chronic graft-versus-host disease, or cGVHD, as well as idiopathic pulmonary fibrosis, or IPF.
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. Except for 2021, we have not been profitable and have incurred
losses in each period since our inception in 2005. For the years ended December 31, 2023 and 2022, we reported a net loss of $209.4 million and $149.3
million, respectively. For the year ended December 31, 2021, we reported a net profit of $24.9 million. As of December 31, 2023, we had an accumulated
deficit of $902.4 million, which included non-cash charges for stock-based compensation, preferred stock accretion and extinguishment charges. As of
December 31, 2023, we had cash, cash equivalents and short-term and long-term investments of $600.5 million.
Significant Risks and Uncertainties
The current inflationary environment may materially affect our business and operating results by increasing the cost of our clinical trial materials and
supplies, driving the U.S. Federal Reserve system to increase interest rates, which in turn increased our overhead costs. Rising interest rates could make it
more difficult for us to obtain traditional financing on acceptable terms, if at all. Additionally, the ongoing recession risk together with the foregoing, could
result in further economic uncertainty and volatility in the capital markets in the near term and, as a result could negatively affect our operations.
Furthermore, such economic conditions have produced downward pressure on share prices. Although we do not believe that inflation has had a material
impact on our financial position or results of operations to date, additional high inflation could increase our operating costs, including our labor costs and
research and development costs. These costs may also be negatively impacted due to supply chain constraints, global geopolitical tensions as a result of the
ongoing war between Russia and Ukraine and the war in Israel, worsening macroeconomic conditions and employee availability and wage increases, which
may result in additional stress on our working capital.
Additionally, we are subject to other challenges and risks specific to our business and our ability to execute on our strategy, as well as risks and
uncertainties common to companies in the pharmaceutical industry with
61
development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of our late-
stage product candidate; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the
inherent uncertainty of clinical success; the challenges of protecting and enhancing our intellectual property rights; and complying with applicable
regulatory requirements.
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, have been solely
derived from our license, development and commercialization agreements with Kyowa Kirin Co., Ltd., or KKC, and with Incyte Corporation, or Incyte. We
generated no revenue during the years ended December 31, 2023 and 2022.
In September 2021, we entered into a collaboration and license agreement with Incyte or the Incyte Collaboration Agreement, with Incyte for the
worldwide development and commercialization of axatilimab. Additionally, in September 2021, we entered into a share purchase agreement with Incyte, or
the Incyte Share Purchase Agreement. Under the terms of the Incyte Collaboration 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. Incyte is responsible for 100% of future development costs for trials that are specific to ex-U.S. countries. All development
costs related to the collaboration will be subject to a joint development plan. In December 2021, we received an upfront cash payment of $117 million and
issued 1,421,523 shares of common stock for an aggregate purchase price of $35 million. 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.
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 (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 in the third quarter of 2021.
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:
•
•
•
•
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;
62
•
•
•
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 drug 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, research studies and
clinical trials of our product candidates. The duration, costs and timing of research studies and clinical trials of our product candidates will depend on a
variety of factors that include, but are not limited to, the following:
•
•
•
•
•
•
•
•
•
per patient costs;
the number of patients that participate;
the number of clinical trial sites;
the countries in which the 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.
Selling, General and Administrative
Selling, 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, human resources, business development and support functions. Other selling,
general and administrative expenses include facility-related costs not otherwise allocated to research and development expenses and accounting, tax, legal,
information technology and consulting services. We anticipate that our selling, general and administrative expenses will further increase in the future as we
continue to increase our headcount to support our continued research and development and anticipated commercialization of our product candidates.
Additionally, in anticipation of expected regulatory approvals of the our drug candidates, we expect an increase in employee-related expenses and other
commercial expenses in 2024 as a result of our preparation for the commercial launch, especially as it relates to the sales and marketing of our drug product
candidates.
63
Interest Expense
Interest expense consists primarily of interest expense on our operational and capital leases and in prior years consisted of our term loan, which was
paid off in 2022.
Interest Income
Interest income consists of income earned on our cash, cash equivalents and short and long-term investment balances.
Other (Expense) Income, net
Other (expense) income net includes income (expense), net consisting of revaluation of foreign currency related to trade payables.
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 "Summary of Significant Accounting Policies" (Note 3) to our
audited consolidated financial statements included in this Annual Report, 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
The preparation of our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in
the United States, or U.S. GAAP, requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities,
equity, revenue and expense and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and
assumptions. 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. Other significant accounting policies are outlined in "Summary of Significant Accounting Policies" (Note 3) to our
consolidated financial statements included in this Annual Report.
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 we expect to receive in exchange for transferring products or services to a
customer, or the 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.
64
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.
As of December 31, 2021, we recorded revenue of $126.6 million relating to the Incyte Collaboration Agreement and $13.3 million relating to the
KKC Agreement. For the years ended December 31, 2023 and 2022, no revenue has been recognized relating to either agreement.
We applied significant judgment to our Incyte Collaboration 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 in the third quarter of 2021.
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 and prepaid clinical 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 study and trial costs 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.
65
Results of Operations
Comparison of the years ended December 31, 2023, 2022 and 2021:
(in thousands)
Revenues:
License fees
Total revenues
Operating expenses:
Research and development
Selling, general and administrative
Total operating expenses
(Loss) income from operations
Other income (expense):
Interest expense
Interest income
Other (expense) income
Total other income (expense)
Net (loss) income
Research and Development
2023
$
Years Ended
December 31,
2022
2023 - 2022 Increase
(Decrease)
2021
$
%
2022 - 2021 Increase
(Decrease)
$
%
$
-
-
-
-
$ 139,709
139,709
$
—
—
0 % $ (139,709 )
0 % (139,709 )
163,032
66,922
229,954
118,499
33,258
151,757
(229,954 )
(151,757 )
88,248
25,241
113,489
26,220
44,533
33,664
78,197
(78,197 )
30,251
38 %
8,017
101 %
38,268
52 %
52 % (177,977 )
(208 )
21,163
(361 )
(3,137 )
5,872
(316 )
(1,899 )
403
202
20,594
$ (209,360 )
2,419
$ (149,338 )
$
(1,294 )
24,926
2,929
15,291
(45 )
18,175
$ (60,022 )
(93 )%
(1,238 )
5,469
260 %
(518 )
14 %
3,713
751 %
40 % $ (174,264 )
(100 )%
(100 )%
34 %
32 %
34 %
(679 )%
65 %
1357 %
(256 )%
(287 )%
(699 )%
The following table summarizes the research and development expenses for the full years ended December 31, 2023, 2022 and 2021:
(in thousands)
Revumenib-related costs
Axatilimab-related costs
Other R&D programs
$
2023
64,122
32,114
5,441
Years Ended
December 31,
2022
47,315
$
$
33,318
6,328
Personnel cost and other expenses
Stock-based compensation
Total research and development expenses
47,208
14,147
$ 163,032
25,522
6,016
$ 118,499
$
2021
31,054
27,925
8,873
15,998
4,398
$
88,248
$
2023 - 2022 Increase
(Decrease)
2022 - 2021 Increase
(Decrease)
$
16,807
(1,204 )
(887 )
21,686
8,131
44,533
%
36 % $
(4 )%
(14 )%
85 %
135 %
38 % $
$
16,261
5,393
(2,545 )
9,524
1,618
30,251
%
52 %
19 %
(29 )%
60 %
37 %
34 %
For the year ended December 31, 2023, our total research and development expenses increased by $44.5 million or 38 % from the prior year. The
increase is primarily due to:
•
•
An increase in $16.8 million in revumenib related costs due to increases in expenses associated with registrational trials, the initiation of
frontline/combination trials, clinical diagnostic test development costs, and regulatory expenses associated with New Drug Applications, or
NDA, submission.
A decrease of $1.2 million in axatilimab-related costs is due to lower registrational trial costs, lower costs for the IPF trial that were driven by
start-up costs in 2022, and lower CMC-related expenses, net of expense reimbursement from Incyte, our co-development partner, of $12.3
million in 2023 and $25.9 million in 2022.
66
•
An increase of $29.8 million in personnel costs, including non-cash stock-based compensation, and other expenses related to increases in
headcount to support of on-going clinical trials and regulatory expenses, NDA activities and related expenses and overhead expenses (e.g.
information technology and facilities).
The following table summarizes the internal and external research and development expenses for the full years ended December 31, 2023 and 2022:
(in thousands)
External research and development expenses
Internal research and development expenses
Total research and development expenses
Years Ended
December 31,
Increase
(Decrease)
2023
2022
$
%
$
$
105,978
57,054
163,032
$
$
89,788
28,711
118,499
$
$
16,190
28,343
44,533
18 %
99 %
38 %
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.
Selling, General and Administrative
The following table summarizes the selling, general and administrative expenses for the full years ended December 31, 2023, 2022 and 2021:
(in thousands)
Commercial related expenses
Other SG&A expenses
Personnel cost and other expenses
Stock-based compensation
Total selling, general and administrative
expenses
$
2023
13,115
14,105
22,898
16,804
Years Ended
December 31,
2022
2021
$
2,116
$
356
$
9,838
11,301
10,003
9,697
6,269
8,919
2023 - 2022 Increase
(Decrease)
2022 - 2021 Increase
(Decrease)
$
10,999
4,267
11,597
6,801
%
520 % $
43 %
103 %
68 %
$
1,760
141
5,032
1,084
%
494 %
1 %
80 %
12 %
$
66,922
$
33,258
$
25,241
$
33,664
101 % $
8,017
32 %
For the year ended December 31, 2023, our total selling, general and administrative expenses increased by $33.7 million, or 101%, from the prior
year. The increase primarily is due to:
•
•
•
An increase of $11.0 million in commercialization activities for the revumenib and axatilimab programs.
An increase of $4.3 million related to increases in rent, information technology, human resources and legal related expenses.
An increase of $18.4 million in personnel costs, including non-cash stock-based compensation, and related costs related to increases in
headcount to support a growing research and development organization and preparation for commercial launch.
67
Interest Expense and Income
For the year end December 31, 2023, interest expense decreased by $2.9 million, or 93%, from the prior year. The decrease is primarily due to the
elimination of interest expense related to the amended loan agreement by and between the Company and Hercules, which was terminated in September
2022.
For the year ended December 31, 2023, interest income increased by $15.3 million, or 260%, from the prior year. This increase was primarily due to
higher interest rates and increased average balance on cash equivalents and short and long-term investments.
Other (Expense) Income, net
For the year ended December 31, 2023, the total other (expense) income, net increased from the comparable period in the prior year primarily due to
an increase in revaluation of foreign currency related to trade payables.
Liquidity and Capital Resources
Overview
As of December 31, 2023, we had cash, cash equivalents and short-term and long-term investments totaling $600.5 million. Since our inception, our
operations have been primarily financed by net proceeds from our public stock offerings, and revenue from our license agreements. We believe that our
cash, cash equivalents and short and long-term investments as of December 31, 2023, 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, short and long-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
In February 2020, we entered into a loan and security agreement, with Hercules, as amended in December 2021, which we refer to as the Amended
Loan Agreement. We terminated the Amended Loan Agreement in September 2022. On September 23, 2022, we made a prepayment of $21.5 million to
satisfy in full all of our principal and interest obligations and related fees under the Amended Loan Agreement. The payoff amount paid by us in connection
with the termination of the Amended Loan Agreement was pursuant to a payoff letter with Hercules and included payment of (a) $1.0 million as an end-of
term fee and (b) $0.4 million as a pre-payment fee. Hercules released all security interests held on our assets.
For additional details on our Amended Loan Agreement, see "Loan Payable" (Note 14) to our consolidated financial statements in this Annual
Report.
Future Funding Requirements
We believe that our available cash, cash equivalents, short-term and long-term investments 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.
68
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;
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 either candidate receives regulatory
approval and we determine, in the case of revumenib to commercialize it ourselves, or in the case of axatilimab to co-commercialize it with
Incyte;
the costs of acquiring, licensing or investing in additional businesses, products, product candidates and technologies;
the interruption of key clinical trial activities, such as clinical trial site monitoring;
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, 2023, 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)
Operating leases for office space
Capital lease for office equipment
(1)
(2)
Total
Less than
1 Year
1 to 3
Years
3 to 5
Years
More than
5 Years
$
$
1,802
26
1,828
$
$
1,196
14
1,210
$
$
606
12
618
$
$
—
—
—
$
$
—
—
—
(1)
In August 2021, we signed a 36-month extension of the lease for the office space in Waltham, MA. In August 2022, we signed a 36-month extension
of the lease for the office space in New York, NY. In May 2023, we
69
(2)
signed a 27-month lease for an additional space in New York, NY. The minimum lease payments above do not include any related common area
maintenance charges or real estate taxes.
In January 2022, we entered into two four-year non-cancelable leases for office equipment. In June 2023, we entered into one two-year non-
cancelable lease for office equipment. All three leases are accounted for as a capital lease. The leased assets are 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, 2023, we had an accumulated deficit of $902.4 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 selling, 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 TD Cowen, under which we could, from time to time, issue
and sell shares of our common stock having aggregate sales proceeds of up to $75.0 million, in a series of one or more at-the-market, or ATM, equity
offerings, or the 2021 ATM Program. On May 26, 2023, we terminated the 2021 ATM Program. Prior to termination, we sold shares under the 2021 ATM
Program for aggregate net proceeds of approximately $25.0 million.
In May 2023, we entered into a new sales agreement with TD Cowen under which we could, from time to time, issue and sell shares of our common
stock having aggregate sales proceeds of up to $200.0 million, in a series of one or more ATM equity offerings, or the 2023 ATM Program. TD Cowen is
not required to sell any specific share amounts but acts as the Company’s sales agent, using commercially reasonable efforts consistent with its normal
trading and sales practices. Pursuant to the sales agreement, shares will be sold under the shelf registration statement on Form S-3ASR (Registration No.
333-254661), which became automatically effective upon the 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, 2023, we sold 2,719,744 shares of common stock under the 2023 ATM Program for
net proceeds of approximately $42.1 million.
Cash Flows
The following is a summary of cash flows:
(in thousands)
Net cash (used in) provided by operating activities
Net cash provided by (used in) investing activities
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Net Cash (Used in) Provided by Operating Activities
Years Ended December 31,
2023
(160,601 ) $
117,609
264,132
221,140
$
2022
(133,675 ) $
(186,188 )
172,254
(147,609 ) $
2021
29,131
(40,873 )
118,464
106,722
$
$
Net cash used in operating activities for the year ended December 31, 2023, was $160.6 million and primarily consisted of our net loss of $209.4
million adjusted for non-cash items including stock-based compensation of $31.0 million, an investment increase of $14.8 million, a net increase in
operating assets and liabilities of $32.0 million and non-cash operating lease expense of $0.7 million. The significant items in the increase in operating
assets and
70
liabilities include an increase in accrued expenses and other liabilities of $14.9 million, an increase in collaboration payable of $10.7 million, an increase in
accounts payable of $5.7 million, and an increase in prepaid expenses and other assets of $0.7 million.
Net cash used in operating activities for the year ended December 31, 2022 was $133.7 million and primarily consisted of our net loss of $149.3
million adjusted for non-cash items including stock-based compensation of $16.0 million, an investment increase of $3.4 million, a net increase in
operating assets and liabilities of $1.7 million, an increase in interest expense associated with the term loan of $1.1 million, and non-cash operating lease
expense of $0.4 million. The significant items in the increase in operating assets and liabilities include an increase in accrued expenses and other liabilities
of $9.4 million, an increase in collaboration receivable of $3.5 million, partially offset by a decrease in prepaid expenses and other assets of $3.0 million,
and a decrease in accounts payable of $1.3 million.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by in investing activities for the year ended December 31, 2023 was $117.6 million and was due to $472.2 million in proceeds
from the maturities of available-for-sale marketable securities, partially offset by the purchase of $354.6 million of available-for-sale marketable securities.
Net cash used in investing activities for the year ended December 31, 2022, was $186.2 million and was primarily due to the purchase of $495.3
million of available-for-sale marketable securities partially offset by $308.9 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, 2023, was $264.1 million and was primarily due to proceeds of $215.9
million from the issuance of common stock in a follow-up offering, $42.1 million from the issuance of common in at-the-market offering, and $6.0 million
of proceeds from the stock option exercises and ESPP purchases.
Net cash provided by financing activities for the year ended December 31, 2022, was $172.3 million and was primarily due proceeds of $162.0
million from the issuance of common stock in a public offering, $19.4 million of proceeds from at-the-market offerings, and $11.9 million of proceeds from
the stock option exercises and ESPP purchases, partially offset by payment on the term loan of $21.0 million.
Net Operating Loss and Research and Development Tax Credit Carryforwards
At December 31, 2023, we had federal and state tax net operating loss carryforwards, or NOLs, of approximately $136.4 million and $63.5 million,
respectively. We have generated federal NOLs of $114.3 million and state NOLs of $0.9 million which have an indefinite carryforward period. The
remaining $22.1 million of federal NOLs and the $62.6 million of state NOLs will begin to expire at various dates starting in 2026. At December 31, 2023,
we had available income tax credits of approximately $12.7 million, with $8.9 million attributable to Federal R&D Credits and $3.8 million attributable to
state R&D Credits, which are available to reduce future income taxes, if any. These income tax credits began to expire in 2024.
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, 2023, we had cash, cash equivalents and short-term and long-term investments of $600.5 million, consisting of overnight
investments, interest-bearing money market funds and highly rated federal bonds and short and long-term investments including 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
71
to ensure liquidity and to preserve principal while at the same time maximizing the interest 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 relative short-term maturities of our cash equivalents and the low risk profile of our short and long-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 and long-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 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, 2023. 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 an evaluation of our
disclosure controls and procedures as of December 31, 2023, our principal 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 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, 2023. 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
72
that assessment, our management concluded that, as of December 31, 2023, 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, 2023, 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, 2023 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, 2023,
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, 2023, 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, 2023, of the Company and our report dated February 27, 2024, 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.
73
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
February 27, 2024
Item 9B. Other Information
Change in Control Arrangements
On February 27, 2024, several of our named executive officers entered into amendments to their employment agreements providing, in part, for
increases in their change in control benefits. For Mr. Metzger, in the event of an involuntary termination without cause or resignation for good reason
within three (3) months prior to, or within twelve (12) months following, a change in control, he will receive (i) an amount equal to 24 months of base
salary, payable in a lump sum, (ii) an amount equal to 24 months of the target annual incentive award, payable in a lump sum, and (iii) continuation of
health benefits for 24 months. For Drs. Gallagher and Madigan and Messrs. Albrecht and Goldan, in the event of an involuntary termination without cause
or resignation for good reason within three (3) months prior to, or within twelve (12) months following, a change in control, each will receive (i) an amount
equal to 18 months of base salary, payable in a lump sum, (ii) an amount equal to 18 months of the target annual incentive award, payable in a lump sum,
and (iii) continuation of health benefits for 18 months.
Trading Arrangements
During our last fiscal quarter, none of our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule
10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408 for the purchase or sale of our securities,
except as set forth below:
Name and Title
Michael Metzger - Chief
Executive Officer and
Director
Briggs W. Morrison,
M.D. - Director
(1)
(1)
Type of Plan
Rule 10b5-1 trading
arrangement
Rule 10b5-1 trading
arrangement
Adoption Date
01/05/2023
Duration or End
Date
12/22/2023
Aggregate Number of
Securities to be Sold
Description of Trading
Arrangement
100,000 Sales of shares intended to satisfy
the affirmative defense of Rule
10b5–1(c)
02/09/2023
12/06/2023
466,167 Sales of shares intended to satisfy
the affirmative
74
(1) Termination of Rule 10b5-1 trading arrangement, each of which the reporting person terminated prior to the sale of all plan securities.
defense of Rule 10b5–1(c)
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable
75
PART III
Certain information required by Part III is omitted from this Annual Report because we will file with the SEC a definitive proxy statement pursuant
to Regulation 14A, or the 2024 Proxy Statement, no later than 120 days after the end of our fiscal year ended December 31, 2023, and certain information
included therein is incorporated herein by reference.
Item 10. Directors, Executive Officers, and Corporate Governance
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 2024
Proxy Statement.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the information set forth in the sections titled "Compensation Discussion and
Analysis", “Executive Officer” and “Director Compensation”, "Pay Versus Performance" and "The Board of Directors and its Committees-Compensation
Committee Interlocks and Insider Participation" in our 2024 Proxy Statement.
Information regarding our Code of Business Conduct and Ethics, or the Code of Conduct, required by this item will be contained in our 2024 Proxy
Statement under the caption “The Board of Directors and Its Committees – Code of Business Conduct and Ethics,” and is hereby incorporated by reference.
If we make any substantive amendments to the Code of Conduct or grants any waiver from a provision of the Code of Conduct to any executive officer or
director, we will promptly disclose the nature of the amendment or waiver on its website. The full text of our Code of Conduct is available at the investors
section of our website at www.syndax.com. The reference to our website address does not constitute incorporation by reference of the information
contained at or available through our website, and you should not consider it to be a part of this Annual Report.
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” and "Securities Authorized for Issuance Under Equity Compensation Plans" in our
2024 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 sections titled “The Board of Directors and Its
Committees – Board Independence” and “Certain Relationships and Related Party Transactions” in our 2024 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 sections titled “Independent Registered Public
Accounting Firm Fees” and “Pre-Approval Policies and Procedures” contained in Proposal 3 in our 2024 Proxy Statement.
76
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements.
PART IV
Report of Independent Registered Public Accounting Firm (PCAOB ID 34)
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules.
Pages
F-2
F-4
F-5
F-6
F-7
F-8
F-10
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
3.3
4.1
4.2
4.3
10.1*
10.2*
10.3*
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).
Certificate of Amendment to the 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 May 18, 2023).
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 issued pursuant to the securities purchase agreement between the Company and Certain Purchasers, dated
December 16, 2021 (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 December 17, 2021).
Description of Capital Stock.
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).
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).
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).
77
Exhibit
No.
Description
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 4.13 to the
Company’s Registration Statement on Form S-8 (File No. 333-210412), 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 March 25, 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*
10.16*
10.17*
10.18*
10.19*
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).
Syndax Pharmaceuticals, Inc. 2023 Inducement Plan.
Form of Option Agreement pursuant to the Syndax Pharmaceuticals, Inc. 2023 Inducement Plan (incorporated herein by reference to
Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-37708), as filed with the SEC on February 8, 2023).
Form of Restricted Stock Unit Agreement pursuant to the Syndax Pharmaceuticals, Inc. 2023 Inducement Plan (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 8,
2023).
Amended and Restated Executive Employment Agreement by and between the Company and Michael A. Metzger, dated as of February
2, 2022 (incorporated herein by reference to Exhibit 10.17 to the
78
Exhibit
No.
Description
Company's Annual Report on Form 10-K (File No. 001-37708), as filed with the SEC on March 1, 2022).
10.20*
Amendment to Amended and Restated Executive Employment by and between the Company and Michael A. Metzger, dated as of
February 26, 2024.
10.21*
Amended and Restated Executive Employment Agreement by and between the Company and Briggs W. Morrison, M.D., dated as of
February 2, 2022 (incorporated herein by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K (File No. 001-
37708), as filed with the SEC on March 1, 2022).
10.22*
Amended and Restated Executive Employment Agreement by and between the Company and Luke J. Albrecht, dated as of April 27,
2020.
10.23*
Amendment to Amended and Restated Executive Employment by and between the Company and Luke J. Albrecht, dated as of February
26, 2024.
10.24*
Executive Employment Agreement by and between the Company and Catherine Madigan, M.D., dated as of March 1, 2022
(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 9, 2022).
10.25*
10.26*
10.27*
10.28*
10.29*
Amendment to Executive Employment by and between the Company and Catherine Madigan, M.D., dated as of February 26, 2024.
Executive Employment Agreement by and between the Company and Keith A. Goldan, dated as of June 8, 2022 (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 June 13, 2022).
Amendment to Executive Employment by and between the Company and Keith A. Goldan, dated as of February 26, 2024.
Executive Employment Agreement by and between the Company and Steve M. Sabus, dated as of December 1, 2022 (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
December 5, 2022).
Executive Employment Agreement by and between the Company and Neil Gallagher, M.D., Ph.D., dated as of March 30, 2023
(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 March 30, 2023).
10.30*
Amendment to Executive Employment by and between the Company and Neil Gallagher, M.D., Ph.D., dated as of February 26, 2024.
10.31*
10.32*
10.33†
10.34†
10.35
Non-employee Director Compensation Policy, as amended, dated as of February 7, 2024.
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).
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).
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
79
Exhibit
No.
10.36†
10.37†
10.38†
10.39†
Description
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).
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).
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).
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).
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).
10.40†
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).
10.41†
Mutual Release and Settlement Agreement by and between the Company and UCB Biopharma SRL, dated as of June 6, 2022
(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 8, 2022).
10.42†
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).
10.43†
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).
10.44†
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).
10.45
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).
21.1
23.1
24.1
31.1
31.2
Subsidiaries of the Registrant (incorporated herein by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K (File
No. 001-37708), as filed with the SEC on February 28, 2023).
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.
80
Exhibit
No.
Description
97
Incentive Compensation Recoupment Policy.
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.
SIGNATURES
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.
Date: February 27, 2024
SYNDAX PHARMACEUTICALS, INC.
/s/ Michael A. Metzger
By:
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
Title
Date
81
/s/ Michael A. Metzger
Michael A. Metzger
/s/ Keith Goldan
Keith Goldan
/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.
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
February 27, 2024
February 27, 2024
Chairman of the Board of Directors
February 27, 2024
Director
Director
Director
Director
Director
Director
82
February 27, 2024
February 27, 2024
February 27, 2024
February 27, 2024
February 27, 2024
February 27, 2024
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, 2023 and 2022
Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021
Notes to Consolidated Financial Statements
Pages
F-2
F-4
F-5
F-6
F-7
F-8
F-10
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,
2023 and 2022, the related consolidated statements of operations, comprehensive (loss) income, stockholders' equity, and cash flows, for each of the three
years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, 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 February 27, 2024, 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.
Prepaid and Accrued Clinical Costs— Refer to Notes 3 and 11 to the financial statements
Critical Audit Matter Description
The Company recognizes research and development expenses as incurred, which include costs relating to clinical trial and clinical study activities
performed by the CROs. Expenses related to clinical trials and studies are based on estimates of the services received and efforts expended pursuant to
contracts with each of the contract research organizations (“CROs”). Tracking the progress of the clinical study and trial activities, including payments
made by
F-2
the Company and by the CROs, allows the Company to record the appropriate expense, prepayments, and accruals under the terms of the agreements with
the CROs.
We identified the estimates for research and development accrued and prepaid CRO expenses, including costs incurred by CROs as a critical audit matter
due to the judgments necessary for management to estimate the level of services provided and the costs incurred for the service when the Company has not
yet been invoiced or otherwise notified of actual costs. Prepaid CRO expenses are recorded within the balance of short-term deposits on the consolidated
balance sheet, while accrued CRO expenses are recorded within the balance of accrued expenses and other current liabilities on the consolidated balance
sheet. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to audit management's estimates
of such accrued and prepaid CRO expenses.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to prepaid and accrued clinical costs included the following, among others:
• We tested the effectiveness of internal controls over the estimation of accrued CRO and prepaid CRO expense calculations, including
management’s controls over the assessment and estimation of the costs incurred for significant research and development activities performed by
CROs.
•
For a sample of contracts, we read the related contracts, purchase orders, statements of work and other contractual documentation. We tested the
completeness and accuracy of the information used to develop the estimates and evaluated the significant assumptions used by management to
estimate the recorded amounts by performing the following:
o
o
o
o
Performed corroborating inquiries with the Company’s research and development personnel to understand the nature and progress of
the studies conducted by the CROs.
Inspected information from third-party service provider CRO.
Obtained corresponding invoices and evidence of payment to third-party service provider CROs.
Compared the estimated accrual balance as of December 31, 2023, to the invoices received after year-end to evaluate the Company’s
ability to estimate the accrual.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 27, 2024
We have served as the Company’s auditor since 2008.
F-3
SYNDAX PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Short-term deposits
Collaboration receivable, net
Prepaid expenses and other current assets
Total current assets
Long-term investments
Property and equipment, net
Right-of-use asset
Restricted cash
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Collaboration payable, net
Accrued expenses and other current liabilities
Current portion of right-of-use liability
Current portion of capital lease
Total current liabilities
Long-term liabilities:
Right-of-use liability, less current portion
Capital lease, less current portion
Total long-term liabilities
Total liabilities
Commitments and contingencies (Note 16)
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized;
0 shares outstanding at December 31, 2023 and December 31, 2022
Common stock, $0.0001 par value, 200,000,000 and 100,000,000 shares authorized at December
31, 2023 and December 31, 2022, respectively;
84,826,632 and 68,111,385 shares outstanding at December 31, 2023 and December 31, 2022,
respectively
Additional paid-in capital
Accumulated other comprehensive income (loss)
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$
December 31,
2023
2022
$
$
$
295,394
275,304
6,885
—
3,293
580,876
29,829
8
1,487
217
463
612,880
9,961
7,232
39,856
1,035
12
58,096
578
10
588
58,684
74,356
401,446
8,595
3,474
1,915
489,786
5,469
20
1,039
115
807
497,236
4,350
—
24,276
434
5
29,065
709
13
722
29,787
—
—
8
1,456,370
218
(902,400 )
554,196
612,880
$
7
1,161,288
(806 )
(693,040 )
467,449
497,236
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
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
Selling, general and administrative
Total operating expenses
(Loss) income from operations
Other income (expense):
Interest expense
Interest income
Other (expense) income, net
Total other income (expense)
Net (loss) income
Net (loss) income attributable to common stockholders
Net (loss) income Per Share:
Basic (loss) earnings per share attributable to common stockholders
Diluted (loss) earnings per share attributable to common stockholders
Weighted-average common shares used in calculating:
Basic (loss) earnings per share attributable to common stockholders
Diluted (loss) earnings per share attributable to common stockholders
Years Ended December 31,
2022
2023
2021
$
— $
—
— $
—
139,709
139,709
163,032
66,922
229,954
(229,954 )
118,499
33,258
151,757
(151,757 )
(208 )
21,163
(361 )
20,594
(3,137 )
5,872
(316 )
2,419
$
$
(209,360 ) $ (149,338 ) $
(209,360 ) $ (149,338 ) $
88,248
25,241
113,489
26,220
(1,899 )
403
202
(1,294 )
24,926
24,926
$
$
(2.98 ) $
(2.98 ) $
(2.46 ) $
(2.46 ) $
0.48
0.46
70,370,519
70,370,519
60,760,906
60,760,906
52,064,809
53,622,904
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SYNDAX PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands)
Net (loss) income
Other comprehensive gain (loss):
Unrealized gain (loss) on marketable securities, net of tax
Comprehensive (loss) income
Years Ended December 31,
2022
2023
$ (209,360 ) $ (149,338 ) $
1,024
(851 )
$ (208,336 ) $ (150,189 ) $
2021
24,926
49
24,975
The accompanying notes are an integral part of these consolidated financial statements.
F-6
SYNDAX PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ EQUITY
(In thousands, except share and per share data)
Common Stock
$0.0001
Par Value
Additional
Paid-In
Amount
Capital
Balance—January 1, 2021
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 cashless exercise
Proceeds from Incyte Share Purchase Agreement
Stock-based compensation expense
Unrealized gain on investments
Vesting of RSU
Employee withholdings ESPP
Proceeds from exercise of stock options
Net income
Balance—December 31, 2021
Proceeds from at-the-market offering, net of $600
offering expenses
Proceeds from direct offering, net of $10,535 offering expenses
Stock purchase under ESPP
Pre-funded warrant cashless exercise
Stock-based compensation expense
Vesting of RSU
Unrealized loss on investments
Employee withholdings ESPP
Proceeds from exercise of stock options
Net loss
Balance—December 31, 2022
Proceeds from direct offering, net of $14,044 offering expenses
Proceeds from at-the-market offerings, net of $1,086 offering expense
Stock-based compensation expense
Unrealized gain on investments
Stock purchase under ESPP
Employee withholdings ESPP
Pre-funded warrant cashless exercise
Vesting of RSU
Proceeds from exercise of stock options
Net loss
Balance—December 31, 2023
Shares
47,881,223
$
277,629
3,802,144
26,878
725,784
1,421,523
—
—
5,500
—
842,424
—
54,983,105
1,111,111
7,840,909
28,999
2,832,151
—
38,749
—
—
1,276,361
—
68,111,385
12,432,431
2,719,744
—
—
34,797
—
857,131
9,102
662,042
—
84,826,632
$
$
Accumulated
Other
Comprehensi
ve
(Loss)
Income
Accumulated
Total
Stockholders'
Equity
Deficit
(Deficit)
5
$
820,815
$
(4 )
$
(568,628 )
$
252,188
—
1
—
—
—
—
—
—
—
—
—
6
—
1
—
—
—
—
—
—
—
—
7
1
—
—
—
—
—
—
—
—
—
8
$
$
$
5,131
81,205
—
—
24,848
13,317
—
—
367
6,336
—
952,019
19,425
161,965
—
—
16,019
—
—
401
11,459
—
1,161,288
215,954
42,139
30,951
—
—
910
—
—
5,128
—
1,456,370
$
$
$
—
—
—
—
—
—
49
—
—
—
—
45
—
—
—
—
—
—
(851 )
—
—
—
(806 )
—
—
—
1,024
—
—
—
—
—
—
218
$
$
$
—
—
—
—
—
—
—
—
—
—
24,926
(543,702 )
$
—
—
—
—
—
—
—
$
—
(149,338 )
(693,040 )
—
—
—
—
—
—
—
—
—
(209,360 )
(902,400 ) $
5,131
81,206
—
—
24,848
13,317
49
—
367
6,336
24,926
408,368
19,425
161,966
—
—
16,019
—
(851 )
401
11,459
(149,338 )
467,449
215,955
42,139
30,951
1,024
—
910
—
—
5,128
(209,360 )
554,196
The accompanying notes are an integral part of these consolidated financial statements.
F-7
SYNDAX PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
2023
Years Ended December 31,
2022
2021
$
(209,360 )
$
(149,338 )
$
24,926
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income
Adjustments to reconcile net loss to net cash provided (used in) provided by
operating activities:
Depreciation
(Accretion) amortization of investments
Non-cash operating lease expense
Non-cash interest income (expense)
Changes in fair value of derivative liability
Stock-based compensation
Other
Changes in operating assets and liabilities:
Prepaid expenses and other assets
Collaboration payable/receivable, net
Accounts payable
Deferred revenue
Accrued expenses and other liabilities
Net cash (used in) provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
Proceeds from sales of equipment
Purchases of short and long-term investments
Proceeds from sales and maturities of short-term investments
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
12
(14,803 )
739
—
—
30,951
—
676
10,706
5,611
—
14,867
(160,601 )
—
—
(354,606 )
472,215
117,609
33
(3,382 )
421
1,103
(187 )
16,019
—
(2,972 )
(3,474 )
(1,319 )
—
9,421
(133,675 )
—
225
(495,346 )
308,933
(186,188 )
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
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
Payment on term loan
Proceeds from ESPP
Proceeds from stock option exercises
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
215,955
161,965
42,139
—
—
—
910
5,128
264,132
221,140
74,471
295,611
$
19,425
—
—
(20,996 )
401
11,459
172,254
(147,609 )
222,080
74,471
$
$
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
Cash, cash equivalents and restricted cash
2023
Years Ended December 31,
2022
(In thousands)
2021
$
$
295,394 $
217
295,611 $
74,356 $
115
74,471 $
221,965
115
222,080
Supplemental disclosures of cash flow information (Note 17).
F-8
The accompanying notes are an integral part of these consolidated financial statements.
F-9
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's two lead product candidates are revumenib and axatilimab. The Company is developing revumenib, a potent, selective,
small molecule inhibitor of the menin-MLL binding interaction for the treatment of KMT2A rearranged, (“KMT2Ar”), also known as mixed lineage
leukemia rearranged, (“MLLr”), acute leukemias including acute lymphoblastic leukemia, (“ALL”), and acute myeloid leukemia, or AML, and
nucleophosmin 1, also known as NPM1, mutant AML. The Company is also exploring the use of revumenib as a treatment in solid tumors, specifically its
activity in metastatic colorectal cancer. The Company is developing axatilimab, a monoclonal antibody that blocks the colony stimulating factor 1 receptor,
(“CSF-1R”), in chronic graft-versus-host disease, (“cGVHD”), as well as idiopathic pulmonary fibrosis, (“IPF”). 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 therapeutics 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, 2023, should enable
the Company to maintain its planned operations for at least 12 months from the issuance date of these financial statements. 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 selling,
general and administrative activities.
The Company is subject to 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 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.
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”).
F-10
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 consolidated 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.
Marketable Securities
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.
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 and long-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 and long-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.
F-11
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.
Revenue Recognition
The Company recognizes revenue when its 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. The Company 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.
Licenses of Intellectual Property: Revenue from non-refundable, up-front fees allocated to the licenses related to the Company's intellectual
property, 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: The Company evaluates whether 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.
F-12
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 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, Collaborative Research 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 years ended December 31, 2023 and 2022, the Company has incurred
external costs related to Incyte cost-sharing collaboration. During the year ended December 31, 2021, the Company incurred no external costs related to
cost-sharing collaborations.
Clinical Costs
Clinical study and trial costs are a component of research and development expenses. The Company expenses clinical trial activities performed by
third parties based on an evaluation of the progress to completion of specific contract tasks using data such as patient enrollment, clinical site activations, or
other information provided to us by our vendors. Depending on the progression of the contract and timing of invoicing and payment the research and
development expense can be an accrued expense or a prepaid expense. Prepaid clinical study and trial costs are included in short-term deposits on the
accompanying consolidated balance sheet.
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.
F-13
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, Leases to these consolidated financial statements) 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, 2023, 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.
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.
(Loss) Earnings 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 financial statements or disclosures.
F-14
4. Collaborative Research and License Agreements
Incyte Collaboration
In September 2021, the Company entered into license and collaboration agreement (the "Incyte License and Collaboration Agreement") with Incyte
Corporation ("Incyte") covering the worldwide development and commercialization of axatilimab. Also, in September 2021 the Company entered into a
share purchase agreement with Incyte, ("Incyte Share Purchase Agreement" and together with Incyte License and Collaboration Agreement, 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. Each company will be
responsible for funding any of its own independent development activities. Incyte is responsible for 100% of future development costs for trials that are
specific to ex-U.S. countries. All development costs related to the collaboration with Incyte will be subject to a joint development plan.
Under the terms of the Incyte Agreements, in December 2021, Incyte paid the Company a non-refundable cash payment of $117.0 million and the
Company issued 1,421,523 shares of common stock with an aggregate purchase price of $35.0 million, or $24.62 per share. Additionally, under the terms of
the Incyte Agreements, the Company is eligible to receive up to $220.0 million in future contingent development and regulatory milestones and up to
$230.0 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.
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, under circumstances under which the upfront payment of $117 million would be returned to Incyte and a cash settlement
on the sale of the Company's common stock would be made to make the parties whole (the “Letter Agreement”). In connection with the closing of this
transaction in December 2021, the Company determined that the cash settlement feature of the Letter Agreement represented an embedded derivative
requiring bifurcation and separate accounting recognition at fair value. The Letter Agreement terminated in March 2022. Accordingly, the Company
initially allocated $0.6 million of the total consideration received to the derivative liability. As of December 31, 2022, the fair value of the derivative is
zero.
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 axatilimab 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 axatilimab represents the only performance obligation within the
scope of Topic 606. The license for axatilimab is considered functional
F-15
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 axatilimab 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 axatilimab 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 axatilimab.
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 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).
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.
As of December 31, 2023, the Company has recorded $2.2 million as a collaboration receivable due from Incyte related to the Company's
development and pre-commercialization costs under the Incyte Agreements and has recorded approximately $9.5 million as a collaboration payable due to
Incyte for development and pre-commercialization costs incurred by Incyte as of December 31, 2023. Both expenses and cost offset are recorded as part of
research and development and selling, general and administrative expense.
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
F-16
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 three existing long-term building leases under 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, MA, 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, MA 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, NY, which commenced on
January 1, 2016. In February 2021, the Company signed an 18-month extension to the lease for the New York office, which commenced on March 1, 2021.
In August 2022, the Company signed a 36-month extension to the lease for the New York office, with aggregate payments of $689,000, with a lease
commencement date of September 1, 2022.
In May 2023, the Company entered into a 27-month operating lease for an additional 12,217 square feet of space in New York, NY, with aggregate
payments of $1.6 million, with a lease commencement date of June 1, 2023.
The remaining lease terms as of December 31, 2023, for the facility in Waltham, MA and the two facilities in New York, NY, were 14 months and
20 months, respectively.
As of December 31, 2023, the consolidated balance sheet includes a $1.5 million operating lease ROU asset and a $1.6 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, 2023, the Company recorded approximately $743,000 in operating lease expense and made approximately $924,000 in lease payments.
Future minimum lease payments under the Company’s operating leases, were as follows:
Maturity of lease liabilities
(in thousands)
2024
2025
Thereafter
Total lease payments
Less: imputed interest
Total operating lease liability
As of
December 31, 2023
1,196
606
—
1,802
(189 )
1,613
$
$
$
Future minimum lease payments under the Company’s capital leases as of December 31, 2023 and 2022, were $25,864 and $22,441, respectively.
F-17
6. (Loss) Earnings per Share
Basic and diluted (loss) earnings per share are calculated as follows (in 000s):
Numerator:
Net (loss) income
Net (loss) income 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 (loss) earnings per share
2023
Years Ended December 31,
2022
2021
$
$
(209,360 ) $
(209,360 ) $
(149,338 ) $
(149,338 ) $
24,926
24,926
70,371
60,761
52,065
—
—
—
—
70,371
—
—
—
-
60,761
1,429
118
11
1,558
53,623
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares outstanding because such
securities have an antidilutive impact due to losses reported (in common stock equivalent shares, in 000s):
Options to purchase common
Non-vested RSUs
ESPP to purchase common stock
2023
10,685
309
35
December 31,
2022
2021
7,982
131
17
—
—
—
For additional information related to the Company's common stock see Note 12, Common Stock to these consolidated financial statements.
F-18
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. Since the inception of the agreement, the Company achieved certain development and regulatory milestones resulting in $8.0
million in expense, which included $2.0 million paid in the first quarter of 2023.
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, sublicensable, exclusive license to UCB6352, which the Company refers to as axatilimab, an Investigational
New Drug Application-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 axatilimab, 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
axatilimab, except that UCB is performing a limited set of transitional chemistry, manufacturing and control tasks related to axatilimab. 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-19
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. Since the start of the license agreement, the Company achieved certain development and regulatory milestones and has recorded $6.0 million as
research and development expense. Additionally, in connection with its most recent amendment of the UCB License Agreement, in the second quarter of
2022 the Company paid UCB $5.8 million, which is recognized as a milestone expense. In the fourth quarter of 2023, UCB achieved a development and
regulatory milestone resulting in a $10.0 million expense, which has been recorded in accrued expenses as of December 31, 2023. The Company paid the
amount to UCB in the first quarter of 2024.
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.
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
Total property and equipment
Accumulated depreciation
Property and equipment, net
December 31,
2023
2022
84
167
134
34
419
(411 )
8
$
$
84
167
134
34
419
(399 )
20
$
$
Depreciation expense was $12,000 and $33,000 for the years ended December 31, 2023 and 2022, respectively.
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.
F-20
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.
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, 2023
Assets:
Cash equivalents
Short-term investments
Long-term investments
Total assets
December 31, 2022
Assets:
Cash equivalents
Short-term investments
Long-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
$
$
$
$
295,394
275,304
29,829
600,527
74,356
401,446
5,469
481,271
$
$
$
$
295,394
—
—
295,394
59,496
—
—
59,496
$
$
$
$
—
275,304
29,829
305,133
$
$
14,860
401,446
5,469
421,775
$
$
—
—
—
—
—
—
—
—
There have been no material impairments of our assets measured and carried at fair value during the years ended December 31, 2023, and 2022. In
addition, there have been no changes in valuation techniques during the years ended December 31, 2023, and 2022. 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 and long-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 short-term and long-term investments are classified as available-for-sale securities. As of December 31, 2023, the remaining contractual
maturities of the available-for-sale securities were 1 to 15 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, 2023. 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, 2023, 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.
F-21
The following table summarizes the available-for-sale securities (in thousands):
December 31, 2023
Commercial paper
Corporate bonds
US Treasury
Federal bonds
December 31, 2022
Commercial paper
US Treasury
Federal bonds
Amortized
Cost
Unrealized
Gains
Unrealized
(Losses)
Fair
Value
$
$
$
$
160,657
47,150
68,111
28,998
304,916
321,630
64,759
36,192
422,581
$
$
$
$
149
62
46
—
257
—
—
—
—
$
$
$
$
—
—
—
(40 )
(40 )
(205 )
(566 )
(35 )
(806 )
$
$
$
$
160,806
47,212
68,157
28,958
305,133
321,425
64,193
36,157
421,775
10. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
Prepaid insurance
Interest receivable on investments
Prepaid subscriptions
Prepaid state and local taxes
Prepaid rent
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):
December 31,
2023
2022
$
$
$
807
1,227
769
264
163
63
3,293 $
Accrued clinical study and trial costs
Accrued compensation and related costs
Accrued professional fees
Accrued milestone costs
Other
Total accrued expense and other current liabilities
12. Common Stock
December 31,
2023
2022
$
$
16,346 $
11,172
1,450
10,000
888
39,856 $
692
583
446
3
74
117
1,915
14,375
5,945
1,352
2,000
604
24,276
The Company is authorized to issue 200,000,000 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 sales agreement with Cowen and Company, LLC, or TD Cowen, under which the Company could, from
time to time, issue and sell shares of its common stock having aggregate sales proceeds of up to $75.0 million, in a series of one or more at-the-market, or
ATM, equity offerings, or the 2021
F-22
ATM Program. On May 26, 2023, the Company terminated the 2021 ATM Program. Prior to termination the Company sold shares under the 2021 ATM
Program for net proceeds of approximately $25.0 million.
In May 2023, the Company entered into a new sales agreement with TD Cowen under which the Company could, from time to time, issue and sell
shares of its common stock having aggregate sales proceeds of up to $200.0 million, in a series of one or more ATM equity offerings, or the 2023 ATM
Program. TD Cowen is not required to sell any specific share amounts but acts as the Company’s sales agent, using commercially reasonable efforts
consistent with its normal trading and sales practices. Pursuant to the new sales agreement, shares will be sold pursuant to the previous 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 the sale, and as a result, prices may vary. In the year ended December 31, 2023, the Company
sold 2,719,744 common shares of common stock under the 2023 ATM Program, with net proceeds of approximately $42.1 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. On
January 24, 2023, 86,000 pre-funded warrants were exercised for 85,998 shares of common stock, under a cashless exercise. On April 12, 2023, 273,000
pre-funded warrants were exercised for 272,996 shares of common stock, under a cashless exercise. On May 9, 2023, 498,142 pre-funded warrants were
exercised for 498,137 shares of common stock, under a cashless exercise. As of December 31, 2023, 285,714 pre-funded warrants were considered issued
and outstanding.
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.
In December 2022, the Company issued 7,840,909 shares of common stock. The offering price for the securities was $22.00 per share, with gross
proceeds of approximately $172.5 million, offset by $10.5 million of issuance cost.
In December 2023, the Company issued 12,432,431 shares of common stock. The offering price for the securities was $18.50 per share, with gross
proceeds of approximately $230.0 million, offset by $14.0 million of issuance cost.
The Company has reserved for future issuance the following shares of common stock pursuant to the following outstanding securities or equity
plans:
Common stock issuable under pre-funded warrants
At-the-market program
RSUs and Options to purchase common stock
Equity plans
2015 Employee Stock Purchase Plan (the “ESPP”)
Total
December 31, 2023
285,714
7,280,256
11,204,294
3,403,382
1,732,614
23,906,260
F-23
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 remain
outstanding and continue to govern the terms of any equity grants that remain outstanding under the 2007 Plan. 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. 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, 2024, the shares available for issuance
under the 2015 was increased to 3,393,065.
In February 2023, the Company's board of directors adopted its 2023 Inducement Plan (the “2023 Inducement Plan”), which became effective
March 1, 2023. The 2023 Inducement Plan allows for the granting of nonqualified stock options, restricted stock units, and other awards under the 2023
Inducement Plan to persons not previously an employee or director of the Company, or following a bona fide period of non-employment, an inducement
material to such persons entering into employment with the Company. The Company initially reserved 1,900,000 shares of its common stock for the
issuance of awards under the 2023 Inducement Plan. On December 6, 2023, the Company's board of directors increased the reserve by 1,100,000 shares.
As of December 31, 2023, there were 2,191,732 shares available for issuance under the 2015 Plan and 1,211,650 shares available for issuance under
the 2023 Inducement Plan.
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
Selling, general and administrative
Total
Stock Options and Restricted Stock Units
2023
Years Ended December 31,
2022
2021
$
$
14,147
16,804
30,951
$
$
6,016
10,003
16,019
$
$
4,398
8,919
13,317
As of December 31, 2023, there was $74.8 million of unrecognized compensation cost related to employee and non-employee unvested stock
options and RSUs granted under the 2015 Plan and the 2023 Inducement Plan, 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.
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.
F-24
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. In the fourth quarter
of 2020, one performance milestone, for the 2019 Performance Awards, was achieved. The Company recorded approximately $128,000 of stock
compensation related to the achievement of the performance milestone for years ended December 31, 2022. As of December 31, 2022, all other
performance milestones were not achieved, and the associated awards have been cancelled.
In 2022, the Company granted to certain employees 140,000 performance-based stock options (“2022 Performance Awards”), primarily related to
the achievement of certain 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 first quarter of 2022, management estimated one of the milestones, for the 2022 Performance Awards, was probable of achievement. The
Company recorded approximately $258,000 and $479,000 of stock compensation expense for these awards for the year ended December 31, 2023 and
2022, respectively. As of December 31, 2023, 140,000 stock options outstanding were unvested, and no options had been cancelled.
In the first quarter of 2023, the Company granted to certain employees 129,550 performance-based RSUs, primarily related to the achievement of
certain regulatory development milestones related to product candidates. Recognition of stock-based compensation expense associated with these
performance-based RSUs 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 October 2021, in connection with the retirement of two employees, the Company entered into severance and consulting agreements. Under these
agreements the Company extended the vesting term for an aggregate of 34,728 unvested options, which would not have otherwise vested and extended the
exercise period of the vested 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 the Company's public stock price. 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:
Expected term (in years)
Volatility rate
Risk-free interest rate
Expected dividend yield
2023
Years Ended December 31,
2022
2021
6.03
75.13 %
3.65 %
0.00 %
6.04
77.87 %
2.52 %
0.00 %
6.02
85.84 %
0.67 %
0.00 %
F-25
A summary of employee and non-employee option activity under the Company’s equity award plans is presented below (in thousands, except share
data):
Outstanding—January 1, 2023
Granted
Exercised
Cancelled, forfeited or expired
Outstanding—December 31, 2023
Exercisable—December 31, 2023
Options vested, or expected to
vest—December 31, 2023
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
14.42
23.75
8.08
23.14
17.78
14.32
7.3 $
88,016
7.3 $
5.7 $
55,091
43,160
Number of
Options
7,981,677 $
3,800,691 $
(662,042 ) $
(435,468 ) $
10,684,858 $
5,468,638 $
10,684,858 $
17.78
7.3 $
55,091
The weighted-average grant date fair value of options granted during the years ended December 31, 2023, 2022 and 2021, was $16.20, $12.64, and
$14.70 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 662,042 options exercised for the year ended December 31, 2023, resulting in total proceeds of $5.1 million; 1.3 million options
exercised for the year ended December 31, 2022, resulting in total proceeds of $11.5 million; and 842,424 options exercised for the year ended December
31, 2021, resulting in total proceeds of 6.3 million. The intrinsic value of options exercised during the years ended December 31, 2023, 2022 and 2021 was
$9.5 million, $17.0 million, and $10.1 million, respectively. In accordance with the Company’s policy, the shares were issued from a pool of shares reserved
for issuance under the 2015 Plan and 2023 Inducement Plan.
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:
Unvested—December 31, 2022
Granted (1)
Vested
Cancelled/Forfeited
Unvested—December 31, 2023
Number of
Shares
Weighted
Average
Grant Date Fair Value
224,788
308,550
(9,102 )
(4,800 )
519,436
$
$
$
$
$
18.02
24.94
13.87
20.36
22.17
(1) RSUs granted in 2023 and 2022 had a weighted average grant date fair value of $24.94 and $15.79, respectively. The fair values of RSUs vested
in 2023 and 2022 totaled $126,000 and $705,000, respectively.
F-26
Employee Stock Purchase Plan
In September 2015, the Company’s Board adopted the ESPP, which was subsequently approved by the Company’s stockholders and became
effective in 2016. The ESPP authorized the initial issuance of up to a total of 250,000 shares of common stock to the Company’s employees. The number of
shares of common stock available under the ESPP will automatically increase on January 1st of each year, continuing until the expiration of the ESPP, in an
amount equal to the lesser of (a) 1% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, or (b)
250,000 shares. On January 1, 2024, the shares of common stock reserved for issuance under the ESPP was increased to 1,982,614. 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 Company issued 34,797 and 28,999 shares during 2023 and 2022, respectively.
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, 2023, 2022 and 2021 the Company recorded stock-based compensation expense related to the ESPP of $308,000, $166,000, and $175,000
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, 2023, 2022 and 2021, the
Company made $1.3 million, $712,000, and $444,000 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”). In
December 2021, the Company entered into Amendment No. 1 to the Company’s Loan Agreement (the “First Amendment” and the Loan Agreement, as
amended, the “Amended Loan Agreement”) with several banks and financial institutions or entities from time-to-time party thereto (collectively, the
“Lender”) and Hercules, in its capacity as administrative agent for itself and the Lender.
On September 23, 2022, the Company made a prepayment of $21.5 million to satisfy in full all of the Company's principal and interest obligations
and related fees under the Amended Loan Agreement. The payoff amount paid by the Company in connection with the termination of the Amended Loan
Agreement was pursuant to a payoff letter with Hercules and included payment of (a) $1.0 million as an end-of term fee and (b) $0.4 million as a pre-
payment fee. Hercules released all security interests held on the assets of the Company and its subsidiaries. The Amended Loan Agreement was fully
terminated as of September 23, 2022.
During the year ended December 31, 2022, the Company recognized $2.1 million, which included $0.4 million of pre-payment fee, of interest
expense related to the initial advance pursuant to the Amended Loan Agreement.
15. Income Taxes
The Company recognized current state income expense of $0.3 million in the year ending December 31, 2023 as a result of investment income
earned in Syndax Securities Corporation. The Company recognized no income taxes in the years ended December 31, 2022 and 2021, due to the utilization
of tax attributes to offset current year federal and state taxable income, immaterial investment income earned at Syndax Securities Corporation, 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:
F-27
Income tax computed at federal statutory rate
State taxes, net of federal benefit
General business credit carryovers
Non-deductible expenses
Change in valuation allowance
Return to provision true up
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
Equity based compensation
Accruals
Other temporary differences
Deferred tax assets before valuation allowance
Valuation allowances
Net deferred tax assets
Years Ended December 31,
2022
2023
2021
21.0 %
13.2 %
1.5 %
-1.0 %
-34.9 %
0.0 %
0.0 %
-0.2 %
21.0 %
2.5 %
1.0 %
-0.2 %
-24.1 %
-0.2 %
0.0 %
0.0 %
21.0 %
2.9 %
-5.0 %
-0.5 %
-19.2 %
0.0 %
0.8 %
0.0 %
Years Ended
December 31,
2023
2022
$
$
32,664
11,765
68,859
79,562
10,276
2,795
36
205,957
(205,957 )
—
$
$
23,650
8,124
45,374
48,917
5,004
1,985
27
133,081
(133,081 )
—
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 increased by $72.9 million in 2023 due to the increase in deferred tax assets, primarily
driven by the generation of net operating losses and capitalized research expenses, and capitalized start-up costs. The valuation allowance increased by
$35.9 million in 2022 due to the increase in deferred tax assets, primarily driven by the generation of net operating losses and capitalized start-up costs,
partially offset by a decrease to other deferred tax assets.
As of December 31, 2023, the Company had approximately $136.4 million and $63.5 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 $114.3 million and state NOLs of $0.9
million which have indefinite carryforward period. The remaining $22.1 million of federal NOLs and $62.6 million the Company’s state NOLs will begin
to expire at various dates starting in 2026.
As of December 31, 2023, the Company had federal and state research credits of $8.9 million and $3.8 million, respectively, which began to expire
in 2024.
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 last completed an analysis from January 1, 2021 through
December 31, 2022 and determined that no ownership changes had occurred in that period. Prior analyses 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.
F-28
The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted in the United States on March 27, 2020. The CARES Act
is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to
curtail the effect of COVID-19. While the CARES Act provides extensive tax changes in response to the COVID-19 pandemic, the provisions did not have
a significant impact on the Company’s financial results. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct
research and development expenditures currently and requires taxpayers to amortize them, over five years for domestically incurred expenditures and over
fifteen years for foreign incurred expenditures, pursuant to IRC Section 174. As of December 31, 2023, the Company has recorded a deferred tax asset of
$79.6 million related to the Capitalized IRC Section 174 expenditures, of which $53.7 million relate to expenses required to be capitalized under the TCJA.
As of December 31, 2023, and 2022, the Company had uncertain tax positions of $0.1 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,
2023 and 2022. 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, 2023, 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,
2022
2023
2021
$
$
143
—
143
$
$
163 $
(20 )
143 $
163
—
163
The Company files tax returns in the U.S. and various states. 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 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.
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.
F-29
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, 2023, or 2022.
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-30
Years Ended December 31,
2023
2022
2021
(In thousands)
$
— $
2,059 $
1,997
$
250 $
131 $
134
Exhibit 4.3
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our amended and restated certificate of incorporation and amended and restated
bylaws are summaries. You should also refer to the amended and restated certificate of incorporation and the amended and restated bylaws, which are
included as an exhibit to our Annual Report on Form 10-K. All references to the “we,” “our,” or “us” refer to Syndax Pharmaceuticals, Inc.
General
Under our amended and restated certificate of incorporation we are authorized to issue up to 200,000,000 shares of common stock, par value
$0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share, all of which shares of preferred stock are undesignated. Our board
of directors may establish the rights and preferences of the preferred stock from time to time.
Common Stock
Voting Rights
Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders. The affirmative vote of
holders of at least 662⁄3% of the voting power of all of the then-outstanding shares of capital stock, voting as a single class, will be required to amend certain
provisions of our amended and restated certificate of incorporation, including provisions relating to amending our amended and restated bylaws, the
classified board, the size of our board, removal of directors, director liability, vacancies on our board, special meetings, stockholder notices, actions by
written consent and exclusive jurisdiction.
Dividends
Subject to preferences that may apply to any outstanding preferred stock, holders of our common stock are entitled to receive ratably any dividends
that our board of directors may declare out of funds legally available for that purpose on a non-cumulative basis.
Liquidation
In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preference of any outstanding preferred stock.
Rights and Preferences
Holders of our common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions
applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to and may be adversely affected by
the rights of the holders of shares of any series of our preferred stock that we may designate in the future.
Preferred Stock
Pursuant to our amended and restated certificate of incorporation, our board of directors has the authority, without further action by our stockholders,
to issue up to 10,000,000 shares of preferred stock in one or more series and to fix the number, rights, preferences, privileges and restrictions thereof. These
rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and sinking
fund terms, and the number of shares constituting any series or the designation of such
series, any or all of which may be greater than the rights of common stock. The issuance of our preferred stock could adversely affect the voting power of
holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of
preferred stock could have the effect of delaying, deferring or preventing a change of control or other corporate action, or make the removal of management
more difficult.
Anti-Takeover Provisions
Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws
Our amended and restated certificate of incorporation and amended and restated bylaws include a number of provisions that may deter or impede
hostile takeovers or changes of control or management. These provisions include:
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Issuance of Undesignated Preferred Stock. Our board of directors has the authority, without further action by the stockholders, to issue up to
10,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our
board of directors. The existence of authorized but unissued shares of preferred stock enables our board of directors to make it more difficult or
to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise.
Classified Board. Our amended and restated certificate of incorporation provides for a classified board of directors consisting of three classes of
directors, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other
classes continuing for the remainder of their respective three-year terms. This provision may have the effect of delaying a change in control of
our board.
Board of Directors Vacancies. Our amended and restated certificate of incorporation and amended and restated bylaws authorize only our board
of directors to fill vacant directorships. In addition, the number of directors constituting our board of directors may be set only by resolution
adopted by a majority vote of our entire board of directors. These provisions prevent a stockholder from increasing the size of our board of
directors and gaining control of our board of directors by filling the resulting vacancies with its own nominee.
Stockholder Action; Special Meetings of Stockholders. Our amended and restated certificate of incorporation provides that our stockholders
may not take action by written consent, but may only take action at annual or special meetings of our stockholders. Stockholders will not be
permitted to cumulate their votes for the election of directors. Our amended and restated certificate of incorporation further provides that only
the chairman of our board of directors or a majority of our board of directors may call special meetings of our stockholders.
Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our amended and restated bylaws provide advance notice
procedures for stockholders seeking to bring business before our annual meeting of stockholders, or to nominate candidates for election as
directors at our annual meeting of stockholders. Our amended and restated bylaws also specify certain requirements as to the form and content of
a stockholder’s notice. These provisions may make it more difficult for our stockholders to bring matters before our annual meeting of
stockholders or to nominate directors at annual meetings of stockholders.
We designed these provisions to enhance the likelihood of continued stability in the composition of our board of directors and its policies, to
discourage certain types of transactions that may involve an actual or threatened acquisition of us, and to reduce our vulnerability to an unsolicited
acquisition proposal. We also designed these provisions to discourage certain tactics that may be used in proxy fights. However, these provisions could
have the effect of discouraging others from making tender offers for our shares and, as a consequence, they may also reduce fluctuations in the market price
of our shares that could result from actual or rumored takeover attempts.
Section 203 of the Delaware General Corporation Law
We are subject to Section 203 of the DGCL, which prohibits a Delaware corporation from engaging in any business combination with any interested
stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:
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before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
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upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock
outstanding, but not the outstanding voting stock owned by the interested stockholder, those shares owned (i) by persons who are directors and
also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer; or
on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the
stockholders, and not by written consent, by the affirmative vote of at least 662⁄3% of the outstanding voting stock that is not owned by the
interested stockholder.
In general, Section 203 defines a “business combination” to include the following:
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any merger or consolidation involving the corporation and the interested stockholder;
any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the
interested stockholder;
any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the
corporation beneficially owned by the interested stockholder; or
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits by or through the
corporation.
In general, Section 203 defines an “interested stockholder” as an entity or person who, together with the entity or person’s affiliates and associates,
beneficially owns, or is an affiliate or associate of the corporation and within three years prior to the time of determination of interested stockholder status
did own, 15% or more of the outstanding voting stock of the corporation.
A Delaware corporation may “opt out” of these provisions with an express provision in its certificate of incorporation. We have not opted out of
these provisions, which may as a result, discourage or prevent mergers or other takeover or change of control attempts of us.
Choice of Forum
Our amended and restated certificate of incorporation will provide that unless we consent in writing to the selection of an alternative forum, the
Court of Chancery of the State of Delaware shall (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any
state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the
District of Delaware), the Court of Chancery of the State of Delaware will be the exclusive forum for (1) any derivative action or proceeding brought on
our behalf, (2) any action or proceeding commenced by any of our stockholders (including any class action) asserting a breach of fiduciary duty owed, or
other wrongdoing, by any director, officer, employee or agent to us or our stockholders, (3) any action or proceeding commenced by any of our
stockholders (including any class action) asserting a claim against us arising pursuant to the DGCL or our amended and restated certificate of incorporation
or our amended and restated bylaws, (4) any action or proceeding commenced by any of our stockholders (including any class action) to interpret, apply,
enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws, or (5) any action or
proceeding commenced by any of our stockholders (including any class action) asserting a claim against us that is governed by the internal affairs doctrine.
SYNDAX PHARMACEUTICALS, INC.
2023 INDUCEMENT PLAN
As Amended: December 6, 2023
Exhibit 10.16
Syndax Pharmaceuticals, Inc., a Delaware corporation (the “Company”), sets forth herein the terms of its 2023 Inducement Plan (the “Plan”), as
follows:
1. GENERAL
1.1 Purpose.
This Plan is intended to provide (a) an inducement material for certain individuals to enter into employment with the Company within the meaning of
Rule 5635(c)(4) of the NASDAQ Marketplace Rules, and (b) incentives to Eligible Employees to stimulate their efforts towards the success of the
Company and to operate and manage its business in a manner that will provide for the long-term growth and profitability of the Company. To that end, the
Plan provides for the grant of Awards of Options, Stock Appreciation Rights, Restricted Stock, Unrestricted Stock, Stock Units, Dividend Equivalent
Rights, Performance Awards, and Other Equity-Based Awards.
1.2 Eligible Award Recipients.
The only persons eligible to receive grants of Awards under this Plan are individuals who satisfy the standards for inducement grants under NASDAQ
Marketplace Rule 5635(c)(4) or 5635(c)(3), if applicable, and the related guidance under NASDAQ IM 5635-1. A person who previously served as an
Employee or Director will not be eligible to receive Awards under the Plan, other than following a bona fide period of non-employment. Persons eligible to
receive grants of Awards under this Plan are referred to in this Plan as “Eligible Employees.” These Awards must be approved by either a majority of the
Company’s “Independent Directors” (as such term is defined in NASDAQ Marketplace Rule 5605(a)(2)) (“Independent Directors”) or the Company’s
compensation committee, provided such committee is comprised solely of Independent Directors of the Company (the “Independent Compensation
Committee”) in order to comply with the exemption from the stockholder approval requirement for “inducement grants” provided under Rule 5635(c)(4)
of the NASDAQ Marketplace Rules. NASDAQ Marketplace Rule 5635(c)(4) and the related guidance under NASDAQ IM 5635-1 (together with any
analogous rules or guidance effective after the date hereof, the “Inducement Award Rules”).
2.
DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:
2.1“Affiliate” means, with respect to the Company, any company or other trade or business that controls, is controlled by, or is under common
control with, the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary. For
purposes of grants of Options or Stock Appreciation Rights, an entity may not be considered an Affiliate of the Company unless the Company holds a
“controlling interest” in such entity, where the term “controlling interest” has the same meaning as provided in Treasury Regulation Section 1.414(c)-2(b)
(2)(i), provided that the language “at least 50 percent” is used instead of “at least 80 percent” and, provided further, that where granting of Options or
Stock Appreciation Rights is based upon a legitimate business criteria, the language “at least 20 percent” is used instead of “at least 80 percent” each
place it appears in Treasury Regulation Section 1.414(c)-2(b)(2)(i).
2.2“Applicable Laws” means the legal requirements relating to the Plan and the Awards under (a) applicable provisions of the Code, the
Securities Act, the Exchange Act, any rules or regulations thereunder, and any other laws, rules, regulations, and government orders of any jurisdiction
applicable to the Company or its Affiliates, (b) applicable provisions of the corporate, securities, tax and other laws, rules, regulations and government
orders of any jurisdiction applicable to Awards granted to residents thereof, and (c) the rules of any Stock Exchange or Securities Market on which the
Stock is listed or publicly traded.
2.3“Award” means a grant of an Option, Stock Appreciation Right, Restricted Stock, Unrestricted Stock, Stock Units, Dividend Equivalent
Right, Performance Award, or Other Equity-Based Award under the Plan.
2.4“Award Agreement” means the written agreement, in such written, electronic, or other form as
determined by the Committee, between the Company and a Grantee that evidences and sets forth the terms and conditions of an Award.
2.5“Benefit Arrangement” shall have the meaning set forth in Section 15.
2.6“Board” means the Board of Directors of the Company.
2.7“Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations, or other equivalents (however
designated, whether voting or non-voting) in equity of such Person, whether outstanding on the Effective Date or issued thereafter, including,
without limitation, all shares of Stock.
2.8“Cause” shall have the meaning set forth in an applicable agreement between a Grantee and the Company or an Affiliate, and in the absence
of such agreement, shall mean, with respect to any Grantee and as determined by the Board, (i) gross negligence or willful misconduct in connection
with the performance of duties; (ii) conviction of, or pleading guilty or nolo contendere to, a criminal offense (other than minor traffic offenses); (iii) a
material violation of a Company policy; or (iv) a material breach of any term of any employment, consulting, or other services, confidentiality,
intellectual property, or non-competition agreements, if any, between such Grantee and the Company or an Affiliate. Any determination by the
Committee regarding whether an event constituting Cause shall have occurred shall be final, binding, and conclusive.
2.9“Change in Control” shall mean, subject to Section 18.9, the occurrence of any of the following:
(a)A transaction or a series of related transactions whereby any person (as defined in Sections 13(d) and 14(d)(2) of the Exchange Act) or Group
(other than the Company or any Affiliate) becomes the Beneficial Owner of more than fifty percent (50%) of the total voting power of the Voting Stock
of the Company, on a Fully Diluted Basis;
(b)Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) (together with any new directors whose election by
such Incumbent Board or whose nomination by such Incumbent Board for election by the stockholders of the Company was approved by a vote of at
least a majority of the members of such Incumbent Board then in office who either were members of such Incumbent Board or whose election or
nomination for election was previously so approved) cease for any reason to constitute a majority of the members of such Board then in office;
(c)The Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company
(regardless of whether the Company is the surviving Person), other than any such transaction in which the Prior Stockholders own directly or indirectly
at least a majority of the voting power of the Voting Stock of the surviving Person in such reorganization, merger, or consolidation transaction
immediately after such transaction;
(d)The consummation of any direct or indirect sale, lease, transfer, conveyance, or other disposition (other than by way of reorganization, merger,
or consolidation), in one transaction or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries,
taken as a whole, to any person (as defined in Sections 13(d) and 14(d)(2) of the Exchange Act) or Group (other than the Company or any Affiliate);
or
(e)The stockholders of the Company adopt a plan or proposal for the liquidation, winding up, or dissolution of the Company.
The Board shall have full and final authority, in its sole discretion, to determine conclusively whether a Change in Control has occurred pursuant to
the above definition, the date of the occurrence of such Change in Control, and any incidental matters relating thereto.
2.10“Code” means the Internal Revenue Code of 1986, as amended, as now in effect or as hereafter amended, and any successor thereto.
References in the Plan to any Code Section shall be deemed to include, as applicable, regulations and guidance promulgated under such Code Section.
2.11“Committee” means a committee of, and designated from time to time by resolution of, the Board, which shall be constituted as provided in
Section 3.3 (or, if no Committee has been designated, the Board itself).
2.12“Company” means Syndax Pharmaceuticals, Inc., a Delaware corporation, and any successor thereto.
2.13“Determination Date” means the Grant Date or such other date as of which the Fair Market Value of a share of Stock is required to be
established for purposes of the Plan.
2.14“Director” means a member of the Board. Directors are not eligible to receive Awards under the Plan with respect to their service in such
capacity.
2.15“Disability” means the inability of the Grantee to perform each of the essential duties of such Grantee’s position by reason of a medically
determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not
less than 12 months.
2.16“Dividend Equivalent Right” means a right, granted to a Grantee under Section 13, to receive, or to receive credits for the future payment of,
cash, Stock, other Awards or other property equal in value to dividend payments or distributions or other periodic payments, declared or paid with
respect to a specified number of shares of Stock, as if such shares of Stock had been issued to and held by the Grantee of such Dividend Equivalent Right
as of the record date.
2.17“Effective Date” means February 2, 2023.
2.18“Eligible Employee” shall have the meaning set forth in Section 1.2.
2.19“Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such
services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
2.20“Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.
2.21“Fair Market Value” means the fair market value of a share of Stock for purposes of the Plan, which shall be determined as of any
Determination Date as follows:
(a)If on such Determination Date the shares of Stock are listed on a Stock Exchange, or are publicly traded on another Securities Market, the Fair
Market Value of a share of Stock shall be the closing price of the Stock as reported on such Stock Exchange or such Securities Market (provided that, if
there is more than one such Stock Exchange or Securities Market, the Committee shall designate the appropriate Stock Exchange or Securities Market
for purposes of the Fair Market Value determination). If there is no such reported closing price on such Determination Date, the Fair Market Value of a
share of Stock shall be the closing price of the Stock on the next preceding day on which any sale of Stock shall have been reported on such Stock
Exchange or such Securities Market.
(b)If on such Determination Date the shares of Stock are not listed on a Stock Exchange or publicly traded on a Securities Market, the Fair Market
Value of a share of Stock shall be the value of the Stock as determined by the Committee by the reasonable application of a reasonable valuation
method, in a manner consistent with Code Section 409A.
Notwithstanding this Section 2.21 or Section 18.3, for purposes of determining taxable income and the amount of the related tax withholding
obligation pursuant to Section 18.3, the Fair Market Value will be determined by the Committee in good faith using any reasonable method as it deems
appropriate, to be applied consistently with respect to Grantees; provided, further, that the Committee shall determine the Fair Market Value of shares of
Stock for tax withholding obligations due in connection with sales, by or on behalf of a Grantee, of such shares of Stock subject to an Award to pay the
Option Price, SAR Exercise Price, and/or any tax withholding obligation on the same date on which such shares may first be sold pursuant to the terms
of the applicable Award Agreement (including broker-assisted cashless exercises of Options and Stock Appreciation Rights, as described in Section
12.3, and sell-to-cover transactions) in any manner consistent with applicable provisions of the Code, including but not limited to using the sale price of
such shares on such date (or if sales of such shares are effectuated at more than one sale price, the weighted average sale price of such shares on such
date) as the Fair Market Value of such shares, so long as such Grantee has provided to the Company, or its designee or agent, with advance written notice
of such sale.
2.22“Family Member” shall mean, with respect to any Grantee as of any date of determination, (a) a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-
in-law, or sister-in-law, including adoptive relationships, of the Grantee, (b) any person sharing the Grantee’s household (other
than a tenant or employee), (c) a trust in which any one or more of the persons specified in clauses (a) and (b) above (and such Grantee) own more than
fifty percent (50%) of the beneficial interest, (d) a foundation in which any one or more of the persons specified in clauses (a) and (b) above and (and
such Grantee) control the management of assets, and (e) any other entity in which one or more of the persons specified in clauses (a) and (b) above and
(and such Grantee) own more than fifty percent (50%) of the voting interests.
2.23“Fully Diluted Basis” shall mean, as of any date of determination, the sum of (x) the number of shares of Voting Stock outstanding as of such
date of determination plus (y) the number of shares of Voting Stock issuable upon the exercise, conversion, or exchange of all then- outstanding
warrants, options, convertible Capital Stock or indebtedness, exchangeable Capital Stock or indebtedness, or other rights exercisable for or convertible
or exchangeable into, directly or indirectly, shares of Voting Stock, whether at the time of issue or upon the passage of time or upon the occurrence of
some future event, and whether or not in-the-money as of such date of determination.
2.24“Grant Date” means, as determined by the Board, the latest to occur of (i) the date as of which the Board approves the Award, (ii) the date
on which the recipient of an Award first becomes eligible to receive an Award under Section 6, or (iii) such subsequent date as may be specified by
the Board in a corporate action approving the Award.
2.25“Grantee” means a person who receives or holds an Award under the Plan.
2.26“Group” shall have the meaning set forth in Sections 13(d) and 14(d)(2) of the Exchange Act.
2.27“Independent Compensation Committee” shall have the meaning set forth in Section 1.2.
2.28“Independent Director” shall have the meaning set forth in Section 1.2.
2.29“Inducement Award Rules” shall have the meaning set forth in Section 1.2.
2.30“Non-Employee Director” shall have the meaning set forth in Rule 16b-3 under the Exchange Act.
2.31“Option” means an option to purchase one or more shares of Stock at a specified Option Price awarded to a Grantee pursuant to Section 8 that
does not qualify as an “incentive stock option” within the meaning of Section 422 of the Code.
2.32“Option Price” means the per share exercise price for shares of Stock subject to an Option.
2.33“Other Agreement” shall have the meaning set forth in Section 15.
2.34“Outside Director” means a member of the Board who is not an officer or Employee of the Company.
2.35“Other Equity-Based Award” means an Award representing a right or other interest that may be denominated or payable in, valued in whole or
in part by reference to, or otherwise based on, or related to, Stock, other than an Option, Stock Appreciation Right, Restricted Stock, a Stock Unit,
Unrestricted Stock, a Dividend Equivalent Right, or a Performance Award.
2.36“Parachute Payment” shall have the meaning set forth in Section 15.
2.37“Performance Award” means an Award made subject to the attainment of performance goals (as determined by the Board) over a
Performance Period of up to ten (10) years.
2.38“Performance Measures” means measures as specified in Section 14.
2.39“Performance Period” means the period of time, up to ten (10) years, during which the performance goals must be met in order to
determine the degree of payout and/or vesting with respect to a Performance Award.
2.40“Plan” means this Syndax Pharmaceuticals, Inc. 2023 Inducement Plan, as amended from time to time.
2.41“Purchase Price” means the purchase price for each share of Stock pursuant to a grant of Restricted Stock, Stock Units or Unrestricted Stock.
2.42“Restricted Stock” means shares of Stock awarded to a Grantee pursuant to Section 10.
2.43“SAR Exercise Price” means the per share exercise price of a SAR.
2.44“Securities Act” means the Securities Act of 1933, as now in effect or as hereafter amended.
2.45“Securities Market” shall mean an established securities market.
2.46“Separation from Service” shall have the meaning set forth in Code Section 409A.
2.47“Service” means service qualifying a Grantee as a Service Provider to the Company or any Affiliate. Unless otherwise provided in the
applicable Award Agreement, a Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee
continues to be a Service Provider to the Company or any Affiliate. Subject to the preceding sentence, any determination by the Board whether a
termination of Service shall have occurred for purposes of the Plan shall be final, binding, and conclusive. If a Service Provider’s employment or other
Service relationship is with an Affiliate of the Company and the applicable entity ceases to be an Affiliate of the Company, a termination of Service shall
be deemed to have occurred when such entity ceases to be an Affiliate unless the Service Provider transfers his or her employment or other Service
relationship to the Company or any of its other Affiliates.
2.48“Service Provider” shall mean (a) an Employee or Director of the Company or an Affiliate, or (b) a consultant or adviser to the Company or
an Affiliate (i) who is a natural person, (ii) who is currently providing bona fide services to the Company or an Affiliate, and (iii) whose services are not
in connection with the Company’s sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the
Company’s Capital Stock; provided, that consultants and advisers are not eligible to receive Awards under the Plan with respect to their service in such
capacity.
2.49“Service Recipient Stock” shall have the meaning set forth in Code Section 409A.
2.50“Share Reserve” shall have the meaning set forth in Section 4.1.
2.51“Stock” means the common stock, par value $0.0001 per share, of the Company, or any security into which shares of Stock may be
changed or for which shares of Stock may be exchanged as provided in Section 17.1.
2.52“Stock Appreciation Right” or “SAR” means a right awarded to a Grantee under Section 9.
2.53“Stock Exchange” means the NASDAQ Stock Market LLC, any successor thereto, or another established national or regional stock
exchange.
2.54“Stock Unit” means a bookkeeping entry representing the equivalent of one share of Stock awarded to a Grantee pursuant to Section 10 that may
be settled, subject to the terms and conditions of the applicable Award Agreement, in shares of Stock, cash, or a combination thereof.
2.55“Subsidiary” shall mean any corporation (other than the Company) or non-corporate entity with respect to which the Company owns, directly
or indirectly, fifty percent (50%) or more of the total combined voting power of all classes of Voting Stock. In addition, any other entity may be
designated by the Committee as a Subsidiary, provided that (a) such entity could be considered as a subsidiary according to generally accepted
accounting principles in the United States of America and (b) in the case of an Award of Options or Stock Appreciation Rights, such Award would be
considered to be granted in respect of Service Recipient Stock under Code Section 409A.
2.56“Substitute Award” means an Award granted upon assumption of, or in substitution for, outstanding awards previously granted by a
company or other entity acquired by the Company or an Affiliate or with which the Company or an Affiliate combines.
2.57“Unrestricted Stock” shall mean Stock that is free of any restrictions.
2.58“Voting Stock” shall mean, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the
election of directors, managers, or other voting members of the governing body of such Person.
3. ADMINISTRATION
3.1. Board.
The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s certificate of
incorporation and by-laws, Applicable Laws, and the Inducement Award Rules. The Board shall have full power and authority to take all actions and to
make all determinations required or provided for under the Plan, any Award, or any Award Agreement and shall have full power and authority to take all
such other actions and to make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be
necessary or appropriate to the administration of the Plan, any Award, or any Award Agreement; provided, however, that Awards may only be granted by
either (a) a majority of the Company’s Independent Directors or (b) the Independent Compensation Committee. Subject to those constraints and the other
constraints of the Inducement Award Rules, the Board may delegate some of its powers of administration of the Plan to a Committee or Committees, as
provided in Section 3.2. All such actions and determinations shall be made by the affirmative vote of a majority of the members of the Board present at a
meeting at which a quorum is present or by unanimous consent of the members of the Board executed in writing or evidenced by electronic transmission in
accordance with the Company’s certificate of incorporation and by-laws and Applicable Laws. The Board shall have the authority to interpret and construe
all provisions of the Plan, any Award, and any Award Agreement, and any such interpretation and construction, and any other determination contemplated
to be made under the Plan, any Award, or any Award Agreement, by the Board shall be final, binding, and conclusive on all persons, whether or not
expressly provided for in any provision of the Plan, such Award, or such Award Agreement.
3.2. Committee.
The Board from time to time may delegate to the Committee such powers and authorities related to the administration and implementation of the Plan,
as set forth in Section 3.1 above and other applicable provisions, as the Board shall determine, consistent with the Company’s certificate of incorporation
and by-laws, Applicable Laws, and the Inducement Award Rules.
(i) Except as provided in Subsection (ii) and except as the Board may otherwise determine, the Committee, if any, appointed by the Board to
administer the Plan shall consist of two or more Outside Directors of the Company who: (a) meet such requirements as may be established from time to
time by the Securities and Exchange Commission for plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act,
and (b) comply with the independence requirements of the Stock Exchange or Securities Market on which the shares of Stock are listed or publicly traded.
(ii) The Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Company who
need not be Outside Directors, who may administer the Plan with respect to Employees or other Service Providers who are not executive officers (as
defined under Rule 3b-7 or the Exchange Act) or Directors of the Company, may grant Awards under the Plan to Eligible Employees (provided that Awards
may only be granted by either (x) a majority of the Company’s Independent Directors or (y) the Independent Compensation Committee), and may
determine all terms of such Awards, subject to the requirements of the Inducement Award Rules, Rule 16b-3 and the rules of the Stock Exchange or
Securities Market on which the shares of Stock are listed or publicly traded.
In the event that the Plan, any Award, or any Award Agreement entered into hereunder provides for any action to be taken by or determination to
be made by the Board, such action may be taken or such determination may be made by a Committee if the power and authority to do so has been delegated
(and such delegated authority has not been revoked) to such Committee by the Board as provided for in this Section. Unless otherwise expressly determined
by the Board, any such action or determination by the Committee shall be final, binding, and conclusive. To the extent permitted by Applicable Laws, the
Committee may delegate its authority under the Plan to a member of the Board, provided, that such member of the Board to whom the Committee delegates
authority under the Plan must be an Outside Director who satisfies the requirements of Subsection (i) (a)-(b) of this Section 3.2.
3.3. Terms of Awards.
Subject to the other terms and conditions of the Plan and the Inducement Award Rules, the Board shall have full and final authority to:
(i) designate Grantees (provided that Awards may only be granted by either (x) a majority of the Company’s Independent Directors or (y) the
Independent Compensation Committee);
(ii) determine the type or types of Awards to be made to a Grantee;
(iii)determine the number of shares of Stock to be subject to an Award or to which an Award relates;
(iv) establish the terms and conditions of each Award (including, but not limited to, the Option Price, SAR Exercise Price, the Purchase Price, the
nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the
shares of Stock subject thereto, the treatment of an Award in the event of a Change in Control (subject to applicable agreements);
(v) prescribe the form of each Award Agreement evidencing an Award;
(vi) subject to the limitations on repricing in Section 3.6, amend, modify or supplement the terms of any outstanding Award. Such authority
specifically includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to make or modify outstanding Awards
made to Eligible Employees who are foreign nationals or are individuals who are employed outside the United States to recognize differences in local law,
tax policy, or custom. Notwithstanding the foregoing, no amendment, modification, or supplement of the terms of any outstanding Award shall, without the
consent of the Grantee thereof, impair the Grantee’s rights under such Award; and
(vii)make Substitute Awards.
3.4. Effect of Board’s Decision.
All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final,
binding and conclusive on all persons.
3.5. Forfeiture; Recoupment.
The Board may reserve the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee with respect to an Award thereunder on
account of actions taken by, or failed to be taken by, such Grantee in violation or breach of, or in conflict with, any (a) employment agreement, (b) non-
competition agreement, (c) agreement prohibiting solicitation of employees or clients of the Company or any Affiliate, (d) confidentiality obligation with
respect to the Company or any Affiliate, or (e) Company or Affiliate policy or procedure, (f) other agreement, or (g) other obligation of such Grantee to the
Company or an Affiliate, as and to the extent specified in such Award Agreement. If the Grantee of an outstanding Award is an employee of the Company
or any Affiliate and such Grantee’s Service is terminated for Cause, the Committee may annul such Grantee’s outstanding Award as of the date of the
Grantee’s termination of Service for Cause.
Any Award granted pursuant to the Plan shall be subject to mandatory repayment by the Grantee to the Company (x) to the extent set forth in this Plan
or an Award Agreement or (y) to the extent the Grantee is, or in the future becomes, subject to (i) any Company “clawback” or recoupment policy that is
adopted to comply with the requirements of any Applicable Laws or (ii) any Applicable Laws which impose mandatory recoupment, under circumstances
set forth in such Applicable Laws.
Furthermore, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of
misconduct, with any financial reporting requirement under the federal securities laws, and any Award Agreement so provides, any Grantee of an Award
under such Award Agreement who knowingly engaged in such misconduct, was grossly negligent in engaging in such misconduct, knowingly failed to
prevent such misconduct, or was grossly negligent in failing to prevent such misconduct, shall reimburse the Company the amount of any payment in
settlement of an Award earned or accrued during the 12-month period following the first public issuance or filing with the United States Securities and
Exchange Commission (whichever first occurred) of the financial document that contained information affected by such material noncompliance.
Notwithstanding any other provision of the Plan or any provision of any Award Agreement, if the Company is required to prepare an accounting
restatement, then a Grantee shall forfeit any cash or shares of Stock received
in connection with an Award (or an amount equal to the Fair Market Value of such shares of Stock on the date of delivery if the Grantee no longer holds the
shares of Stock) if pursuant to the terms of the Award Agreement for such Award, the amount of the Award earned or the vesting in the Award was
explicitly based on the achievement of pre- established performance goals set forth in the Award Agreement (including earnings, gains, or other
performance goals) that are later determined, as a result of the accounting restatement, not to have been achieved.
3.6.No Repricing Without Stockholder Approval.
Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, distribution (whether in
the form of cash, shares of Stock, other securities, or other property), stock split, extraordinary dividend, recapitalization, Change in Control,
reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of Stock, or other securities or similar transaction),
the Company may not: (a) amend the terms of outstanding Options or SARs to reduce the Option Price or SAR Exercise Price, as applicable, of such
outstanding Options or SARs; (b) cancel outstanding Options or SARs in exchange for or substitution of Options or SARs with an Option Price or SAR
Exercise Price, as applicable, that is less than the Option Price or SAR Exercise Price of the original Options or SARs; or (c) cancel outstanding Options or
SARs with an Option Price or SAR Exercise Price, as applicable, above the current per share Fair Market Value in exchange for cash or other securities, in
each case unless such action (i) is subject to and approved by the Company’s stockholders or (ii) would not be deemed to be a repricing under the rules of
any Stock Exchange or Securities Market on which the Stock is listed or publicly traded.
3.7.Deferral Arrangement.
The Board may permit or require the deferral of any payment pursuant to an Award into a deferred compensation arrangement, subject to such rules
and procedures as it may establish, which may include provisions for the payment or crediting of interest or Dividend Equivalent Rights and, in connection
therewith, provisions for converting such credits into deferred Stock Units and for restricting deferrals to comply with hardship distribution rules affecting
tax-qualified retirement plans subject to Code Section 401(k)(2)(B)(IV); provided that no Dividend Equivalent Rights may be granted in connection with,
or related to, an Award of Options or SARs. Any such deferrals shall be made in a manner that complies with Code Section 409A, including, if applicable,
with respect to when a Separation from Service occurs.
3.8.Limitation on Liability.
No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan, any Award, or
any Award Agreement. Notwithstanding any provision of the Plan to the contrary, neither the Company, any of its Affiliates, the Board, the Committee, nor
any person acting on behalf of the Company, any of its Affiliates, the Board, or the Committee will be liable to any Grantee or to the estate or beneficiary
of any Grantee or to any other holder of an Award under the Plan by reason of any acceleration of income, or any additional tax (including any interest and
penalties), asserted by reason of the failure of an Award to satisfy the requirements of Code Section 409A or by reason of Code Section 4999, or otherwise
asserted with respect to the Award; provided, that this Section 3.8 shall not affect any of the rights or obligations set forth in an applicable agreement
between the Grantee and the Company or any of its Affiliates.
3.9.Stock Issuance/Book-Entry.
Notwithstanding any provision of this Plan to the contrary, the issuance of the shares of Stock under the Plan may be evidenced in such a manner as
the Board, in its discretion, deems appropriate, including by book-entry or direct registration (including transaction advices) or the issuance of one or more
share certificates.
4.
STOCK SUBJECT TO THE PLAN
4.1. Number of Shares of Stock Available for Awards.
Subject to the other provisions of this Section 4 and subject to adjustment as provided under Section 17.1, 3,000,000 shares of Stock shall be
authorized for issuance pursuant to Awards under the Plan (the “Share Reserve”).
4.2.Adjustments in Authorized Shares of Stock.
The Board shall have the right to substitute or assume awards in connection with mergers, reorganizations, separations, or other transactions. The
Share Reserve shall be increased by the corresponding number of awards assumed and, in the case of a substitution, by the net increase in the number of
shares of Stock subject to awards
before and after the substitution. Shares available for issuance under a stockholder-approved plan of a business entity that is party to such transaction (as
appropriately adjusted, if necessary, to reflect the transaction) may be used for Awards under the Plan and shall not reduce the number of shares of Stock
otherwise available for issuance under the Plan, subject to applicable rules of any Stock Exchange or Securities Market on which the Stock is listed or
publicly traded.
4.3.Share Usage.
Shares of Stock covered by an Award shall be counted as used as of the Grant Date for purposes of calculating the number of shares of Stock
available for issuance under Section 4.1. Any shares of Stock that are subject to Awards, including shares of Stock acquired through dividend reinvestment
pursuant to Section 10, will be counted against the limit set forth in Section 4.1 as one (1) share of Stock for every one (1) share of Stock subject to an
Award. With respect to SARs, the number of shares of Stock subject to an award of SARs will be counted against the aggregate number of shares of Stock
available for issuance under the Plan regardless of the number of shares of Stock actually issued to settle the SAR upon exercise. The target number of
shares issuable under a Performance Award grant shall be counted against the limit set forth in Section 4.1 as of the Grant Date, but such number shall be
adjusted to equal the actual number of shares issued upon settlement of the Performance Award to the extent different from such target number of shares. If
any shares of Stock covered by an Award granted under the Plan are not purchased or are forfeited or expire, or if an Award otherwise terminates without
delivery of any shares of Stock subject thereto or is settled in cash in lieu of shares of Stock, then the number of shares of Stock counted against the
aggregate number of shares of Stock available under the Plan with respect to such Award shall, to the extent of any such forfeiture, termination, expiration,
or settlement, again be available for making Awards under the Plan in the same amount as such shares of Stock were counted against the limit set forth in
Section 4.1.
The number of shares of Stock available for issuance under the Plan will not be increased by the number of shares of Stock (i) tendered, withheld, or
subject to an Award granted under the Plan surrendered in connection with the purchase of shares of Stock upon exercise of an Option, (ii) that were not
issued upon the net settlement or net exercise of a Stock-settled SAR granted under the Plan, (iii) deducted or delivered from payment of an Award granted
under the Plan in connection with the Company’s tax withholding obligations as provided in Section 18.3, or (iv) purchased by the Company with proceeds
from Option exercises.
5. EFFECTIVE DATE, DURATION AND AMENDMENTS
5.1.Effective Date.
The Plan shall be effective as of the Effective Date.
5.2.Term.
The Plan shall terminate on the first to occur of (a) the tenth (10th) anniversary of the Effective Date, (b) the date determined in accordance with
Section 5.3, and (c) the date determined in accordance with Section 17.3. Upon such termination of the Plan, all outstanding Awards shall continue to
have full force and effect in accordance with the provisions of the terminated Plan and the applicable Award Agreement (or other documents evidencing
such Awards).
5.3.Amendment, Suspension and Termination of the Plan.
The Board may, at any time and from time to time, amend, suspend, or terminate the Plan; provided that, with respect to Awards theretofore granted
under the Plan, no amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, impair rights or obligations under any
such Award theretofore awarded under the Plan. The effectiveness of any amendment to the Plan shall be contingent on approval of such amendment by
the Company’s stockholders to the extent stated by the Board, required by Applicable Laws, or required by the Stock Exchange or Securities Market on
which the shares of Stock are listed or publicly traded.
6. AWARD ELIGIBILITY AND LIMITATIONS
6.1.Eligibility for Awards.
Subject to this Section 6, Awards may only be granted to persons who are Eligible Employees described in Section 1.2 of the Plan, where the
Award is an inducement material to the individual’s entering into
employment with the Company or an Affiliate within the meaning of Rule 5635(c)(4) of the NASDAQ Marketplace Rules, provided however, that
Awards may not be granted to Employees who are providing Service only to any “parent” of the Company, as such term is defined in Rule 405 of the
Securities Act, unless (i) the stock underlying such Awards is treated as “service recipient stock” under Section 409A of the Code (for example,
because the Awards are granted pursuant to a corporate transaction such as a spin off transaction), or (ii) the Company, in consultation with its legal
counsel, has determined that such Awards are otherwise exempt from or comply with the distribution requirements of Section 409A of the Code.
6.2.Stand-Alone, Additional, Tandem, and Substitute Awards.
Subject to Section 3.6, Awards granted under the Plan may, in the discretion of the Board, be granted either alone or in addition to, in tandem with,
or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity to be
acquired by the Company or an Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate. Such additional,
tandem, exchange, or Substitute Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award, or for an
award granted under another plan of the Company, an Affiliate, or any business entity that has been a party to a transaction with the Company or an
Affiliate, the Board shall require the surrender of such other Award or award under such other plan in consideration for such exchange or grant of the
Substitute Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the
Company or any Affiliate. Notwithstanding Section 8.1 and Section 9.1, but subject to Section 3.6, the Option Price of an Option or the SAR Exercise
Price of an SAR that is a Substitute Award may be less than one hundred percent (100%) of the Fair Market Value of a share of Stock on the original
Grant Date; provided, that, the Option Price or SAR Exercise Price is consistent with Code Section 409A for any Option or SAR.
7. AWARD AGREEMENT
Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time
determine. Award Agreements utilized under the Plan from time to time or at the same time need not contain similar provisions but shall be consistent
with the terms of the Plan. Each Award Agreement evidencing an Award of Options shall specify that such Options are intended to be nonqualified, and,
in the absence of such specification, such Options shall be deemed to be nonqualified. In the event of any inconsistency between the Plan and an Award
Agreement, the provisions of the Plan shall control.
8. TERMS AND CONDITIONS OF OPTIONS
8.1.Option Price.
The Option Price of each Option shall be fixed by the Board and stated in the Award Agreement evidencing such Option. Except in the case of
Substitute Awards, the Option Price of each Option shall be at least the Fair Market Value of one (1) share of Stock on the Grant Date. In no case shall
the Option Price of any Option be less than the par value of one (1) share of Stock.
8.2.Vesting and Exercisability.
Subject to Sections 8.3 and 17.3, each Option granted under the Plan shall become vested and/or exercisable at such times and under such
conditions as shall be determined by the Board and stated in the Award Agreement, in another agreement with the Grantee, or otherwise in writing;
provided that no Option shall be granted to Grantees who are entitled to overtime under Applicable Laws that will vest or be exercisable within a six (6)-
month period starting on the Grant Date.
8.3.Term.
Each Option granted under the Plan shall terminate, and all rights to purchase shares of Stock thereunder shall cease, upon the expiration of ten (10)
years from the Grant Date of such Option, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option; provided, that to the extent deemed necessary or appropriate by the Board to reflect
differences in local law, tax policy, or custom with respect to any Option granted to a Grantee who is a foreign national or is a natural Person who is
employed outside the United States, such Option may terminate, and all rights to purchase shares of Stock thereunder may cease, upon the expiration of
a period longer than ten (10) years from the Grant Date of such Option as the Board shall determine.
8.4.Termination of Service.
Each Award Agreement with respect to the grant of an Option shall set forth the extent to which the Grantee thereof, if at all, shall have the right
to exercise such Option following termination of such Grantee’s Service. Such provisions shall be determined in the sole discretion of the Board, need
not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.
8.5.Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, after the occurrence of an event
referred to in Section 17 which results in the termination of the Option.
8.6.Method of Exercise.
Subject to the terms of Section 12 and Section 18.3, an Option that is exercisable may be exercised by the Grantee’s delivery to the Company or its
designee or agent of notice of exercise on any business day, at the Company’s principal office, or the office of such designee or agent, on the form
specified by the Company and in accordance with any additional procedures specified by the Board. Such notice shall specify the number of shares of
Stock with respect to which the Option is being exercised and shall be accompanied by payment in full of the Option Price of the shares of Stock for
which the Option is being exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to
withhold with respect to the exercise of such Option.
8.7.Rights of Holders of Options.
Unless otherwise stated in the applicable Award Agreement, a Grantee or other person holding or exercising an Option shall have none of the rights
of a stockholder of the Company (for example, the right to receive cash or dividend payments or distributions attributable to the subject shares of Stock or
to direct the voting of the subject shares of Stock subject to such Option, or to receive notice of any meeting of the Company’s stockholders) until the
shares of Stock subject thereto are fully paid and issued to such Grantee or other person. Except as provided in Section 17, no adjustment shall be made
for dividends, distributions or other rights with respect to any shares of Stock subject to an Option for which the record date is prior to the date of
issuance of such shares of Stock.
8.8.Delivery of Stock Certificates.
Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of
a stock certificate or certificates evidencing his or her ownership of the shares of Stock subject to the Option, as shall be consistent with Section 3.9.
8.9.Transferability of Options.
Except as provided in Section 8.10, during the lifetime of a Grantee of an Option, only the Grantee (or, in the event of such Grantee’s legal
incapacity or incompetency, the Grantee’s guardian or legal representative) may exercise such Option. Except as provided in Section 8.10, no Option
shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.
8.10.Family Transfers.
If authorized in the applicable Award Agreement and by the Board, in its sole discretion, a Grantee may transfer, not for value, all or part of an
Option to any Family Member. For the purpose of this Section 8.10, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a
domestic relations order in settlement of marital property rights; or (iii) unless Applicable Laws do not permit such transfer, a transfer to an entity in
which more than fifty percent (50%) of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity.
Following a transfer under this Section 8.10, any such Option shall continue to be subject to the same terms and conditions as were applicable
immediately prior to such transfer. Subsequent transfers of transferred Options are prohibited except to Family Members of the original Grantee in
accordance with this Section 8.10 or by will or the laws of descent and distribution. The events of termination of Service of Section 8.4 shall continue to
be applied with respect to the original Grantee, following which such Option shall be exercisable by the transferee only to the extent, and for the periods
specified, in Section 8.4.
9. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
9.1.Right to Payment and SAR Exercise Price.
A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one (1)
share of Stock on the date of exercise over (B) the SAR Exercise Price as determined by the Board. The Award Agreement for a SAR shall specify the
SAR Exercise Price, which shall be no less than the Fair Market Value of one (1) share of Stock on the Grant Date. SARs may be granted in conjunction
with all or part of an Option granted under the Plan or at any subsequent time during the term of such Option, in conjunction with all or any part of any
other Award or without regard to any Option or other Award; provided that a SAR that is granted in tandem with all or part of an Option will have the
same term, and expire at the same time, as the related Option; provided, further, that a SAR that is granted subsequent to the Grant Date of a related
Option must have a SAR Exercise Price that is no less than the Fair Market Value of one share of Stock on the SAR Grant Date.
9.2.Other Terms.
The Board shall determine on the Grant Date or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in
whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease
to be or become exercisable following termination of Service or upon other conditions, the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which shares of Stock will be delivered or deemed to be delivered to Grantees, whether or not
a SAR shall be granted in tandem or in combination with any other Award; and any and all other terms and conditions of any SAR; provided that no
SARs shall be granted to Grantees who are entitled to overtime under Applicable Laws that will vest or be exercisable within a six (6)-month period
starting on the Grant Date.
9.3.Term.
Each SAR granted under the Plan shall terminate, and all rights thereunder shall cease, upon the expiration of ten (10) years from the Grant Date of
such SAR, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award
Agreement relating to such SAR.
9.4.Rights of Holders of SARs.
Unless otherwise stated in the applicable Award Agreement, a Grantee or other Person holding or exercising a SAR shall have none of the rights of a
stockholder of the Company (for example, the right to receive cash or dividend payments or distributions attributable to the shares of Stock underlying
such SAR, to direct the voting of the shares of Stock underlying such SAR, or to receive notice of any meeting of the Company’s stockholders) until the
shares of Stock underlying such SAR, if any, are issued to such Grantee or other Person. Except as provided in Section 17, no adjustment shall be made
for dividends, distributions, or other rights with respect to any shares of Stock underlying a SAR for which the record date is prior to the date of issuance
of such shares of Stock, if any.
9.5.Transferability of SARs.
Except as provided in Section 9.6, during the lifetime of a Grantee of a SAR, only the Grantee (or, in the event of such Grantee’s legal
incapacity or incompetency, such Grantee’s guardian or legal representative) may exercise such SAR. Except as provided in Section 9.6, no SAR
shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.
9.6.Family Transfers.
If authorized in the applicable Award Agreement and by the Board, in its sole discretion, a Grantee may transfer, not for value, all or part of a SAR
to any Family Member. For the purpose of this Section 9.6, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic
relations order in settlement of marital property rights; or (iii) unless Applicable Laws do not permit such transfers, a transfer to an entity in which more
than fifty percent (50%) of the voting interests are owned by Family Members (and/or the Grantee) in exchange for an interest in that entity. Following a
transfer under this Section 9.6, any such SAR shall continue to be subject to the same terms and conditions as were applicable immediately prior to such
transfer. Subsequent transfers of transferred SARs are prohibited except to Family Members of the original Grantee in accordance with this Section 9.6
or by will or the laws of descent and distribution.
10. TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS
10.1.Grant of Restricted Stock or Stock Units.
Awards of Restricted Stock or Stock Units may be made in consideration for the promise to perform future Service to the Company or an Affiliate.
10.2.Restrictions.
At the time a grant of Restricted Stock or Stock Units is made, the Board may, in its sole discretion, establish a period of time (a “restricted
period”) applicable to such Restricted Stock or Stock Units. Each Award of Restricted Stock or Stock Units may be subject to a different restricted
period. The Board may in its sole discretion, at the time a grant of Restricted Stock or Stock Units is made, prescribe restrictions in addition to or other
than the expiration of the restricted period, including the achievement of corporate or individual performance objectives, which may be applicable to all
or any portion of the Restricted Stock or Stock Units as described in Section 14. Neither Restricted Stock nor Stock Units may be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of during the restricted period or prior to the satisfaction of any other restrictions prescribed by
the Board with respect to such Restricted Stock or Stock Units.
10.3.Restricted Stock Certificates.
Pursuant to Section 3.9, to the extent that ownership of Restricted Stock is evidenced by a book-entry registration or direct registration (including
transaction advices), such registration shall be notated to evidence the restrictions imposed on such Award of Restricted Stock under the Plan and the
applicable Award Agreement. Subject to Section 3.9, and the immediately following sentence, the Company may issue, in the name of each Grantee to
whom Restricted Stock has been granted, certificates representing the total number of shares of Restricted Stock granted to the Grantee, as soon as
reasonably practicable after the Grant Date of such Restricted Stock. The Board may provide in an Award Agreement with respect to an Award of
Restricted Stock that either (i) the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the shares of
Restricted Stock are forfeited to the Company or the restrictions applicable thereto lapse and such Grantee shall deliver a stock power to the Company
with respect to each certificate, or (ii) such certificates shall be delivered to such Grantee, provided, that such certificates shall bear a legend or legends
that comply with the applicable securities laws and regulations and makes appropriate reference to the restrictions imposed on such Award of Restricted
Stock under the Plan and such Award Agreement.
10.4.Rights of Holders of Restricted Stock.
Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such shares of Stock and the
right to receive any dividend payments or distributions declared or paid with respect to such shares of Restricted Stock. The Board may provide in an
Award Agreement evidencing a grant of Restricted Stock that that (a) any cash dividend payments or distributions paid on Restricted Stock must be
reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and restrictions as applicable to such underlying shares of
Restricted Stock or (b) any dividend payments or distributions declared or paid on shares of Restricted Stock shall only be made or paid upon satisfaction
of the vesting conditions and restrictions applicable to such shares of Restricted Stock. Dividend payments or distributions declared or paid on shares of
Restricted Stock which vest or are earned based upon the achievement of performance goals shall not vest unless such performance goals for such shares
of Restricted Stock are achieved, and if such performance goals are not achieved, the Grantee of such shares of Restricted Stock shall promptly forfeit
and, to the extent already paid or distributed, repay to the Company such dividend payments or distributions. All stock dividend payments or
distributions, if any received by a Grantee with respect to shares of Restricted Stock as a result of any stock split, stock dividend, combination of stock, or
other similar transaction shall be subject to the same vesting conditions and restrictions as applicable to such underlying shares of Restricted Stock.
10.5.Rights of Holders of Stock Units.
10.5.1. Voting and Dividend Rights.
Holders of Stock Units shall have no rights as stockholders of the Company. The Board may provide in an Award Agreement evidencing a grant of
Stock Units that the holder of such Stock Units shall be entitled to receive, upon the Company’s payment of a cash dividend on its outstanding shares of
Stock, a cash payment for
each Stock Unit held equal to the per-stock dividend paid on the shares of Stock. Such Award Agreement may also provide that such cash payment will
be deemed reinvested in additional Stock Units at a price per unit equal to the Fair Market Value of a share of Stock on the date on which such dividend is
paid.
10.5.2. Creditor’s Rights.
A holder of Stock Units shall have no rights other than those of a general unsecured creditor of the Company. Stock Units represent an unfunded and
unsecured obligation of the Company, subject to the terms and conditions of the applicable Award Agreement.
10.6.Termination of Service.
Unless the Board otherwise provides in an Award Agreement, in another agreement with the Grantee, or otherwise in writing after such Award
Agreement is issued, but prior to the termination of a Grantee’s Service, upon the termination of such Grantee’s Service, any Restricted Stock or Stock
Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be
deemed forfeited. Upon forfeiture of Restricted Stock or Stock Units, the Grantee shall have no further rights with respect to such Award, including but
not limited to any right to vote Restricted Stock or any right to receive dividends or Dividend Equivalent Rights, as applicable, with respect to Restricted
Stock or Stock Units.
10.7.Purchase of Restricted Stock and Shares of Stock Subject to Stock Units.
The Grantee of an Award of Restricted Stock or vested Stock Units shall be required, to the extent required by Applicable Laws, to purchase such
Restricted Stock or shares of Stock subject to such vested Stock Units from the Company at a Purchase Price equal to the greater of (i) the aggregate par
value of the shares of Stock represented by such Restricted Stock or such vested Stock Units or (ii) the Purchase Price, if any, specified in the Award
Agreement relating to such Restricted Stock or such vested Stock Units. The Purchase Price shall be payable in a form described in Section 12 or in
consideration for future Service to be rendered by the Grantee to the Company or an Affiliate.
10.8.Delivery of Shares of Stock.
Upon the expiration or termination of any restricted period and the satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to Restricted Stock or Stock Units settled in shares of Stock shall lapse, and, unless otherwise provided in the Award Agreement, a book-entry
or direct registration (including transaction advices) or a certificate evidencing ownership of such shares of Stock shall, consistent with Section 3.9, be
issued, free of all such restrictions, to the Grantee thereof or the Grantee’s beneficiary or estate, as the case may be. Neither the Grantee, nor the Grantee’s
beneficiary or estate, shall have any further rights with regard to a Stock Unit once the shares of Stock represented by such Stock Unit have been
delivered in accordance with this Section 10.8.
11. TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS AND OTHER EQUITY-BASED AWARDS
11.1.Unrestricted Stock Awards.
The Board may, in its sole discretion, grant (or sell at par value or at such other higher purchase price determined by the Board) an Unrestricted
Stock Award to any Grantee pursuant to which such Grantee may receive shares of Unrestricted Stock under the Plan. Unrestricted Stock Awards may be
granted or sold as described in the preceding sentence in respect of Service rendered or, if so provided in the related Award Agreement or a separate
agreement, to be rendered by the Grantee to the Company or an Affiliate or other valid consideration, in lieu of, or in addition to, any cash compensation
due to such Grantee.
11.2.Other Equity-Based Awards.
The Board may, in its sole discretion, grant Awards to Participants in the form of Other Equity-Based Awards, as deemed by the Board to be
consistent with the purposes of the Plan. Awards granted pursuant to this Section 11.2 may be granted with vesting, value and/or payment contingent
upon the attainment of one or more performance goals. The Board shall determine the terms and conditions of such Other Equity-Based Awards on the
Grant Date or thereafter. Unless the Board otherwise provides in an Award Agreement, in another agreement with the Grantee, or otherwise or in writing
after the Award Agreement is issued, upon the
termination of a Grantee’s Service, any Other Equity-Based Awards held by such Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed forfeited. Upon forfeiture of Other Equity-Based Awards, the Grantee shall
have no further rights with respect to such Award.
12.
FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK
12.1.General Rule.
Payment of the Option Price for the shares of Stock purchased pursuant to the exercise of an Option or the Purchase Price, if any, for Restricted
Stock shall be made in cash or in cash equivalents acceptable to the Company.
12.2.Surrender of Shares of Stock.
To the extent the Award Agreement so provides, payment of the Option Price for shares of Stock purchased pursuant to the exercise of an Option or
the Purchase Price for Restricted Stock may be made all or in part through the tender or attestation to the Company of shares of Stock, which shall be
valued, for purposes of determining the extent to which the Option Price or Purchase Price has been paid thereby, at their Fair Market Value on the date
of such tender or attestation.
12.3.Cashless Exercise.
With respect to an Option only (and not with respect to Restricted Stock), to the extent permitted by law and to the extent the Award Agreement so
provides, payment of the Option Price for shares of Stock purchased pursuant to the exercise of an Option may be made all or in part by delivery (on a
form acceptable to the Board) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell shares of Stock and to deliver
all or part of the sales proceeds to the Company in payment of the Option Price and any withholding taxes described in Section 18.3, or, with the consent
of the Company, by issuing the number of shares of Stock equal in value to the difference between the Option Price and the Fair Market Value of the
shares of Stock subject to the portion of the Option being exercised.
12.4.Other Forms of Payment.
To the extent the Award Agreement so provides and/or unless otherwise specified in an Award Agreement, payment of the Option Price for shares of
Stock purchased pursuant to exercise of an Option or the Purchase Price, if any, for Restricted Stock may be made in any other form that is consistent
with Applicable Laws, regulations and rules, including, without limitation, Service by the Grantee thereof to the Company or an Affiliate.
13.
TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS
13.1.Dividend Equivalent Rights.
A Dividend Equivalent Right is an Award entitling the recipient to receive credits based on cash distributions that would have been paid on the
shares of Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares of Stock had been issued to and held by the
recipient. A Dividend Equivalent Right may be granted hereunder to any Grantee, provided that no Dividend Equivalent Rights may be granted in
connection with, or related to, an Award of Options or SARs. The terms and conditions of Dividend Equivalent Rights shall be specified in the Award
Agreement therefor. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently (with or without being subject to
forfeiture or a repayment obligation) or may be deemed to be reinvested in additional shares of Stock or Awards, which may thereafter accrue additional
Dividend Equivalent Rights (with or without being subject to forfeiture or a repayment obligation). Any such reinvestment shall be at the Fair Market
Value on the date of reinvestment. Dividend Equivalent Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment
or multiple installments, all determined in the sole discretion of the Board. A Dividend Equivalent Right granted as a component of another Award may
provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other award, and
that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other award. A Dividend Equivalent
Right granted as a component of another Award may also contain terms and conditions different from such other Award; provided, however, that
Dividend Equivalent Rights credited pursuant to a Dividend Equivalent Right granted as a component of another Award which vests or is earned
based upon the achievement of performance goals shall not vest unless the performance goals for such underlying Award are achieved, and if such
performance goals are not achieved, the Grantee of such Dividend Equivalent Rights shall promptly forfeit and, to the extent already paid or distributed,
repay to the Company payments or distributions made in connection with such Dividend Equivalent Rights.
13.2.Termination of Service.
Unless the Board otherwise provides in an Award Agreement, in another agreement with the Grantee, or otherwise or in writing after the Award
Agreement is issued, a Grantee’s rights in all Dividend Equivalent Rights shall automatically terminate upon such Grantee’s termination of Service for
any reason.
14.
TERMS AND CONDITIONS OF PERFORMANCE AWARDS
14.1.Grant of Performance Awards.
Subject to the terms and provisions of the Plan, the Board, at any time and from time to time, may grant Performance Awards to a Plan participant in
such amounts and upon such terms as the Committee shall determine.
14.2.Value of Performance Awards.
Each Performance Award shall have an initial cash value or an actual or target number of shares of Stock that is established by the Board as of the
Grant Date. The Board shall set performance goals in its discretion which, depending on the extent to which they are achieved, shall determine the value
and/or number of shares of Stock subject to Performance Awards that will be paid out to the Grantee thereof.
14.3.Earning of Performance Awards.
Subject to the terms of the Plan, after the applicable Performance Period has ended, the Grantee of Performance Awards shall be entitled to receive
a payout of the value earned under such Performance Awards earned by such Grantee over such Performance Period.
14.4.Form and Timing of Payment of Performance Awards.
Payment of the value earned under Performance Awards shall be made, as determined by the Committee, in the form, at the time, and in the manner
described in the applicable Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, (i) may pay the value earned under
Performance Awards in the form of cash, shares of Stock, or other Awards, or in a combination thereof, including shares of Stock and/or Awards,
including shares of Stock and/or Awards that are subject to any restrictions deemed appropriate by the Committee, and (ii) shall pay the value earned
under Performance Awards at the close of the applicable Performance Period, or as soon as reasonably practicable after the Committee has determined
that the performance goal or goals relating thereto have been achieved; provided that, unless specifically provided in the Award Agreement, such
payment shall occur no later than the fifteenth (15th) day of the third (3rd) month following the end of the calendar year in which such Performance
Period ends.
14.5.Performance Conditions.
The right of a Grantee to exercise or to receive a grant or settlement of any Performance Award, and the timing thereof, may be subject to such
performance conditions as may be specified by the Board. The Board may use such business criteria and other measures of performance as it may deem
appropriate in establishing any performance conditions.
14.5.1. Performance Goals Generally.
The performance goals for Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with
respect to each of such criteria, as specified by the Committee. The Committee may determine that such Awards shall be granted, exercised and/or
settled upon achievement of any single performance goal or of two (2) or more performance goals. Performance goals may differ for Awards granted to
any one Grantee or to different Grantees.
14.5.2. Payment of Awards; Other Terms.
Payment of such Awards shall be in cash, shares of Stock, other Awards, or a combination thereof, including shares of Stock and/or Awards
that are subject to any restrictions deemed appropriate by the
Committee, in each case as determined in the sole discretion of the Committee. The Committee may, in its sole discretion, reduce the amount of a
payment otherwise to be made in connection with such Awards. The Committee shall specify the circumstances in which such Performance Awards
shall be paid or forfeited in the event of termination of Service by the Grantee prior to the end of a Performance Period or settlement of such
Performance Awards. In the event payment of the Performance-Based Award is made in the form of another Award subject to Service-based vesting, the
Committee shall specify the circumstances in which the Award will be paid out or forfeited in the event of a termination of Service.
14.5.3. Performance Measures.
The performance goals upon which the payment or vesting of a Performance Award may be conditioned may be based on any one of, or
combination of, the following Performance Measures, as selected by the Committee, with or without adjustment (including pro forma adjustments): (a)
net earnings or net income; (b) operating earnings; (c) pretax earnings; (d) earnings per share of stock; (e) stock price, including growth measures and
total stockholder return; (f) earnings before interest and taxes; (g) earnings before interest, taxes, depreciation and/or amortization; (h) earnings before
interest, taxes, depreciation and/or amortization as adjusted to exclude any one or more of the following: stock-based compensation expense; income from
discontinued operations; gain on cancellation of debt; debt extinguishment and related costs; restructuring, separation, and/or integration charges and
costs; reorganization and/or recapitalization charges and costs; impairment charges; merger-related events; gain or loss related to investments; sales and
use tax settlements; and gain on non-monetary transactions; (i) sales or revenue growth, whether in general, by type of product or service, or by type of
customer; (j) gross or operating margins; (k) return measures, including return on assets, capital, investment, equity, sales or revenue; (l) cash flow,
including operating cash flow, free cash flow, cash flow return on equity and cash flow return on investment; (m) productivity ratios; (n) expense targets;
(o) market share; (p) financial ratios as provided in credit agreements of the Company and its subsidiaries; (q) working capital targets; (r) completion of
acquisitions of business or companies; (s) completion of divestitures and asset sales; (t) revenues under management; (u) funds from operations; (v)
successful implementation of clinical trials, including components thereof; (w) submitting regulatory filings; (x) obtaining regulatory or marketing
approvals; (y) entering into contractual agreements; (z) meeting contractual requirements; (aa) achieving contractual milestones; (bb) entering into
collaborations; (cc) receipt of grant funding; (dd) developing or expanding manufacturing or production capacity; (ee) any combination of any of the
foregoing business criteria; and (ff) other measures of performance selected by the Committee.
Performance under any of the foregoing Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or
Affiliate as a whole or any business unit or operating segment of the Company, Subsidiary, and/or Affiliate or any combination thereof, as the
Committee may deem appropriate, and any of the above Performance Measures may be compared to the performance of a group of comparator
companies, or published or special index that the Committee, in its sole discretion, deems appropriate. In addition, the Company, in its sole discretion
may select performance under the Performance Measure specified in clause (e) above for comparison to performance under one or more stock market
indices. The Committee also has the authority to provide for accelerated vesting of any Performance Award based on the achievement of performance
goals pursuant to the Performance Measures specified in this Section 14.
14.5.4. Evaluation of Performance.
The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that
occur during a Performance Period and may make any other appropriate adjustments selected thereby: (a) asset write-downs; (b) litigation or claims,
judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any
reorganization or restructuring events or programs; (e) extraordinary non-core, non-operating, or non-recurring items; (f) acquisitions or divestitures; (g)
foreign exchange gains and losses; (h) impact of shares of Stock purchased through share repurchase programs; (i) tax valuation allowance reversals; (j)
impairment expense; and (k) environmental expense.
14.5.5. Committee Discretion.
The Committee shall have the discretion to adjust any Performance Award or the amount payable thereunder and may, in its sole discretion, alter the
Performance Measures governing a Performance Award.
15.
PARACHUTE LIMITATIONS
If a Grantee is a “disqualified individual,” as defined in Code Section 280G(c), then, notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a Grantee with the Company or an Affiliate, except an agreement, contract, or
understanding that expressly addresses Code Section 280G or Code Section 4999 (an “Other Agreement”), and notwithstanding any formal or informal
plan or other arrangement for the direct or indirect provision of compensation to the Grantee (including groups or classes of Grantees or beneficiaries of
which the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Grantee (a “Benefit
Arrangement”), any right to exercise, vesting, payment, or benefit to the Grantee under this Plan shall be reduced or eliminated:
(i)
to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the
Grantee under the Plan, all Other Agreements, and all Benefit Arrangements, would cause any exercise, vesting, payment, or benefit to the Grantee under
this Plan to be considered a “parachute payment” within the meaning of Code Section 280G(b)(2) as then in effect (a “Parachute Payment”); and
(ii) if, as a result of receiving such Parachute Payment, the aggregate after-tax amounts received by the Grantee from the Company under this
Plan, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Grantee without
causing any such exercise, vesting, payment or benefit to be considered a Parachute Payment.
Except as required by Code Section 409A or to the extent that Code Section 409A permits discretion, the Committee shall have the right, in the
Committee’s sole discretion, to designate those rights, payments, or benefits under this Plan, all Other Agreements, and all Benefit Arrangements that
should be reduced or eliminated so as to avoid having such rights, payments, or benefits be considered a Parachute Payment; provided, however, to the
extent any payment or benefit constitutes deferred compensation under Code Section 409A, in order to comply with Code Section 409A, the Company
shall instead accomplish such reduction by first reducing or eliminating any cash payments (with the payments to be made furthest in the future being
reduced first), then by reducing or eliminating any accelerated vesting of Performance Awards, then by reducing or eliminating any accelerated vesting of
Options or SARs, then by reducing or eliminating any accelerated vesting of Restricted Stock or Stock Units, then by reducing or eliminating any other
remaining Parachute Payments.
16.
REQUIREMENTS OF LAW
16.1.General.
The Company shall not be required to offer, sell or issue any shares of Stock under any Award, whether pursuant to the exercise of an Option, a
SAR, or otherwise, if the offer, sale or issuance of such shares of Stock would constitute a violation by the Grantee, any other individual or entity, or the
Company or an Affiliate of any provision of the Company’s certificate of incorporation or bylaws or of Applicable Laws, including without limitation
any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration, or
qualification of any shares of Stock subject to an Award upon any Stock Exchange or Securities Market or under any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the offering, sale issuance or purchase of shares of Stock in connection with any Award,
no shares of Stock may be offered, issued or sold to the Grantee or any other individual or entity pursuant to the exercise of such Award unless such
listing, registration or qualification shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused
thereby shall in no way affect the date of termination of the Award. Without limiting the generality of the foregoing, upon the exercise of any Option or
any SAR that may be settled in shares of Stock or the delivery of any shares of Stock underlying an Award, unless a registration statement under the
Securities Act is in effect with respect to the shares of Stock subject to such Award, the Company shall not be required to offer, sell or issue such shares
of Stock unless the Board has received evidence satisfactory to it that the Grantee or any other individual or entity exercising Option or SAR or accepting
delivery of such shares may acquire such shares of Stock pursuant to an exemption from registration under the Securities Act. Any determination by the
Board in connection with the foregoing shall be final, binding, and conclusive. The Company may register, but shall in no event be obligated to register,
any shares of Stock or other securities issuable pursuant to the Plan pursuant to the Securities Act. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of an Option or a SAR or the issuance of shares of Stock or other securities pursuant to the Plan to
comply with any Applicable Laws. As to any jurisdiction that expressly imposes the requirement that an Option (or SAR that may be settled in shares of
Stock) shall not be exercisable until the shares of Stock covered by such Option (or SAR) are registered under the securities laws thereof or are exempt
from registration, the exercise of such Option (or SAR) under circumstances in which the laws of such jurisdiction apply shall be deemed conditioned
upon the effectiveness
of such registration or the availability of such an exemption.
16.2.Rule 16b-3.
During any time when the Company has a class of equity securities registered under Section 12 of the Exchange Act, it is the intent of the Company
that Awards pursuant to the Plan and the exercise of Options and SARs granted hereunder that would otherwise be subject to Section 16(b) of the
Exchange Act will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by
the Board does not comply with the requirements of Rule 16b-3, such provision or action shall be deemed inoperative with respect to such Awards to the
extent permitted by Applicable Laws and deemed advisable by the Board, and shall not affect the validity of the Plan. In the event that Rule 16b-3 is
revised or replaced, the Board may exercise its discretion to modify this Plan in any respect necessary or advisable in its judgment to satisfy the
requirements of, or to permit the Company to avail itself of the benefits of, the revised exemption or its replacement.
17.
EFFECT OF CHANGES IN CAPITALIZATION
17.1. Changes in Stock.
If the number of outstanding shares of Stock is increased or decreased or the shares of Stock are changed into or exchanged for a different number of
shares or kind of Capital Stock or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse stock split, spin-
off, combination of stock, exchange of stock, stock dividend or other distribution payable in capital stock, or other increase or decrease in shares of stock
effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of shares of Capital Stock for which
grants of Options and other Awards may be made under the Plan, including, without limitation, the Share Reserve, shall be adjusted proportionately and
accordingly by the Board. In addition, the number and kind of shares of Capital Stock for which Awards are outstanding shall be adjusted proportionately
and accordingly by the Committee so that the proportionate interest of the Grantee therein immediately following such event shall, to the extent practicable,
be the same as immediately before such event. Any such adjustment in outstanding Options or SARs shall not change the aggregate Option Price or SAR
Exercise Price payable with respect to shares that are subject to the unexercised portion of such outstanding Options or SARs, as applicable, but shall
include a corresponding proportionate adjustment in the per share Option Price or SAR Exercise Price, as the case may be. The conversion or exercise of
any convertible securities of the Company shall not be treated as an increase in shares effected without receipt of consideration. Notwithstanding the
foregoing, in the event of any distribution to the Company’s stockholders of securities of any other entity or other assets (including an extraordinary
dividend but excluding a non-extraordinary dividend of the Company) without receipt of consideration by the Company, the Board shall, in such manner as
it deems appropriate, adjust (i) the number and kind of shares of Capital Stock subject to outstanding Awards and/or (ii) the aggregate and per share Option
Price of outstanding Options and the aggregate and per share SAR Exercise Price of outstanding SARs as required to reflect such distribution.
17.2.Reorganization in Which the Company Is the Surviving Entity Which Does not Constitute a Change in Control.
Subject to Section 17.3, if the Company shall be the surviving entity in any reorganization, merger, or consolidation of the Company with one or more
other entities which does not constitute a Change in Control, any Award theretofore granted pursuant to the Plan shall pertain to and apply to the Capital
Stock to which a holder of the number of shares of Stock subject to such Award would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the per share Option Price or per share SAR Exercise Price of any outstanding
Option or SAR so that the aggregate Option Price or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR Exercise Price
of the shares of Stock remaining subject to the Option or SAR as in effect immediately prior to such reorganization, merger, or consolidation. Subject to
any contrary language in an Award Agreement, in another agreement with the Grantee, or otherwise set forth in writing, any restrictions applicable to such
Award shall apply as well to any replacement shares of Capital Stock subject to such Award, or received by the Grantee as a result of such reorganization,
merger, or consolidation. In the event of any reorganization, merger, or consolidation of the Company described in this Section 17.2, Awards subject to
performance criteria may be adjusted (including any adjustments to the Performance Measures or other performance criteria applicable to such Awards
deemed appropriate by the Board) to take into account such reorganization, merger, or consolidation.
17.3.Change in Control in which Awards are not Assumed.
Except as otherwise provided in the applicable Award Agreement, in another agreement with the Grantee, or as otherwise set forth in writing, upon
the occurrence of a Change in Control in which outstanding Awards are not being assumed or continued, the following provisions shall apply to such
Award, to the extent not assumed or continued:
(i)Immediately prior to the occurrence of such Change in Control, in each case with the exception of any Performance Award, all outstanding shares of
Restricted Stock and all Stock Units and Dividend Equivalent Rights shall be deemed to have vested, and the shares of Stock and/or cash subject to such
Awards shall be delivered; and
(ii)Either of the following two actions shall be taken:
(A)at least fifteen (15) days prior to the scheduled consummation of the Change in Control, all Options and SARs outstanding hereunder shall
become immediately exercisable and shall remain exercisable for a period of fifteen (15) days. With respect to the Company’s establishment of an exercise
window, any exercise of an Option or SAR during such fifteen (15)-day period shall be conditioned upon the consummation of the Change in Control and
shall be effective only immediately before the consummation of the Change in Control, and upon consummation of the Change in Control, the Plan and all
outstanding but unexercised Options and SARs shall terminate, with or without consideration (including, without limitation, consideration in accordance
with clause (ii) below) as determined by the Board in its sole discretion. The Board shall send notice of an event that will result in such a termination to all
Grantees who hold Options and SARs not later than the time at which the Company gives notice thereof to its stockholders; and/or
(B)the Board may elect, in its sole discretion, to cancel any outstanding Awards of Options, SARs, Restricted Stock, Stock Units, and/or
Dividend Equivalent Rights and pay or deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or securities having a value (as
determined by the Board acting in good faith), in the case of Restricted Stock, Stock Units, and Dividend Equivalent Rights (for shares of Stock subject
thereto) equal to the formula or fixed price per share paid to holders of shares of Stock pursuant to such Change in Control and, in the case of Options or
SARs, equal to the product of the number of shares of Stock subject to the Options or SARs multiplied by the amount, if any, by which (I) the formula or
fixed price per share paid to holders of shares of Stock pursuant to such transaction exceeds (II) the Option Price or SAR Exercise Price applicable to such
Options or SARs.
(iii)For Performance Awards denominated in Stock or Stock Units, if less than half of the Performance Period has lapsed, the Awards shall be
converted into Restricted Stock or Stock Units assuming target performance has been achieved (or Unrestricted Stock if no further restrictions apply). If
more than half the Performance Period has lapsed, the Performance Awards shall be converted into Restricted Stock or Stock Units based on actual
performance to date (or Unrestricted Stock if no further restrictions apply). If actual performance is not determinable, then Performance Awards shall be
converted into Restricted Stock or Stock Units assuming target performance has been achieved, based on the discretion of the Committee (or Unrestricted
Stock if no further restrictions apply).
(iv)Other Equity-Based Awards shall be governed by the terms of the applicable Award Agreement.
17.4.Change in Control in which Awards are Assumed.
Except as otherwise provided in the applicable Award Agreement, in another agreement with the Grantee, or as otherwise set forth in writing, upon
the occurrence of a Change in Control in which outstanding Awards are being assumed or continued, the following provisions shall apply to such Award, to
the extent assumed or continued:
The Plan and the Options, SARs, Restricted Stock, Stock Units, Dividend Equivalent Rights, and Other Equity-Based Awards theretofore granted
under the Plan shall continue in the manner and under the terms so provided in the event of any Change in Control to the extent that provision is made in
writing in connection with such Change in Control for the assumption or continuation of the Options, SARs, Restricted Stock, Stock Units, Dividend
Equivalent Rights, and Other Equity-Based Awards theretofore granted, or for the substitution for such Options, SARs, Restricted Stock, Stock Units,
Dividend Equivalent Rights, and Other Equity-Based Awards theretofore granted for new stock options, stock appreciation rights, restricted stock, stock
units, dividend equivalent rights, and other equity-based awards relating to the capital stock or other securities of a successor entity, or a parent or
subsidiary thereof, with appropriate adjustments as to the number of shares (disregarding any consideration that is not common stock) and exercise prices
of options and stock appreciation rights.
17.5.Adjustments
Adjustments under this Section 17 related to shares of Stock or Capital Stock of the Company shall be made by the Board, whose determination in
that respect shall be final, binding, and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share. The Board may provide in
an applicable Award Agreement as of the Grant Date, in another agreement with the Grantee, or otherwise in writing at any time thereafter with the consent
of the Grantee, for different provisions to apply to an Award in place of those described in Sections 17.1, 17.2, 17.3 and 17.4. This Section 17 does not
limit the Company’s ability to provide for alternative treatment of Awards outstanding under the Plan in the event of a change in control event involving the
Company that is not a Change in Control.
17.6.No Limitations on Company.
The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or
any part of its business or assets (including all or any part of the business or assets of any Subsidiary or other Affiliate) or to engage in any other transaction
or activity.
18.
GENERAL PROVISIONS
18.1.Disclaimer of Rights.
No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon any individual or entity the right to remain in the
Service of the Company or an Affiliate, or to interfere in any way with any contractual or other right or authority of the Company or an Affiliate either to
increase or decrease the compensation or other payments to any individual or entity at any time, or to terminate any Service or other relationship between
any individual or entity and the Company or an Affiliate. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise
stated in the applicable Award Agreement, in another agreement with the Grantee, or otherwise in writing, no Award granted under the Plan shall be
affected by any change of duties or position of the Grantee thereof, so long as such Grantee continues to provide Service. The obligation of the Company to
pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under
the conditions prescribed herein. The Plan and Awards shall in no way be interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan.
18.2.Nonexclusivity of the Plan.
The adoption of the Plan shall not be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive
compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines desirable.
18.3.Withholding Taxes.
The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal,
state, or local taxes of any kind required by Applicable Laws to be withheld with respect to the vesting of or other lapse of restrictions applicable to an
Award or upon the issuance of any shares of Stock upon the exercise of an Option or pursuant to any other Award. At the time of such vesting, lapse, or
exercise, the Grantee shall pay in cash to the Company or an Affiliate, as the case may be, any amount that the Company or an Affiliate may reasonably
determine to be necessary to satisfy such withholding obligation; provided, that if there is a same-day sale of shares of Stock subject to an Award, the
Grantee shall pay such withholding obligation on the day on which the same-day sale is completed. Subject to the prior approval of the Company or an
Affiliate, which may be withheld by the Company or an Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such
withholding obligations, in whole or in part, (i) by causing the Company or an Affiliate to withhold shares of Stock otherwise issuable to the Grantee or (ii)
by delivering to the Company or an Affiliate shares of Stock already owned by the Grantee. The shares of Stock so withheld or delivered shall have an
aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding
obligation shall be determined by the Company or an Affiliate as of the date that the amount of tax to be withheld is to be determined. A Grantee who has
made an election pursuant to this Section 18.3 may satisfy such Grantee’s withholding obligation only with shares of Stock that are not subject to any
repurchase, forfeiture, unfulfilled vesting, or other similar requirements. The maximum
number of shares of Stock that may be withheld from any Award to satisfy any federal, state, or local tax withholding requirements upon the exercise,
vesting, or lapse of restrictions applicable to such Award or payment of shares of Stock pursuant to such Award, as applicable, may not exceed such
number of shares of Stock having a Fair Market Value equal to the minimum statutory amount required by the Company or an Affiliate to be withheld and
paid to any such federal, state, or local taxing authority with respect to such exercise, vesting, lapse of restrictions, or payment of shares of Stock.
18.4.Captions.
The use of captions in the Plan or any Award Agreement is for convenience of reference only and shall not affect the meaning of any provision of the
Plan or such Award Agreement.
18.5.Other Provisions.
Each Award granted under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
18.6.Number and Gender.
With respect to words used in the Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as
the context requires.
18.7.Severability.
If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in
any other jurisdiction.
18.8.Governing Law
The validity and construction of this Plan and the instruments evidencing the Awards hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Delaware, other than any conflicts or choice of law rule or principle that might otherwise refer construction or
interpretation of this Plan and the instruments evidencing the Awards granted hereunder to the substantive laws of any other jurisdiction.
18.9.Section 409A of the Code.
The Plan is intended to comply with Code Section 409A to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan
will be interpreted and administered to be in compliance with Code Section 409A. Any payments described in the Plan that are due within the “short-term
deferral period” (as defined for purposes of Code Section 409A) will not be treated as deferred compensation unless Applicable Laws require otherwise.
Notwithstanding any provision of the Plan to the contrary, to the extent required to avoid accelerated taxation and tax penalties under Code Section 409A,
amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6)-month period immediately
following the Grantee’s Separation from Service will instead be paid on the first payroll date after the six (6)-month anniversary of the Grantee’s
Separation from Service (or the Grantee’s death, if earlier).
Furthermore, notwithstanding anything to the contrary in the Plan, in the case of an Award that is characterized as deferred compensation under Code
Section 409A, and pursuant to which settlement and delivery of the cash or shares of Stock subject to the Award is triggered based on a Change in Control,
in no event will a Change in Control be deemed to have occurred for purposes of such settlement and delivery of cash or shares of Stock if the transaction
is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the
Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). If an Award
characterized as deferred compensation under Code Section 409A is not settled and delivered on account of the provision of the preceding sentence, the
settlement and delivery will occur on the next succeeding settlement and delivery triggering event that is a permissible triggering event under Code Section
409A. No provision of this paragraph will in any way affect the determination of a Change in Control for purposes of vesting in an Award that is
characterized as deferred compensation under Code Section 409A.
Notwithstanding the foregoing, neither the Company nor the Committee will have any obligation to take any action to prevent the assessment of any
excise tax or penalty on any Grantee under Code Section 409A and neither the Company, nor an Affiliate, nor the Board will have any liability to any
Grantee for such tax or penalty.
* * *
To record adoption of the Plan by the Board on February 2, 2023, effectiveness of the Plan on February 2, 2023, and amendment of the Plan on
December 6, 2023, the Company has caused its authorized officer to execute the Plan.
SYNDAX PHARMACEUTICALS, INC.
By: /s/ Luke J. Albrecht
Name: Luke J. Albrecht
Title: General Counsel & Secretary
Exhibit 10.20
AMENDMENT TO AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT TO AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Amendment”)
is entered into as of the 26th day of February, 2024 (the “Execution Date”), between MICHAEL A. METZGER (“Executive”) and
SYNDAX PHARMACEUTICALS, INC. (the “Company”) and supplements the terms of that certain amended and restated executive
employment agreement by and between the Parties, dated as of February 2, 2022 (the “Agreement”). Capitalized terms used and not
otherwise defined herein shall have the meaning ascribed to such terms in the Agreement.
RECITALS
A. The Company employs Executive as its Chief Executive Officer upon the terms and conditions set forth in the Agreement.
B. The Compensation Committee of the Company’s Board of Directors approved certain changes to terms of Executive’s
employment and the parties are entering this Amendment specifying such changes.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained herein, the Company and Executive agree as follows:
1.1 Executive’s Target Performance Bonus as set forth in the Agreement is hereby amended to a threshold of up to seventy percent
(70%) of Executive’s Annual Base Salary.
1.2 “Change in Control Benefits Period” means the period of twenty-four (24) months commencing on the Termination Date.
1.3 “Change in Control Severance Period” means the period of twenty-four (24) months commencing on the Termination Date.
1.4 Effectiveness of Agreement. This Amendment shall be effective on the Execution Date.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Amendment on the Execution Date written above.
SYNDAX PHARMACEUTICALS, INC.
EXECUTIVE
By:
/s/ Luke J. Albrecht
Name:
Title:
Luke J. Albrecht
General Counsel
By:
/s/ Michael A. Metzger
Name: Michael A. Metzger
1.
Exhibit 10.22
AMENDED & RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as
of the 27th day of April, 2020 (the “Effective Date”), between LUKE J. ALBRECHT (“Executive”) and SYNDAX
PHARMACEUTICALS, INC. (the “Company”). Certain capitalized terms used in this Agreement are defined in Article 6.
A. The Company is a biopharmaceutical company.
RECITALS
B. The Company desires to continue to employ Executive in the position set forth below, and Executive wishes to continue to be
employed by the Company in such position, upon the terms and conditions set forth in this Agreement.
AGREEMENT
follows:
NOW, THEREFORE, in consideration of the mutual promises contained herein, the Company and Executive agree as
ARTICLE 1
TERMS OF EMPLOYMENT
1.1.Appointment. Executive shall serve as Senior Vice President, General Counsel and Secretary, reporting to the President and
Chief Operating Officer. As Senior Vice President, General Counsel and Secretary, Executive will have such duties and responsibilities as
may 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 participate in charitable, civic, educational,
professional, community or industry affairs so long as such activities do not conflict with or are 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. 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. Executive and the Company acknowledge that
Executive’s primary office will be located at the Company’s New York City office, but that Executive may be required to spend a certain
amount of time each month at the Company’s Waltham headquarters.
1.2.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. 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.
1.3.Compensation.
a)
Annual Base Salary. Executive’s annual base salary shall be $390,719 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 or decreased
from time to time, but shall not be reduced unless, and only to the extent that, the base salaries of all other similarly situated executives of
the Company are proportionately reduced.
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.
c)
Bonus. In addition to Annual Base Salary, Executive shall be eligible to earn an annual performance bonus of up
to forty percent (40%) of Executive’s Annual Base Salary, which bonus shall be based 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 applicable bonus year. Except as provided in Section 2.2, 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.
1.4.Reimbursement of Expenses. Subject to Section 4.10(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.
ARTICLE 2
CHANGE IN CONTROL SEVERANCE BENEFITS
2.1Severance 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 2.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.
2.2Salary and Pro-Rata Bonus Payment. In consideration of Executive’s execution and non-revocation of the Release by the
Release Deadline Date, the Company shall pay Executive a severance payment equal to (a) the sum of Executive’s Monthly Base Salary
and Pro-Rata Bonus multiplied by (b) 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 4) in a lump sum on the first regularly-scheduled payroll date occurring
on or after the Release Deadline Date.
2
2.3Health 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. 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 2.3, (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)
2.4Stock Awards. Upon a Change in Control 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 in full; (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 other stock award granted to Executive pursuant to any
equity incentive plan of the Company shall lapse; 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 (i) twelve (12) months or (ii) the remaining term of the outstanding option.
ARTICLE 3
COVERED TERMINATION SEVERANCE BENEFITS
3.1Severance 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 3.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.
3
3.2Salary Payment. In consideration of Executive’s timely execution and non-revocation of the Release by the Release
Deadline Date, the Company shall pay Executive a severance payment equal to Executive’s Monthly Base Salary multiplied by the
number of months in the Covered Termination Severance Period, less applicable withholdings. The severance payment shall be payable
(except as set forth in Article 4) in a lump sum on the first regularly-scheduled payroll date occurring on or after the Release Deadline
Date.
3.3Health 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 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. 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 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)
3.4Stock 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 that would otherwise
have vested 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 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 that would otherwise have lapsed during the twelve
(12) month period following the Termination Date in accordance with the option’s
4
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 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 (i) twelve (12) months or (ii) the
remaining term of the outstanding option.
c)
ARTICLE 4
LIMITATIONS AND CONDITIONS ON BENEFITS
4.1Rights Conditioned on Compliance. Executive’s rights to receive all severance benefits described in Article 2 and Article 3
shall be conditioned upon and subject to Executive’s compliance with the limitations and conditions on benefits as described in this
Article 4.
4.2Continuation 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.
4.3Release 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.
4.4Return 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
5
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 and1or deletion is done.
4.5Cooperation 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 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 acknowledges and agrees that Executive’s obligations under this Section 4.5 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 4.5
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 2 or Article 3. If it is determined by a court of competent jurisdiction in any state that
any restriction in this Section 4.5 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.
4.6Parachute 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
6
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 and1or benefits constituting the Payment, and (ii) reduction in payments and1or 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 4.6. 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.
4.7Certain 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.
4.8Mitigation. 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 2.3 and 3.3 above).
4.9Indebtedness of Executive. If Executive is indebted to the Company on the effective date
7
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.
4.10Application 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 2 or Article 3 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 4.10(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 4.10(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.
4.11Tax Withholding. All payments under this Agreement shall be subject to applicable withholding for federal, state and local
income and employment taxes.
4.12No Duplication of Severance Benefits. The severance and other benefits provided in Article 2 and Article 3 are mutually
exclusive of each other, and in no event shall Executive receive any severance or other benefits pursuant to both Article 2 and Article 3.
8
ARTICLE 5
TERMINATION WITH CAUSE OR BY VOLUNTARY RESIGNATION; OTHER RIGHTS AND BENEFITS
5.1Termination 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 1.4 and 4.10(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 2 or
Article 3 upon Executive’s termination for Cause.
5.2Termination 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 1.4 and Section 4.10(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 2 or Article 3 upon any voluntary resignation by
Executive that is not a Resignation for Good Reason.
5.3Other 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 4, Section 5.1 and Section 5.2 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:
6.1“Board” means the Board of Directors of the Company.
ARTICLE 6
DEFINITIONS
6.2 “Cause” means, upon a reasonable determination by the Company, Executive’s: (a) dishonest statements or acts with respect
to the Company, any subsidiary or any affiliate of the Company or any subsidiary; (b) commission by or indictment for (i) a felony or (ii)
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); (c) gross negligence, willful misconduct or insubordination with respect to the
Company, any subsidiary or any affiliate of the Company or any subsidiary; (d) material breach of any of Executive’s obligations under
any agreement to which Executive and the Company or any subsidiary are a party; or (e) death or disability.
9
With respect to clause (d), 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.
6.3“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;
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).
10
6.4“Change in Control Benefits Period” means the period of twelve (12) months commencing on the Termination Date.
6.5“Change in Control Severance Period” means the period of twelve (12) months commencing on the Termination Date.
6.6“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.
6.7“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
6.8“Code” means the Internal Revenue Code of 1986, as amended.
6.9“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.
6.10“Confidentiality Agreement” means Executive’s Assignment of Developments, Non- Disclosure, and Non-Solicitation
Agreement with the Company (or any successor agreement thereto).
6.11“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.
6.12“Covered Termination Benefits Period” means the period of nine (9) months commencing on the Termination Date.
6.13“Covered Termination Severance Period” means the period of nine (9) months commencing on the Termination Date.
6.14“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.
6.15“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.
6.16“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.
11
6.17“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 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;
a)
b)
Executive’s duties or responsibilities are materially diminished (not simply a change in title or reporting
relationships); provided, that Executive shall not be deemed to have a “Resignation for Good Reason” if the Company survives as a
separate legal entity or business unit following the Change in Control and Executive holds materially the same position in such legal entity
or business unit as Executive held before the Change in Control;
c)
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; or
materially agree to perform under the terms of this Agreement.
d)
The failure of the Company to obtain a satisfactory agreement from any successor to materially assume and
6.18“Termination Date” means the effective date of the Change in Control Termination, the Covered Termination or a
termination for Cause, as applicable.
ARTICLE 7
GENERAL PROVISIONS
7.1Employment 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.
7.2Notices. 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.
7.3Severability. 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
12
invalid, illegal or unenforceable provisions had never been contained herein.
7.4Waiver. 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.
7.5Complete 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.
7.6Amendment 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 2 hereof.
7.7Counterparts. 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.
7.8Headings. 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.
7.9Successors 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.
7.10Choice 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.
7.11Arbitration. 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
13
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:11www.jamsadr.com1rules-employment-arbitration1. 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 7.11 of this Agreement.
7.12Construction 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.
7.13Circular 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.
14
IN WITNESS WHEREOF, the parties have executed this Agreement on the Effective Date written below.
SYNDAX PHARMACEUTICALS, INC. EXECUTIVE
By: By:
Name: Briggs W. Morrison, M.D. Name: Luke J. Albrecht
Title: Chief Executive Officer Date:
Exhibit A:
Release (Individual Termination - Age 40 or Older)
Exhibit B:
Release (Individual and Group Termination - Under Age 40)
Exhibit C:
Release (Group Termination - Age 40 or Older)
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 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
A
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:
A
A-2
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- 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).
Printed Name
Date:
EXECUTIVE:
Signature
B-2
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 of revocation to the
21
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:
22
Exhibit 10.23
AMENDMENT TO AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT TO AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Amendment”)
is entered into as of the 26th day of February, 2024 (the “Execution Date”), between LUKE J. ALBRECHT (“Executive”) and SYNDAX
PHARMACEUTICALS, INC. (the “Company”) and supplements the terms of that certain amended and restated executive employment
agreement by and between the Parties, dated as of April 27, 2020 (the “Agreement”). Capitalized terms used and not otherwise defined
herein shall have the meaning ascribed to such terms in the Agreement.
RECITALS
A. The Company employs Executive as its General Counsel upon the terms and conditions set forth in the Agreement.
B. The Compensation Committee of the Company’s Board of Directors approved certain changes to terms of Executive’s
employment and the parties are entering this Amendment specifying such changes.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the Company and Executive agree as follows:
1.1 Executive’s Target Performance Bonus as set forth in the Agreement is hereby amended to a threshold of up to forty-five percent
(45%) of Executive’s Annual Base Salary.
AGREEMENT
1.2 “Change in Control Benefits Period” means the period of eighteen (18) months commencing on the Termination Date.
1.3 “Change in Control Severance Period” means the period of eighteen (18) months commencing on the Termination Date.
1.4 Effectiveness of Agreement. This Amendment shall be effective on the Execution Date.
IN WITNESS WHEREOF, the parties have executed this Amendment on the Execution Date written above.
* * * * *
SYNDAX PHARMACEUTICALS, INC.
EXECUTIVE
By:
/s/ Michael A. Metzger
By:
/s/ Luke J. Albrecht
Name:
Title:
Michael A. Metzger
Chief Executive Officer
Name: Luke J. Albrecht
1.
Exhibit 10.25
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (this “Amendment”) is entered into as of the 26th day
of February, 2024
(“Executive”) and SYNDAX
PHARMACEUTICALS, INC. (the “Company”) and supplements the terms of that certain executive employment agreement by and
between the Parties, dated as of March 1, 2022 (the “Agreement”). Capitalized terms used and not otherwise defined herein shall have the
meaning ascribed to such terms in the Agreement.
(the “Execution Date”), between CATHERINE MADIGAN, M.D.
RECITALS
A. The Company employs Executive as its Chief Medical Officer upon the terms and conditions set forth in the Agreement.
B. The Compensation Committee of the Company’s Board of Directors approved certain changes to terms of Executive’s
employment and the parties are entering this Amendment specifying such changes.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the Company and Executive agree as follows:
1.1 Executive’s Target Performance Bonus as set forth in the Agreement is hereby amended to a threshold of up to forty-five percent
(45%) of Executive’s Annual Base Salary.
AGREEMENT
1.2 “Change in Control Benefits Period” means the period of eighteen (18) months commencing on the Termination Date.
1.3 “Change in Control Severance Period” means the period of eighteen (18) months commencing on the Termination Date.
1.4 Effectiveness of Agreement. This Amendment shall be effective on the Execution Date.
IN WITNESS WHEREOF, the parties have executed this Amendment on the Execution Date written above.
* * * * *
SYNDAX PHARMACEUTICALS, INC.
EXECUTIVE
By:
/s/ Luke J. Albrecht
Name:
Title:
Luke J. Albrecht
General Counsel
By:
/s/ Catherine Madigan, M.D.
Name: Catherine Madigan, M.D.
1.
Exhibit 10.27
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (this “Amendment”) is entered into as of the 26th day
of February, 2024 (the “Execution Date”), between KEITH A. GOLDAN (“Executive”) and SYNDAX PHARMACEUTICALS, INC.
(the “Company”) and supplements the terms of that certain executive employment agreement by and between the Parties, dated as of June 8,
2022 (the “Agreement”). Capitalized terms used and not otherwise defined herein shall have the meaning ascribed to such terms in the
Agreement.
RECITALS
A. The Company employs Executive as its Chief Financial Officer upon the terms and conditions set forth in the Agreement.
B. The Compensation Committee of the Company’s Board of Directors approved certain changes to terms of Executive’s
employment and the parties are entering this Amendment specifying such changes.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the Company and Executive agree as follows:
1.1 Executive’s Target Performance Bonus as set forth in the Agreement is hereby amended to a threshold of up to forty-five percent
(45%) of Executive’s Annual Base Salary.
AGREEMENT
1.2 “Change in Control Benefits Period” means the period of eighteen (18) months commencing on the Termination Date.
1.3 “Change in Control Severance Period” means the period of eighteen (18) months commencing on the Termination Date.
1.4 Effectiveness of Agreement. This Amendment shall be effective on the Execution Date.
IN WITNESS WHEREOF, the parties have executed this Amendment on the Execution Date written above.
* * * * *
SYNDAX PHARMACEUTICALS, INC.
EXECUTIVE
By:
/s/ Luke J. Albrecht
Name:
Title:
Luke J. Albrecht
General Counsel
By:
/s/ Keith A. Goldan
Name: Keith A. Goldan
1.
Exhibit 10.30
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
This AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (this “Amendment”) is entered into as of the 26th day
of February, 2024
(“Executive”) and SYNDAX
PHARMACEUTICALS, INC. (the “Company”) and supplements the terms of that certain executive employment agreement by and
between the Parties, dated as of March 30, 2023 (the “Agreement”). Capitalized terms used and not otherwise defined herein shall have the
meaning ascribed to such terms in the Agreement.
(the “Execution Date”), between NEIL GALLAGHER, M.D., Ph.D.
RECITALS
A. The Company employs Executive as its President, Head of Research and Development, upon the terms and conditions set forth
in the Agreement.
B. The Compensation Committee of the Company’s Board of Directors approved certain changes to terms of Executive’s
employment and the parties are entering this Amendment specifying such changes.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the Company and Executive agree as follows:
1.1 Executive’s Target Performance Bonus as set forth in the Agreement is hereby amended to a threshold of up to fifty percent
(50%) of Executive’s Annual Base Salary.
AGREEMENT
1.2 “Change in Control Benefits Period” means the period of eighteen (18) months commencing on the Termination Date.
1.3 “Change in Control Severance Period” means the period of eighteen (18) months commencing on the Termination Date.
1.4 Effectiveness of Agreement. This Amendment shall be effective on the Execution Date.
IN WITNESS WHEREOF, the parties have executed this Amendment on the Execution Date written above.
* * * * *
SYNDAX PHARMACEUTICALS, INC.
EXECUTIVE
By:
/s/ Luke J. Albrecht
Name:
Title:
Luke J. Albrecht
General Counsel
By:
/s/ Neil Gallagher, M.D., Ph.D.
Name: Neil Gallagher, M.D., Ph.D.
1.
Exhibit 10.31
SYNDAX PHARMACEUTICALS, INC.
AMENDED & RESTATED
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
Effective: February 7, 2024
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
$45,644. 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 17,000 shares and the Chair shall also receive an annual award of deferred settlement
restricted stock units to purchase 34,000 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 $79,876 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 – $11,410
Compensation committee – $8,558
Science & Technology committee – $8,558
Nominating and corporate governance committee – $5,706
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 – $22,822
Compensation committee – $17,115
Science & Technology committee – $17,115
Nominating and corporate governance committee – $11,410
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.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 333-258628, and 333-263185 on Form S-8 of our reports dated February 27, 2024, 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, 2023.
Exhibit 23.1
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 27, 2024
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: February 27, 2024
By: /s/ Michael A. Metzger
Michael A. Metzger
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
I, Keith A. Goldan, 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: February 27, 2024
By: /s/ Keith A. Goldan
Keith A. Goldan
Chief Financial Officer
(Principal Financial Officer)
Exhibit 32.1
CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
*
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 Keith A. Goldan, Chief Financial Officer and Treasurer 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, 2023, 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: February 27, 2024
Date: February 27, 2024
_______
By /s/ Michael A. Metzger
Michael A. Metzger
Chief Executive Officer
By
/s/ Keith A. Goldan
Keith A. Goldan
Chief Financial Officer and Treasurer
* 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
SYNDAX PHARMACEUTICALS, INC.
INCENTIVE COMPENSATION RECOUPMENT POLICY
Exhibit 97
1.
INTRODUCTION
The Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of Syndax
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), has determined that it is in the best interests of the Company and its
stockholders to adopt this Incentive Compensation Recoupment Policy (this “Policy”) providing for the Company’s recoupment of
Recoverable Incentive Compensation that is received by Covered Officers of the Company under certain circumstances. Certain capitalized
terms used in this Policy have the meanings given to such terms in Section 3 below.
This Policy is designed to comply with, and shall be interpreted to be consistent with, Section 10D of the Exchange Act, Rule 10D-
1 promulgated thereunder (“Rule 10D-1”) and Nasdaq Listing Rule 5608 (the “Listing Standards”).
2.
EFFECTIVE DATE
This Policy shall apply to all Incentive Compensation that is received by a Covered Officer on or after October 2, 2023 (the
“Effective Date”). Incentive Compensation is deemed “received” in the Company’s fiscal period in which the Financial Reporting Measure
specified in the Incentive Compensation award is attained, even if the payment or grant of such Incentive Compensation occurs after the end
of that period.
3.
DEFINITIONS
“Accounting Restatement” means an accounting restatement that the Company is required to prepare due to the material
noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting
restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that
would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
“Accounting Restatement Date” means the earlier to occur of (a) the date that the Board, a committee of the Board authorized to
take such action, or the officer or officers of the Company authorized to take such action if Board action is not required, concludes, or
reasonably should have concluded, that the Company is required to prepare an Accounting Restatement, or (b) the date that a court, regulator
or other legally authorized body directs the Company to prepare an Accounting Restatement.
“Administrator” means the Compensation Committee or, in the absence of such committee, the Board.
“Code” means the U.S. Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
“Covered Officer” means each current and former Executive Officer.
“Exchange” means the Nasdaq Stock Market.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Executive Officer” means the Company’s president, principal financial officer, principal accounting officer (or if there is no such
accounting officer, the controller), any vice-president of the Company in charge of a principal business unit, division, or function (such as
sales, administration, or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-
making functions for the Company. Executive officers of the Company’s parent(s) or subsidiaries are deemed executive officers of the
Company if they perform such policy-making functions for the Company. Policy-making function is not intended to include policy-making
functions that are not significant. Identification of an executive officer for purposes of this Policy would include at a minimum executive
officers identified pursuant to Item 401(b) of Regulation S-K promulgated under the Exchange Act.
“Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles
used in preparing the Company’s financial statements, and any measures derived wholly or in part from such measures, including Company
stock price and total stockholder return (“TSR”). A measure need not be presented in the Company’s financial statements or included in a
filing with the SEC in order to be a Financial Reporting Measure.
“Incentive Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of
a Financial Reporting Measure.
“Lookback Period” means the three completed fiscal years immediately preceding the Accounting Restatement Date, as well as any
transition period (resulting from a change in the Company’s fiscal year) within or immediately following those three completed fiscal years
(except that a transition period of at least nine months shall count as a completed fiscal year). Notwithstanding the foregoing, the Lookback
Period shall not include fiscal years completed prior to the Effective Date.
“Recoverable Incentive Compensation” means Incentive Compensation received by a Covered Officer during the Lookback Period
that exceeds the amount of Incentive Compensation that would have been received had such amount been determined based on the
Accounting Restatement, computed without regard to any taxes paid (i.e., on a gross basis without regard to tax withholdings and other
deductions). For any compensation plans or programs that take into account Incentive Compensation, the amount of Recoverable Incentive
Compensation for purposes of this Policy shall include, without limitation, the amount contributed to any notional account based on
Recoverable Incentive Compensation and any earnings to date on that notional amount. For any Incentive Compensation that is based on
stock price or TSR, where the Recoverable Incentive Compensation is not subject to mathematical recalculation directly from the information
in an Accounting Restatement, the Administrator will determine the amount of Recoverable Incentive Compensation based on a reasonable
estimate of the effect of the Accounting Restatement on the stock price or TSR upon which the Incentive Compensation was received. The
Company shall maintain documentation of the determination of that reasonable estimate and provide such documentation to the Exchange in
accordance with the Listing Standards.
“SEC” means the U.S. Securities and Exchange Commission.
4.
RECOUPMENT
(a) Applicability of Policy. This Policy applies to Incentive Compensation received by a Covered Officer (i) after beginning
services as an Executive Officer, (ii) who served as an Executive Officer at any time during the performance period for such Incentive
Compensation, (iii) while the Company had a class of securities listed on a national securities exchange or a national securities association,
and (iv) during the Lookback Period.
(b) Recoupment Generally. Pursuant to the provisions of this Policy, if there is an
2
Accounting Restatement, the Company must reasonably promptly recoup the full amount of the Recoverable Incentive Compensation, unless
the conditions of one or more subsections of Section 4(c) of this Policy are met and the Compensation Committee, or, if such committee does
not consist solely of independent directors, a majority of the independent directors serving on the Board, has made a determination that
recoupment would be impracticable. Recoupment is required regardless of whether the Covered Officer engaged in any misconduct and
regardless of fault, and the Company’s obligation to recoup Recoverable Incentive Compensation is not dependent on whether or when any
restated financial statements are filed.
(c) Impracticability of Recovery. Recoupment may be determined to be impracticable if, and only if:
(i)
the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount of the applicable
Recoverable Incentive Compensation; provided that, before concluding that it would be impracticable to recover any amount of
Recoverable Incentive Compensation based on expense of enforcement, the Company shall make a reasonable attempt to recover
such Recoverable Incentive Compensation, document such reasonable attempt(s) to recover, and provide that documentation to the
Exchange in accordance with the Listing Standards; or
(ii)
recoupment of the applicable Recoverable Incentive Compensation would likely cause an otherwise tax-qualified
retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Code
Section 401(a)(13) or Code Section 411(a) and regulations thereunder.
(d) Sources of Recoupment. To the extent permitted by applicable law, the Administrator shall, in its sole discretion, determine the
timing and method for recouping Recoverable Incentive Compensation hereunder, provided that such recoupment is undertaken reasonably
promptly. The Administrator may, in its discretion, seek recoupment from a Covered Officer from any of the following sources or a
combination thereof, whether the applicable compensation was approved, awarded, granted, payable or paid to the Covered Officer prior to,
on or after the Effective Date: (i) direct repayment of Recoverable Incentive Compensation previously paid to the Covered Officer; (ii)
cancelling prior cash or equity-based awards (whether vested or unvested and whether paid or unpaid); (iii) cancelling or offsetting against
any planned future cash or equity-based awards; (iv) forfeiture of deferred compensation, subject to compliance with Code Section 409A; and
(v) any other method authorized by applicable law or contract. Subject to compliance with any applicable law, the Administrator may
effectuate recoupment under this Policy from any amount otherwise payable to the Covered Officer, including amounts payable to such
individual under any otherwise applicable Company plan or program, e.g., base salary, bonuses or commissions and compensation previously
deferred by the Covered Officer. The Administrator need not utilize the same method of recovery for all Covered Officers or with respect to
all types of Recoverable Incentive Compensation.
(e) No Indemnification of Covered Officers. Notwithstanding any indemnification agreement, applicable insurance policy or any
other agreement or provision of the Company’s certificate of incorporation or bylaws to the contrary, no Covered Officer shall be entitled to
indemnification or advancement of expenses in connection with any enforcement of this Policy by the Company, including paying or
reimbursing such Covered Officer for insurance premiums to cover potential obligations to the Company under this Policy.
(f) Indemnification of Administrator. Any members of the Administrator, and any other members of the Board who assist in the
administration of this Policy, shall not be personally liable for any action, determination or interpretation made with respect to this Policy and
shall be indemnified by the
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Company to the fullest extent under applicable law and Company policy with respect to any such action, determination or interpretation. The
foregoing sentence shall not limit any other rights to indemnification of the members of the Board under applicable law or Company policy.
(g) No “Good Reason” for Covered Officers. Any action by the Company to recoup or any recoupment of Recoverable Incentive
Compensation under this Policy from a Covered Officer shall not be deemed (i) “good reason” for resignation or to serve as a basis for a
claim of constructive termination under any benefits or compensation arrangement applicable to such Covered Officer, or (ii) to constitute a
breach of a contract or other arrangement to which such Covered Officer is party.
5.
ADMINISTRATION
Except as specifically set forth herein, this Policy shall be administered by the Administrator. The Administrator shall have full and
final authority to make any and all determinations required under this Policy. Any determination by the Administrator with respect to this
Policy shall be final, conclusive and binding on all interested parties and need not be uniform with respect to each individual covered by this
Policy. In carrying out the administration of this Policy, the Administrator is authorized and directed to consult with the full Board or such
other committees of the Board as may be necessary or appropriate as to matters within the scope of such other committee’s responsibility and
authority. Subject to applicable law, the Administrator may authorize and empower any officer or employee of the Company to take any and
all actions that the Administrator, in its sole discretion, deems necessary or appropriate to carry out the purpose and intent of this Policy
(other than with respect to any recovery under this Policy involving such officer or employee).
6.
SEVERABILITY
If any provision of this Policy or the application of any such provision to a Covered Officer shall be adjudicated to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Policy, and the
invalid, illegal or unenforceable provisions shall be deemed amended to the minimum extent necessary to render any such provision or
application enforceable.
7.
NO IMPAIRMENT OF OTHER REMEDIES
Nothing contained in this Policy, and no recoupment or recovery as contemplated herein, shall limit any claims, damages or other
legal remedies the Company or any of its affiliates may have against a Covered Officer arising out of or resulting from any actions or
omissions by the Covered Officer. This Policy does not preclude the Company from taking any other action to enforce a Covered Officer’s
obligations to the Company, including, without limitation, termination of employment and/or institution of civil proceedings. This Policy is in
addition to the requirements of Section 304 of the Sarbanes-Oxley Act of 2002 (“SOX 304”) that are applicable to the Company’s Chief
Executive Officer and Chief Financial Officer and to any other compensation recoupment policy and/or similar provisions in any
employment, equity plan, equity award, or other individual agreement, to which the Company is a party or which the Company has adopted
or may adopt and maintain from time to time; provided, however, that compensation recouped pursuant to this Policy shall not be duplicative
of compensation recouped pursuant to SOX 304 or any such compensation recoupment policy and/or similar provisions in any such
employment, equity plan, equity award, or other individual agreement except as may be required by law.
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8.
AMENDMENT; TERMINATION
The Administrator may amend, terminate or replace this Policy or any portion of this Policy at any time and from time to time in its
sole discretion. The Administrator shall amend this Policy as it deems necessary to comply with applicable law or any Listing Standard.
9.
SUCCESSORS
This Policy shall be binding and enforceable against all Covered Officers and, to the extent required by Rule 10D-1 and/or the
applicable Listing Standards, their beneficiaries, heirs, executors, administrators or other legal representatives.
10. REQUIRED FILINGS
The Company shall make any disclosures and filings with respect to this Policy that are required by law, including as required by the
SEC.
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SYNDAX PHARMACEUTICALS, INC.
INCENTIVE COMPENSATION RECOUPMENT POLICY
FORM OF EXECUTIVE ACKNOWLEDGMENT
I, the undersigned, agree and acknowledge that I am bound by, and subject to, the Syndax Pharmaceuticals, Inc. Incentive Compensation
Recoupment Policy, as may be amended, restated, supplemented or otherwise modified from time to time (the “Policy”). In the event of any
inconsistency between the Policy and the terms of any employment agreement, offer letter or other individual agreement with Syndax
Pharmaceuticals, Inc. (the “Company”) to which I am a party, or the terms of any compensation plan, program or agreement, whether or not
written, under which any compensation has been granted, awarded, earned or paid to me, the terms of the Policy shall govern.
In the event that the Administrator (as defined in the Policy) determines that any compensation granted, awarded, earned or paid to me must
be forfeited or reimbursed to the Company pursuant to the Policy, I will promptly take any action necessary to effectuate such forfeiture
and/or reimbursement. I further agree and acknowledge that I am not entitled to indemnification, and hereby waive any right to advancement
of expenses, in connection with any enforcement of the Policy by the Company.
Agreed and Acknowledged:
Name:
Title:
Date: