UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
For the fiscal year ended December 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 001-38811
Delaware
(State or other jurisdiction of
incorporation or organization)
TCR2 Therapeutics Inc.
(Exact name of registrant as specified in its charter)
100 Binney Street, Suite 710
Cambridge, Massachusetts 02142
(Address of principal executive offices)
(617) 949-5200
(Registrant’s telephone number, including area code)
47-4152751
(IRS Employer Identification No.)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 Par Value
Trading Symbol(s)
TCRR
Name of each exchange on which registered
The Nasdaq Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐ Accelerated filer
☒ Smaller reporting company
Emerging growth company
☐
☒
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2021: $492,524,243
As of March 18, 2022, there were 38,546,345 shares of the registrant’s Common Stock, $0.0001 par value per share, outstanding.
TCR2 Therapeutics Inc.
Table of Contents
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer 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
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Exhibit List
Signatures
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SUMMARY OF THE MATERIAL AND OTHER RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to numerous material and other risks and uncertainties that you should be aware of in evaluating our business.
These risks are described more fully in “Item 1A—Risk Factors,” and include, but are not limited to, the following:
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Our approach to the discovery and development of product candidates based on our TRuC-T cell platform represents a novel approach to cancer treatment,
which creates significant challenges for us. Further, we are very early in our development efforts. Most of our product candidates are still in preclinical
development. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our
product candidates, or experience significant delays in doing so, our business will be materially harmed.
Our business is highly dependent on our clinical trials for our lead product candidate, gavo-cel, and we must complete IND-enabling studies and clinical testing
before we can seek regulatory approval and begin commercialization of any of our product candidates. We cannot be certain that we will be able to complete
ongoing clinical trials, initiate future planned clinical trials, or advance our product candidates into additional trials, or to successfully develop, or obtain regulatory
approval for, or successfully commercialize, any of our product candidates.
We have limited experience as a company in conducting clinical trials. Clinical development involves a lengthy and expensive process with an uncertain
outcome, and results of earlier studies and trials may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient to
support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing, or ultimately be unable to
complete, the development of such product candidate.
Manufacturing and administering our product candidates are complex and we may encounter difficulties in production, particularly with respect to process
development or scaling up of our manufacturing capabilities. If we encounter such difficulties, our ability to provide supply of our TRuC-T cells for clinical trials or
for commercial purposes could be delayed or stopped. We plan to establish our own manufacturing facility and infrastructure in addition to or in lieu of relying on
third parties for the manufacture of our product candidates and the use of third-party manufacturing suites, which will be costly, time-consuming, and which may
not be successful.
The market opportunities for our product candidates may be relatively small as it will be limited to those patients who are ineligible for or have failed prior
treatments and our estimates of the prevalence of our target patient populations may be inaccurate.
We plan to rely on third parties to conduct our clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet
expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates. If these third parties do not properly and
successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product
candidates.
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability. We have incurred
significant losses since inception, and we expect to incur losses over the next several years and may not be able to achieve or sustain revenues or profitability in
the future.
The current outbreak of novel coronavirus, or COVID-19, has caused, and could continue to cause, severe disruptions in the U.S., regional and global
economies. COVID-19 has affected our on-going clinical trials and could seriously harm our development efforts, increase our costs and expenses and have a
material adverse effect on our business, financial condition and results of operations.
If we are unable to obtain and maintain patent protection for any products we develop and for our technology, or if the scope of the patent protection obtained is
not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to commercialize any
product candidates we may develop, and our technology may be adversely affected.
The U.S. Food and Drug Administration (FDA) regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the
clinical development and regulatory approval of our product candidates.
Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which
may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated
problems with our product candidates.
We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to
successfully implement our business strategy.
Our stock price has been and will likely continue to be volatile. Securities class action or other litigation involving our company or members of our management
team could also substantially harm our business, financial condition and results of operations.
We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our
common stock less attractive to investors. We are also a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting
companies may make our common stock less attractive to investors.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K of TCR2 Therapeutics Inc. (the “Company,” “we,” “us” and “our”) contains or incorporates statements that
constitute forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or
current facts or matters are forward looking statements. In some cases, you can identify forward-looking statements by terminology such as
“may,” “will,” “could,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “continue”
or the negative of these terms or other comparable terminology. Forward-looking statements appear in a number of places in this Annual
Report on Form 10-K and include, but are not limited to, statements about:
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the timing of preclinical studies and clinical trials of gavo-cel, TC-510 and any other product candidates;
our need to raise additional funding before we can expect to generate any revenues from product sales;
our ability to submit our planned INDs, conduct successful clinical trials and obtain regulatory approval for gavo-cel, TC-510 or any other product candidates that
we may identify or develop;
the ability of our TRuC-T cell platform to generate and advance additional product candidates;
our ability to establish an adequate safety, potency and purity profile for gavo-cel, TC-510 or any other product candidates that we may identify or develop;
our ability to manufacture gavo-cel, TC-510 or any other product candidate in conformity with our specifications and with the FDA’s requirements and to scale up
manufacturing of our product candidates to commercial scale, if approved;
the implementation of our strategic plans for our business, any product candidates we may develop and our technology;
our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our product
candidates and technology;
the rate and degree of market acceptance and clinical utility for any product candidates we may develop;
our estimates regarding our expenses, future revenues, capital requirements and our needs for additional financing;
our ability to maintain and establish collaborations;
our ability to effectively manage our anticipated growth;
developments relating to our competitors and our industry, including the impact of government regulation;
our estimates regarding the market opportunities for our product candidates;
our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;
our estimates of our expenses, ongoing losses, future revenue, capital requirements and our needs for, or ability to obtain, additional financing;
our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act, or the JOBS Act;
the current and future impact of the ongoing COVID-19 pandemic on our business;
our financial performance; and
other risks and uncertainties, including those listed under the section titled “Risk Factors.”
Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to our
strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and
expected market growth, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements
expressed or implied by these forward-looking statements. You are urged to carefully review the disclosures we make concerning these risks
and other factors that may affect our business and operating results under “Item 1A. Risk Factors” in this Annual Report on Form 10-K. You
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. The
Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after
the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so.
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Except where the context otherwise requires or where otherwise indicated, the terms “TCR2,” “TCRR,” “we,” “us,” “our,” “our company,” “the
company,” and “our business” refer to TCR2 Therapeutics Inc. and its consolidated subsidiaries.
Part I
Item 1. Business
Overview
We are a clinical-stage cell therapy company developing a pipeline of novel T cell therapies for cancer patients suffering from solid tumors by
powering the T cell receptor (TCR) with our proprietary, first-in-class TCR Fusion Construct T cells (TRuC-T cells). Designed to overcome the
limitations of current cell therapy modalities, our TRuC-T cells specifically recognize and kill cancer cells by harnessing the entire TCR
signaling complex, independent of human leukocyte antigens (HLA), which we believe is essential for T cell therapies to be effective in
patients with solid tumors.
Our lead TRuC-T cell targeting mesothelin-expressing solid tumors is gavocabtagene autoleucel (gavo-cel, formerly TC-210). We are
conducting our Phase 1/2 clinical trial for gavo-cel to treat patients with non-small cell lung cancer (NSCLC), ovarian cancer, malignant
pleural/peritoneal mesothelioma or cholangiocarcinoma. We estimate the patient population for gavo-cel in the four indications which we are
exploring in our clinical trial is up to 81,000 patients in the United States alone.
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Based on the latest interim data readout from patients in dose escalation in our Phase 1/2 clinical trial as of the June 30, 2021
data cutoff, gavo-cel has demonstrated consistent clinical benefit, with 15 of 16 patients evaluable for efficacy experiencing
tumor regression, clinical activity observed in all three mesothelin-expressing tumor types treated (i.e. mesothelioma, ovarian
cancer and cholangiocarcinoma), and an 81% disease control rate (DCR).
We have observed a 31% Overall Response Rate (ORR) in patients infused with gavo-cel following lymphodepletion with four
RECIST partial responses (PRs) (3 confirmed and 1 unconfirmed) by independent assessment, including the first ovarian cancer
patient to ever achieve a PR with a single agent, engineered cell therapy and one mesothelioma patient achieving a complete
metabolic response. Additionally, we observed our first PR by investigator assessment in a metastatic cholangiocarcinoma
patient.
Based on our mesothelin cutoff screening protocol (confirmed positive mesothelin expression on ≥50% of tumor cells that are 2+
and/or 3+ by immunohistochemistry), 46% of patients screened have been eligible to be enrolled in our clinical trial.
A maximum tolerated dose (MTD) was declared by the Safety Review Team (SRT) after all three patients treated at dose level 5
(DL5: 5x108 cells/m2 following lymphodepletion) experienced Grade ≥3 CRS. Below DL5, gavo-cel exhibited a manageable
safety profile with no patients experiencing on-target, off-tumor toxicities. In late December 2021, the SRT declared 1x108
cells/m2following lymphodepletion as the recommended Phase 2 dose (RP2D).
In October 2021, we announced a clinical trial collaboration agreement with Bristol Myers Squibb to evaluate gavo-cel in
combination with Opdivo® (nivolumab) and Yervoy®(ipilimumab) in our planned Phase 2 clinical trial in treatment refractory
mesothelin-expressing solid tumors.
We have received a Food and Drug Administration (FDA) Orphan Drug Designation for the treatment of mesothelioma and
cholangiocarcinoma with gavo-cel and we plan to apply for FDA Fast Track designation for gavo-cel. We anticipate presenting
the expanded and complete Phase 1 dataset in the first half of 2022, initiating the Phase 2 expansion cohort in the first half of
2022, and providing an initial update from at least one of the Phase 2 expansion cohorts of the ongoing gavo-cel Phase 1/2
clinical trial in the second half of 2022.
Our next most advanced program is TC-510, our first enhanced TRuC-T cell targeting mesothelin-expressing solid tumors which incorporates
a PD-1:CD28 chimeric switch receptor. In our preclinical studies of TC-510, we have observed functional improvements over gavo-cel
including enhanced signaling, increased proliferation, reduced exhaustion and improved in vivo efficacy against tumors with high PD-L1
expression. Based on these preclinical studies, we believe we can improve on the efficacy of gavo-cel in specific hostile solid tumor
microenvironment settings and potentially expand into new solid tumor indications. The Company announced the submission of an
Investigational New Drug (IND) to the FDA in the first quarter of 2022. We anticipate reporting initial safety, efficacy and translational data
from at least one of the Phase 1 dose escalation cohorts of the TC-510 Phase 1/2 clinical trial in the second half of 2022
In addition to our lead clinical program, we are expanding our pipeline by utilizing our versatile platform to address some of the primary
challenges to cell therapies such as the hostile and immunosuppressive tumor microenvironment. These include
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enhancements, such as: TC-510, our TRuC-T cell co-expressing a PD-1:CD28 chimeric switch receptor that converts inhibitory PD-1
signaling into positive costimulation and TC-520, our TRuC-T cell co-expressing IL-15 pathway enhancements to improve T cell persistence;
dual targeting TRuC-T cells to combat tumor heterogeneity; and other accessories to combat the tumor microenvironment. We are also
pursuing new targets such as CD70, GPC3 and Nectin-4 for which we believe TRuC-T cells offer advantages over existing therapeutic
modalities. We continue to advance our allogeneic, or off-the-shelf, TRuC-T cell approaches to simplify manufacturing, reduce cost of
therapy, and improve patient access. In January 2022, we announced a strategic research collaboration and non-exclusive license
agreement with Arbor Biotechnologies focused on the further development of allogeneic TRuC-T cell therapies.
We expect that further updates from our emerging TRuC pipeline in 2022 will include the presentation of new preclinical data from
autologous TRuC-T cells targeting novel antigens and enhancements, preclinical data from our lead allogeneic TRuC-T cell candidate in
2022 and the selection of a lead allogeneic TRuC-T cell candidate in 2022.
Our Strategy
Our goal is to cure certain cancers with our TRuC-T cell therapies. We intend to make a difference in the lives of patients by building a fully
integrated cancer cell therapy company offering the first HLA-independent T cell therapy that works through activation of the full TCR. The
key components of our strategy are:
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Rapidly advance clinical development of our lead solid tumor programs to validate our TRuC platform. Our strategy for our TRuC
platform includes the initial pursuit of validated immunotherapy targets, such as mesothelin, based on well-characterized disease
models in an attempt to minimize target risk. We are treating patients with gavo-cel, our lead TRuC-T cell targeting mesothelin-
expressing solid tumors, in the dose escalation portion of our Phase 1/2 clinical trial. We anticipate treating patients with TC-510,
our first enhanced TRuC-T cell incorporating a PD-1:CD28 switch targeting patients with mesothelin-expressing solid tumors, in the
dose escalation portion of our Phase 1/2 clinical trial in 2022. We believe promising clinical trial results in these initial programs
could translate into broader therapeutic potential for our TRuC platform.
Exploit the versatility of our platform to broaden our pipeline. We are exploring new targets such as CD70, GPC3 and Nectin-4 for
which we believe TRuC-T cells offer advantages compared to existing therapeutic modalities and are developing several additional
enhancements such as the PD-1:CD28 switch receptor that may be incorporated into our future product candidates to overcome
tumor defense mechanisms, including dual-antigen targeting TRuC-T cells to minimize the possibility of antigen escape and cancer
relapse. We are also developing several strategies to counter the prominent immunosuppressive mechanisms in the tumor
microenvironment, including interference with immune checkpoint pathways. Further, we are evaluating proprietary designs for
allogeneic, or off-the-shelf, TRuC-T cells which will enable us to broaden access to patients.
Scale our manufacturing capacity to match our future product needs. We plan to develop our own manufacturing capabilities. We
are currently manufacturing GMP-grade clinical lots for gavo-cel through third-party manufacturers. We have also established a
manufacturing presence in the US by entering into agreements with ElevateBio BaseCamp, Inc. (ElevateBio), which provides us
access to ElevateBio's centralized 140,000 square foot, world-class cell and gene therapy manufacturing facility based in Waltham,
Massachusetts, and Alexandria Real Estate Equities, Inc., (ARE) for an 85,000 square foot state-of-the-art facility which is ready for
Current Good Manufacturing Practice (cGMP) build-out in Rockville, Maryland. Our agreement with ElevateBio will support the
manufacturing demand for the expansion portion of the gavo-cel Phase 1/2 clinical trial and enables utilization of our own
equipment in close proximity to our U.S. headquarters in Cambridge, Massachusetts. The ARE agreement will allow us to build a
manufacturing center of excellence which will support clinical and commercial production of gavo-cel with capacity to treat several
thousand cancer patients annually while expanding our capacity to supply future clinical trials. We can also apply our learnings from
ElevateBio towards our Rockville manufacturing center of excellence facility, and multiple suppliers will diversify and help to solidify
our clinical trial manufacturing capacity.
Retain significant economic and commercial rights to our product candidates and potentially acquire or in-license strategic
complementary businesses, assets or technologies. We currently own all rights to our product candidates and programs and intend
to build a fully integrated cell therapy company. We intend to maintain product rights in key geographies, in particular for gavo-cel.
We believe the versatility of our platform presents an opportunity for us to selectively form strategic collaborations and acquire or in-
license complementary businesses, assets or technologies allowing us to expand our capabilities and product offerings into other
therapeutic areas and potentially accelerate the development and maximize the commercial potential of our product candidates.
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Our Pipeline
The versatility of our platform is highlighted by our lead program and multiple approaches in development. We have generated a broad
pipeline with assets that focus on solid tumors. Our product candidates are listed in the figure below.
Our Approach Utilizes the Full T-Cell Receptor
The TCR is one of the body’s most complex receptors, composed of an antigen-recognizing heterodimer (TCRα and TCRβ chains) which
binds to specific peptide-MHC ligands in association with a complex of signaling subunits, collectively called CD3: CD3γ, CD3δ, and two
subunits each of CD3ε and CD3ζ. The contribution and interplay of the TCR’s six different receptor subunits to its very broad and complex
signaling activities in T cells is not fully understood but we believe all subunits play an important role in regulating and tuning activation
signals downstream of the TCR. In total, the six different CD3 subunits contain ten immune receptor tyrosine-based activation motifs (ITAM)
and the multiplicity of ITAMs within the TCR regulates the signaling potency and thereby the strength of T cell activation following TCR
ligation. Besides ITAMs, other unique motifs in the intracellular domains of CD3γ, CD3δ, CD3ε, and CD3ζ are crucial for homeostasis,
negative feedback regulation, signaling, and function of the TCR complex. In contrast to CAR-Ts, which operate as stand-alone receptors
utilizing only one of the six TCR subunits (CD3ζ), TRuCs fully integrate into the TCR complex and therefore have the potential utilize the full
signaling capacity of the TCR and take advantage of its intrinsic regulatory mechanisms.
Our Novel T-Cell Receptor Fusion Construct (TRuC) Platform
We are pioneering the development of a novel, transformative T cell engineering platform which, based on its design and our preclinical and
clinical studies, we believe has the potential to address the shortcomings of CAR-T cells and TCR-T cells and is fundamentally different from
these existing approaches. Research over more than two decades has shown that each of the TCR subunits makes distinct contributions to
the activation and regulation of T cells and the sum of the TCR subunits is required to optimally activate and control the function of T cells.
We believe that engaging the entire TCR signaling complex is required to fully realize the potential of T cells in their fight against cancer.
Our T cell engineering approach relies upon natural TCR elements to produce therapeutic T cells that function independently of HLA
restriction. To that end, we fuse a cancer antigen recognition domain (i.e. antibody-based binder) directly to a subunit of the TCR and use a
lentiviral vector to transfer the genetic information for the TRuC construct into a patient’s own T cells. This
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modified subunit then naturally integrates into the native TCR complex, creating an engineered T cell equipped with a new "homing device"
to detect and engage a specific antigen on the surface of cancer cells. Upon antigen engagement, these T cells harness the entire TCR to
produce a highly potent T cell response against cancer. We refer to T cells engineered with our TCR fusion constructs as TRuC-T cells. In
preclinical studies of both solid tumors and hematological malignancies we have observed greater anti-tumor activity, longer persistence and
less cytokine release compared to CAR-T cells we have engineered to target the same cancer antigen. Our findings suggest that the signal
delivered through the full TCR by TRuCs results in efficient T cell activation while avoiding overactivation and overproduction of cytokines as
occurs in CARs. We believe that these properties could translate into more durable responses with potentially fewer adverse events for
patients with cancer.
The figure below describes the natural HLA-restricted TCR complex as compared to the HLA-independent TRuC TCR.
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Our platform enables the design of TRuC-T cells with a number of potential advantages, as described in the table below:
ATTRIBUTES
FEATURES
Optimized
Signaling
TRuC construct integrates into and
utilizes the full signaling capacity of
the natural TCR
Solid Tumor
Efficacy
Potent elimination of solid tumors
with functional persistence
Reprogramming of the TCR by
antibody-based binder recognition of
tumor antigens
Versatile
Targeting
Dual targeting
MECHANISMS
• Naturally controlled T cell responses through TCR
regulatory motifs
• Avoids cytokine overproduction
• No requirement for built-in costimulatory domain
• Efficient solid tumor penetration and retention
• Favorable metabolic profile promotes T cell fitness
• Promotion of memory T cell phenotype
DESIRED PATIENT OUTCOME
• Produce a more powerful, well-controlled
anti-tumor T cell response
• Lower risk of adverse events
• Overcomes restricted T cell migration in solid
tumors
• Long-term persistence to achieve durable
responses
• HLA-independent tumor antigen recognition through
the full TCR
• Avoids HLA downregulation as a mechanism
of escape/relapse
• Ability to attack tumors based on the recognition of
two different antigens
• Improved response rates in tumors with
heterogeneous target antigen expression
• Screening of diverse binder pools yields TRuC-T
cells with optimal properties
• Reduced risk of relapse due to antigen
escape
Broad range of available binder
formats allows identification of
optimized TRuC for each target
• Binder formats include, but are not limited to, single-
chain variable fragments, single-domain antibodies
and receptors
• TRuC optimization leads to increased
likelihood of clinical activity
Our goal is to improve upon the efficacy and safety of T-cell therapies by enhancing trafficking of T cells into tumors, tumor antigen targeting,
the ability to withstand the tumor microenvironment, long-lasting T-cell persistence, and a controlled anti-tumor response. In our preclinical
studies, TRuC-T cells have shown improvements in each of these key characteristics compared to CAR-T cells, including those we have
engineered with the same binders. Importantly, in our gavo-cel Phase 1 dose escalation, we have demonstrated proof-of-concept and benefit
for patients in all three treated indications.
We use our TRuC-T cell platform to target many different cancer antigens. Our core format, in which we target a single cancer antigen, is
known as a mono TRuC-T cell. Our mono TRuC-T cell product candidates have shown promising anti-tumor activity and persistence in our
preclinical studies.
We are expanding our core format with a series of next-generation enhancements that may further improve clinical outcomes. These fall into
four broad categories:
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First, we are developing several strategies to counter the immunosuppressive microenvironment of solid tumors including
mechanisms to block a key cancer defense known as the PD-1 pathway, which can inhibit anti-tumor responses by T cells.
Second, we are evaluating proprietary designs for allogeneic or off-the-shelf TRuC-T cells, aiming to give patients faster access to
and reduce the costs of TRuC-T cell therapies.
Third, we are developing TRuC formats that target two antigens, known as dual TRuC-T cells, which could improve tumor response
in patients by preventing potential antigen escape.
Finally, the versatility of the TRuC platform allows us to target other tumor-associated antigens and add enhancements like the PD-
1:CD28 chimeric switch receptor and secreted or membrane bound IL-15 to expand the reach of TRuC-T cell therapies to more
solid tumor indications.
Gavo-cel: Our Lead Mono TRuC-T Cells Targeting Mesothelin Positive Solid Tumors
Our most advanced TRuC-T cell product candidate is gavo-cel, which targets mesothelin-positive solid tumors. Mesothelin is a cell-surface
protein whose expression is mostly restricted to mesothelial cell layers lining the pleura, pericardium and peritoneum but which is not known
to be expressed on any vital organs. While its expression on normal tissues is low, mesothelin is highly expressed in many solid tumors. The
cancer types that we intend to treat in our Phase 1/2 clinical trial include non-small cell lung cancer, ovarian cancer, malignant
pleural/peritoneal mesothelioma and cholangiocarcinoma. These cancers represent a patient population of up to 81,000 in the United States
alone. Additionally, we estimate potential expansion opportunities in six additional indications that overexpress mesothelin to represent a
population of up to 163,000 patients.
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In dose escalation in our Phase 1/2 clinical trial, gavo-cel has demonstrated consistent clinical benefit, with all but one patient experiencing
tumor regression, resulting in an 81% DCR. Four patients have achieved a confirmed PR by RECISTv1.1 criteria (ORR 25%), including three
patients with mesothelioma and the first patient with ovarian cancer to ever achieve a PR with an engineered cell therapy given intravenously
as a single agent. In December 2021, the SRT declared the recommended Phase 2 dose (RP2D) as 1x108 cells/m2 following
lymphodepletion.
In October 2021, we announced a clinical trial collaboration agreement with Bristol Myers Squibb to evaluate gavo-cel in combination with
Opdivo®(nivolumab) and Yervoy® (ipilimumab) in our planned Phase 2 clinical trial in treatment refractory mesothelin-expressing solid tumors.
We have received an FDA Orphan Drug Designation for the treatment of mesothelioma and cholangiocarcinoma with gavo-cel and we plan
to apply for FDA Fast Track designation for gavo-cel. We anticipate presenting the expanded and complete Phase 1 dataset in the first half of
2022, initiating the Phase 2 expansion cohort in the first half of 2022, and providing an initial update from at least one of the Phase 2
expansion cohorts of the ongoing gavo-cel Phase 1/2 clinical trial in the second half of 2022.
Design of the gavo-cel TRuC Construct
The construct used to generate gavo-cel is comprised of a humanized single-domain antibody that specifically binds to mesothelin on the cell
surface. This binding domain is tethered to the human CD3ε subunit via a flexible linker to form the mesothelin-targeting TRuC construct, as
shown below. We use a lentiviral vector to transfer the genetic information for the TRuC construct into a patient’s own T cells. Once in the T
cell, the TRuC protein is expressed and integrated into the endogenous TCR followed by transport of the reprogrammed TCR to the cell
surface. There, it redirects the TRuC-T cells to recognize mesothelin-positive tumor cells and activate them to eliminate mesothelin-positive
tumors. We believe that gavo-cel’s unique way of engaging and powering T cells as well as its humanized binding domain could lead to
improved clinical outcomes for patients. The following figure illustrates the design of gavo-cel.
Gavo-cel Market Opportunity
Mesothelin is overexpressed on the cell surface in multiple cancers, including approximately 76% of malignant pleural mesotheliomas (the
most common type of mesothelioma), 58% of ovarian cancers and 31% of NSCLC, among others. The following figure illustrates the
proportion of cancer patients with mesothelin expressed on the surface of their tumors and are therefore potential candidates for gavo-cel
therapy.
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NSCLC Background
NSCLC remains the leading cause of cancer-related mortality worldwide, accounting for approximately 18% of all cancer deaths. There are
an estimated 235,760 new cases in the United States annually with an estimated 62,600 (27%) expressing mesothelin on the cell surface.
Patients with metastatic NSCLC have a poor prognosis with a median survival of approximately 26-months and a five-year survival rate of
approximately 16% to 32%. While recent advances with checkpoint inhibitors have demonstrated promising results, the majority of patients
treated with these agents do not derive a long-term benefit. Notably, no standard of care is available for patients failing to respond or
relapsing after checkpoint inhibitor therapy, a segment of the NSCLC market which is expected to grow in size as the use of immune
checkpoint inhibitors increases in first- and second-line settings.
Ovarian Cancer Background
Epithelial ovarian cancer comprises approximately 90% of all ovarian malignancies. Approximately 21,000 patients in the United States are
estimated to be diagnosed with ovarian cancer in 2021 with an estimated 12,400 cases expressing mesothelin on the cell surface.
Taxane and platinum-based combinations have been the backbone of ovarian cancer treatment for the past 20 years, despite having very
low efficacy rates (below 15%) in patients with advanced forms of the disease. The majority of patients progressing after platinum
retreatment have the options of three approved PARP inhibitors, expanding treatment options. Relapsed, recurrent ovarian cancer remains
incurable with an estimated 13,770 deaths from ovarian cancer in 2021 in the United States alone.
Malignant Pleural/Peritoneal Mesothelioma Background
Malignant mesothelioma is a rare and aggressive malignancy arising from mesothelial cells lining the cavity surrounding the lungs (pleura),
abdomen (peritoneum), heart (pericardium) or testes. Patients with either malignant pleural mesothelioma or malignant peritoneal
mesothelioma are eligible for enrollment in our Phase 1/2 clinical trial of gavo-cel.
Malignant pleural mesothelioma is the most common form of mesothelioma, accounting for an estimated 84% of cases. Asbestos exposure
causes approximately 80% of malignant pleural mesothelioma cases. There are an estimated 2,600 new cases per year of malignant
mesothelioma in the United States of which an estimated 1,800 express mesothelin on the cell surface.
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Effective treatment options for patients with malignant pleural mesothelioma are very limited. In October 2020, the FDA approved Opdivo
(nivolumab) in combination with Yervoy (ipilimumab) for the first-line treatment of adults with malignant pleural mesothelioma that cannot be
removed by surgery. This is the first drug regimen approved for mesothelioma in 16 years and the second FDA-approved systemic therapy
for mesothelioma. In second line, the standard of care recommended is chemotherapy that includes a platinum salt and an anti-folate.
Unfortunately, the ORR is 17% to 40% and the median overall survival of patients with malignant pleural mesothelioma is 12 to 19 months
when systemic chemotherapy is used with or without anti-angiogenic agents or targeted therapy. Malignant mesothelioma causes
approximately 2,500 deaths in the United States annually.
Malignant peritoneal mesothelioma is the second-most common form of mesothelioma, accounting for an estimated 10% of cases. While
malignant peritoneal mesothelioma is less commonly studied than malignant pleural mesothelioma, similar systemic chemotherapy regimens
of platinum and antifolate combinations are often used. The prognosis for patients with malignant peritoneal mesothelioma is poor as only
35% of patients survive more than two years after diagnosis.
Cholangiocarcinoma Background
Cholangiocarcinoma is a form of cancer that is composed of mutated epithelial cells that originate in the bile ducts. There are an estimated
8,000 new cholangiocarcinoma cases in the United States per year with about 50% expressing mesothelin on the cell surface. Most patients
with cholangiocarcinoma have advanced-stage disease at presentation, for which the available standard-of-care chemotherapy (gemcitabine
and cisplatin) renders a median overall survival of less than one year. In 2020, the FDA approved pemigatinib for the treatment of
unresectable locally advanced or metastatic cholangiocarcinoma with a fibroblast growth factor receptor 2 (FGFR2) fusion or other
rearrangement, however this treatment addresses only 10-16% of patients. Multiple products, including checkpoint inhibitors and others, are
being tested in clinical trials, but cholangiocarcinoma remains an unmet medical need. Cholangiocarcinoma causes over 7,000 deaths per
year in the United States alone.
In 2021, we received an FDA Orphan Drug Designation for gavo-cel’s treatment of cholangiocarcinoma. In addition, we plan to apply for FDA
Fast Track, FDA Breakthrough Therapy and additional Orphan Drug Designations, as well as Accelerated Approvals, where applicable.
Gavo-cel Phase 1/2 Trial in Mesothelin-Positive Tumors
We have initiated a Phase 1/2 clinical trial of gavo-cel in patients with mesothelin-positive NSCLC, ovarian cancer, malignant
pleural/peritoneal mesothelioma and cholangiocarcinoma. Given the high unmet need and limited treatment options in malignant
pleural/peritoneal mesothelioma and cholangiocarcinoma, our goal is to obtain Fast Track designations for gavo-cel in those indications from
the FDA, which we believe will provide the potential for accelerated licensing based on Phase 2 clinical trial data.
Our Phase 1/2 clinical trial consists of two parts:
•
•
In the Phase 1 portion of the clinical trial, patients receive gavo-cel at four dose levels with or without lymphodepleting
chemotherapy to determine the recommended Phase 2 dose (RP2D). At each dose level, gavo-cel T cells are first given without
lymphodepletion to one patient and, if deemed safe, given to the subsequent three patients following lymphodepleting
chemotherapy.
The objective of the Phase 2 portion of the clinical trial, in addition to further characterizing the safety profile of gavo-cel, is to
evaluate the efficacy of gavo-cel in mesothelin-expressing cancers as assessed by overall response rate (ORR) according to
standard Response Evaluation Criteria In Solid Tumors (RECIST) v1.1 criteria (ORR: complete response + partial response).
Secondary endpoints include time to response, duration of response, progression free survival and overall survival. Approximately
50 patients plan to receive gavo-cel at the RP2D schedule and will be stratified according to their cancer diagnosis in four groups:
NSCLC, ovarian cancer, malignant pleural/peritoneal mesothelioma and cholangiocarcinoma. A total of ten patients per indication
plan to be infused with gavo-cel T cells, except in the NSCLC cohort where 20 patients will be treated, including eight receiving
gavo-cel as single agent and 12 receiving gavo-cel in combination with the PD-1 blocking antibody.
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Clinical findings
On September 17, 2021, we announced positive interim data from the ongoing Phase 1 portion of the gavo-cel Phase 1/2 clinical trial for
mesothelin-expressing solid tumors. As of the June 30, 2021 data cutoff, four PRs according to RECIST 1.1 criteria have been recorded
among the first 16 evaluable patients treated on study in dose escalation. Furthermore, our first patient with metastatic cholangiocarcinoma
treated with gavo-cel also achieved a PR according to the investigator assessment. Gavo-cel was administered up to dose level 5 (DL5)
(5x108/m2 following lymphodepletion).
Two dose limiting toxicities (DLTs) were reported: at DL1, one Grade 3 pneumonitis that resolved with supportive measures, which permitted
the continuation of dose escalation, and at DL5, one Grade 5 bronchoalveolar hemorrhage along with the development of severe CRS in all
3 patients treated at this dose level. Following the DLT at DL5, one patient had received gavo-cel at 3x108/m2 after lymphodepletion using a
split dosing approach to refine the identification of the RP2D and an additional patient was treated at DL3 (1x108/m2 following
lymphodepletion). In both cases gavo-cel was well tolerated with only Grade 1 non-hematological toxicities being reported. Since then, five
additional patients were treated at 3x108/m2 after lymphodepletion and subsequently, in late December 2021, the SRT declared DL3 as the
RP2D.
The primary objectives of the Phase 1 portion of the study are to define the safety profile of gavo-cel in patients whose tumors overexpress
mesothelin and to determine the RP2D. Secondary objectives include ORR and DCR. Exploratory objectives include the assessment of
expansion, tumor infiltration, and persistence of gavo-cel.
Summary of trial conduct, baseline characteristics and gavo-cel dose:
•
•
•
Screening: Forty-six percent of patients met the mesothelin expression cut-off as defined per protocol.
Patient Characteristics: 17 patients received gavo-cel including 12 with mesothelioma, 4 with ovarian cancer and 1 with
cholangiocarcinoma with a median age of 57 years (range, 31-84 years). The median number of prior therapies was 5 (range, 1-9),
including immune checkpoint inhibitor therapy (n=11) and anti-mesothelin therapies (n=5).
Gavo-cel Dose: The eight patients disclosed to date have received gavo-cel at the following dose level (DL):
o
o
o
DL 0: 5x107 cells/m2 without lymphodepletion – 1 mesothelioma
DL 1: 5x107 cells/m2 following lymphodepletion – 5 mesothelioma and 1 ovarian cancer
DL 2: 1x108 cells/m2 without lymphodepletion – 1 mesothelioma
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o
o
o
DL3: 1x108 cells/m2 following lymphodepletion – 1 mesothelioma patient, 1 cholangiocarcinoma patient, and 3 ovarian
cancer patients
DL4: 5x108 cells/m2 without lymphodepletion – 1 mesothelioma patient
DL5: 5x108 cells/m2 following lymphodepletion – 3 mesothelioma patients
Key clinical findings from the first seventeen patients treated with gavo-cel:
•
•
•
Safety: gavo-cel was generally well tolerated with a manageable adverse event profile up until DL5, with no patients experiencing
on-target, off-tumor toxicities. Two DLTs were observed: one case of Grade 3 pneumonitis at DL1 that resolved with anti-cytokine
therapy, and one case of Grade 5 bronchoalveolar hemorrhage at DL5. Furthermore, all three patients treated at DL5 experienced
Grade ≥3 CRS which resulted in 5x108 cells/m2 following lymphodepletion being declared the MTD.
Clinical Activity: 16 patients were evaluable for response. Tumor regression was observed in 15 (94%) patients with a DCR
(CR+PR+SD lasting at least 3 months) of 81%. Six patients achieved partial responses (PRs) by target lesion assessment, four of
whom (3 with mesothelioma and 1 with ovarian cancer) achieved a PR according to RECISTv1.1 criteria. The ORR by RECISTv1.1
criteria among patients infused with gavo-cel was 25% by independent review assessment (31% for patients receiving gavo-cel
following lymphodepletion), including one patient who achieved a complete metabolic response, and 31% by investigator
assessment (38% for patients receiving gavo-cel following lymphodepletion), which included a PR in a patient with metastatic
cholangiocarcinoma.
Translational Data: Peak gavo-cel expansion (Cmax) increased when gavo-cel was administered following lymphodepletion in a
dose dependent fashion. Cytokine elevations post-gavo-cel infusion were observed in all evaluable patients, which is indicative of
mesothelin target engagement.
TC-510: Our First TRuC-T Cell Enhanced with a PD-1:CD28 Chimeric Switch Receptor Targeting Mesothelin Positive Solid Tumors
We are also developing TC-510, a mesothelin-targeted TRuC-T cell that co-expresses a PD-1:CD28 chimeric switch receptor to provide a
local costimulatory signal in the hostile tumor microenvironment. In our preclinical studies of TC-510, the co-expression of the PD-1:CD28
switch receptor enhanced TCR downstream signaling, increased proliferation, reduced exhaustion and improved in vivo efficacy against
tumors with high PD-L1 expression. Based on these studies, we believe the TC-510 can improve on the efficacy of gavo-cel in a PD-L1 rich
hostile solid tumor microenvironment and potentially expand into new solid tumor indications. The Company announced the submission of an
IND to the FDA in the first quarter of 2022. We anticipate reporting initial safety, efficacy and translational data from at least one of the Phase
1 dose escalation cohorts of the TC-510 Phase 1/2 clinical trial in the second half of 2022.
Design of TC-510
TC-510 cells express two transgenes: the mesothelin-specific TRuC construct used in TC-210 and a chimeric PD-1:CD28 switch receptor.
Both proteins are encoded by a single genetic construct. As described for TC-210, a humanized single-domain antibody that specifically
binds to mesothelin is tethered to the human CD3ε subunit via a flexible linker to form the mesothelin-targeting TRuC construct, as shown
below. The PD-1:CD28 switch receptor is constructed by fusing the cytoplasmic signaling domain of CD28 to the extracellular domain of PD-
1. We use a lentiviral vector to transfer the genetic information for the transgenes into a patient’s own T cells. Once in the T cell, the TRuC
protein is expressed and integrated into the endogenous TCR. There, it redirects the TRuC-T cells to recognize mesothelin-positive tumor
cells and eliminate mesothelin-positive tumors. The PD-1:CD28 switch receptor is co-expressed on the cell surface to engage with PD-L1
expressed in tumor microenvironment thereby co-activating the TRuC-T cells. We believe that TC-510’s unique way of engaging and
powering T cells by providing local co-stimulation of T cells reduces TRuC cell exhaustion and improves persistence resulting in enhanced
clinical outcomes for patients. The following figure illustrates the design of TC-510.
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Summary of our Preclinical Data on TC-510
Our preclinical data support our hypothesis that TC-510 could have potent anti-tumor activity and improve clinical efficacy for patients
compared to gavo-cel allowing expansion into additional solid tumor indications beyond gavo-cel’s initial cancer targets. TC-510 showed
functional improvements in preclinical models where we compared the T cell signaling, cytokine production and anti-tumor activity of TC-510
with gavo-cel and gavo-cel with a mutationally inactivated CD28 signaling domain of the switch to eliminate the costimulatory function of the
switch receptor, which we engineered with the same mesothelin binder as TC-510. In our preclinical studies of TC-510, we observed the
following results:
•
•
•
•
Enhanced early TCR downstream signaling;
Significantly increased cell proliferation;
Prevented exhaustion upon repeated antigen stimulation; and
Enhanced efficacy of gavo-cel against PD-L1 overexpressing solid tumors.
TC-510 Cleared Tumors with High PD-L1 Expression in MSTO Mouse Model More Efficiently
We compared the anti-tumor activity of TC-510 with that of gavo-cel and gavo-cel with a mutationally inactivated CD28 signaling domain of
the switch to eliminate the costimulatory function of the switch receptor in a MSTO-M/PDL1 model expressing high mesothelin and PD-L1. In
order to make the tumor model more challenging, tumors were allowed to grow to a large size prior to treatment. Under these conditions,
mice were treated with similar numbers of either unmodified T cells, TC-510, gavo-cel, or gavo-cel engineered with a mutationally inactivated
CD28 signaling domain of the PD-1:CD28 switch receptor, in each case bearing an identical mesothelin-binding domain. As shown below,
treatment with gavo-cel and gavo-cel with the CD28 mutated switch failed to control tumor growth, whereas TC-510 achieved deep tumor
regressions in all treated animals, further confirming the importance of the CD28 signaling to TC-510’s function.
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Broadening our Core TRuC-T Cell Platform with a Series of Next-Generation Enhancements
We have developed a novel, transformative platform to address the limitations of existing T cell therapies. Our TRuC-T cell platform is
designed to deliver the first HLA-independent TCR-T cell therapies to a broader population of patients with solid tumors. Our approach is to
fuse a cancer antigen recognition domain directly to a subunit of the TCR, which becomes fully integrated into the natural complex. This has
the effect of activating the entire TCR to produce a more powerful, yet controlled T cell response to cancer.
We are focused on continued innovation to broaden our platform through internal research and collaboration with leading academic
laboratories and industry partners in the field of T-cell immunology, cell therapy, gene editing, and process development. These innovations
fall into three broad categories:
Enhancements
We are developing enhancements that further combat the immunosuppressive solid tumor microenvironment, including mechanisms
designed to block a key cancer defense known as the PD-1/PD-L1 pathway. Our lead enhanced TRuC is TC-510, our mesothelin targeting
TRuC-T cell co-expressing a PD-1:CD28 switch receptor. This switch receptor acts as a cell-intrinsic mechanism to overcome PD-L1/PD-L2
mediated immunosuppression. In our preclinical studies, upon repeated antigen stimulation, co-expression of the switch receptor in
mesothelin-targeting T cells enhanced TCR signaling, prevented PD-L1-mediated functional T-cell inhibition, significantly increased
proliferation and augmented the production of growth and effector cytokines. We anticipate an IND filing for the TC-510 program targeting
mesothelin in the first half of 2022.
Our next most advanced enhanced TRuC is TC-520, our fratricide resistant CD70 targeting TRuC-T cell co-expressing an IL-15
enhancement. In our preclinical studies, we have shown that an IL-15 enhancement can further improve the preclinical efficacy of our CD70
targeting TRuC-T cells due to IL-15 effectively improving the expansion, persistence and durable efficacy. Additionally, we have also
developed dual TRuCs that target two antigens, to combat heterogeneity and antigen escape in solid tumors.
Allogeneic TRuC-T Cells
We are evaluating proprietary designs for off-the-shelf TRuC-T cells, aiming to give patients faster access to and reduce the costs of TRuC-T
cell therapies. In our preclinical studies, we have demonstrated that utilizing our TRuC platform and employing CRISPR endonucleases
yielded fully functional TRuC-T cells that lack alloreactivity and upregulated activation markers, secreted cytokines and killed tumors cells in
an antigen-specific manner. In January 2022, we announced a strategic research collaboration and non-exclusive license agreement with
Arbor Biotechnologies to leverage their proprietary CRISPR gene-editing technology. This collaboration is focused on the further
development of a defined set of allogeneic TRuC-T cell therapies. We anticipate presenting preclinical data from our allogeneic TRuC
program and selecting a lead allogeneic candidate in 2022.
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Novel Targets
Due to the TRuC platform’s potential versatility, we believe that we have the capability to target many different cancer antigens. We are
focused on the discovery and validation of novel targets to broaden the reach of TRuC-T cells in solid tumors. We plan to report preclinical
data from TRuC-T cells targeting novel antigens and enhancements in 2022.
Manufacture and Delivery of TRuC-T Cells to Patients
TRuC-T Cell Production and Delivery
The process of manufacturing cell and gene therapies, such as TRuC-T cells, is highly complex. As shown in the figure below, the generation
of our TRuC-T cells starts with the collection of white blood cells from patients, known as leukapheresis, at the treatment center. The blood
cells are shipped to a central manufacturing facility where they are further processed. Following the enrichment of the sample T cells, they
are activated, which causes them to divide. In the next step, a viral vector is used to shuttle the genetic information encoding the TRuC
construct into the T cells. During the assembly process of the TCR, the TRuC construct is integrated into the natural TCR complex and
transported to the cell surface. The now reprogrammed TRuC-T cells are further stimulated to replicate and produce enough quantities to
administer a therapeutic dose to the patient from whom the cells were originally collected.
We use a next-generation cell processing platform that performs cell sample loading, cell washing, density-based cell separation, magnetic
separation, cell culture and final product formulation. This is a semi-automated and functionally closed system that we believe will enable us
to scale our TRuC-T cell manufacturing and overcome the constraints associated with current processes.
TRuC-T Cell Manufacturing Strategy
We are devoting extensive resources in process development and manufacturing to optimize the reliability of our product candidates and
reduce manufacturing costs and vein-to-vein time. This investment will ensure that our manufacturing and delivery process will have utility
across all the product candidates in our pipeline.
The generation of a genetically-modified autologous T cell therapy such as TRuC-T cells involves several integrated and complex steps,
including the collection of T cells through leukapheresis, cryopreservation, manufacture of the transfer vector under cGMP conditions, ex vivo
selection, activation, transduction, and expansion of the TRuC-T cells, ultimately leading to infusion of TRuC-T cells into patients. The
technical, logistical, and regulatory challenges associated with the virus and cell manufacturing processes are significant. We plan to simplify
the manufacturing process through the implementation of automated technologies and the development of scalable processes aimed at
reducing the cost of goods.
We have already taken two critical steps geared towards simplifying our manufacturing process. First, our TRuC-T cells are manufactured via
a semi-automated and functionally closed system (CliniMACS Prodigy), which provides a common platform that will be employed in the
development of all of the product candidates in our pipeline. This manufacturing process is economical, reliable, and scalable, and can
support rapid development of the product candidates throughout the clinical life cycle and regulatory approvals. This system has a small
footprint, which enables us to manufacture multiple products in parallel units within the same minimally controlled space, thereby reducing
operating costs. Second, both the input leukapheresis material that enters the manufacturing process as well as the final TRuC-T cells are
cryopreserved products, which simplifies the logistics for delivery to the patient and reduces the risk of product delivery failure. The entire
vein-to-vein manufacturing process has safe-guards in place designed to ensure product identity and integrity throughout the production life-
cycle.
We have entered into manufacturing agreements for the supply of GMP-S plasmids for generation of the viral vectors, which are
manufactured by third parties. The viral vectors are manufactured through established agreements with various CDMOs. We outsource our T
cell manufacturing process and we may enter into additional agreements to increase capacity for future clinical trials and commercialization if
licensed. Because our starting materials are frozen, we expect to be able to base future agreements on rolling forecasts of regularly
scheduled manufacturing runs, which we expect will minimize any cost overruns due to loss of reservation fees. Depending on the results of
our clinical trials, we may choose to develop our own manufacturing capabilities.
As part of our manufacturing strategy, we plan to expand our capacity as we continue our existing clinical trials and begin additional clinical
trials and are planning for potential further expansion in anticipation of an approval for any of our TRuC-T cell product candidates.
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Under our existing agreements with CDMOs, we estimate that we have potential access to capacity to produce up to approximately 100
annual treatments per year, which we believe will be sufficient to conduct our initial planned clinical trials. We are in the process of adding
manufacturing capacity to support larger clinical trials for our product candidates.
In November 2020, we contracted with ElevateBio, LLC, to leverage the extensive technical capabilities at ElevateBio BaseCamp, a world-
class cell and gene therapy manufacturing facility based in Waltham, MA. ElevateBio BaseCamp was established as a center of innovation
dedicated to cell and gene therapy research and development, process development and cGMP manufacturing operations, using state-of-
the-art facilities designed to rapidly develop single and multi-product cell and gene therapies, regenerative medicine and immunotherapies.
The BaseCamp partnership enables us to utilize our own equipment in close proximity to our U.S. headquarters in Cambridge, MA and
establish additional manufacturing capacity and technical capabilities in the U.S. and will support the Phase 2 expansion portion of the gavo-
cel Phase 1/2 clinical trial once a recommended Phase 2 dose is defined. Additionally, we intend to apply our learnings from ElevateBio
towards our own future commercial manufacturing.
In March 2021, we signed a long-term, full-building lease with ARE for an existing 85,000 square foot, state-of-the-art cell therapy
manufacturing facility in Rockville, Maryland which is ready for cGMP build-out. The site will serve as our manufacturing center of excellence
and will support clinical and commercial production of gavo-cel with a capacity to treat several thousand cancer patients annually through the
utilization of semi-automated and functionally closed systems which aim to provide cGMP manufacturing while optimizing the reliability of our
cell therapy products, while reducing manufacturing costs and vein-to-vein time. The facility is expected to support our commercial-scale
manufacturing timelines with production anticipated in 2023 and the flexible layout will allow production of gavo-cel and other emerging cell
therapies in our pipeline.
We believe our manufacturing platform can be scaled with minimal infrastructure while meeting GMP requirements, which will facilitate the
design and building of a standard centralized manufacturing facility. Further into the future, however, we expect this system to be amenable
to manufacturing in a controlled non-classified environment closer to or at the point of care, such as at a regional hub or hospital, resulting in
a decentralized manufacturing model. We anticipate that this decentralized model would require minimal infrastructure, be led by operators
that would require minimal technical training, shorten vein-to-vein time, and decrease costs.
Intellectual Property
Intellectual property is a fundamental component of our business and of vital importance in our field. We actively seek to protect the
intellectual property and proprietary technology that we believe is important to our business, including seeking, maintaining, enforcing and
defending patent rights for our product candidates and processes, whether developed internally or licensed from third parties. We may
additionally rely on regulatory protection afforded through orphan drug designations, data exclusivity, market exclusivity, and patent term
extensions where available.
The TRuC-T cell platform was initially conceived and developed by our scientific founder, Dr. Patrick Baeuerle. The priority patent application
disclosing the TRuC-T cell platform was filed in May 2015. Our further work encompassing a broad range of TRuC concepts has been
described in subsequent patent applications.
Additional patent applications filed by us since 2015 include at least the following additional technological innovations and product-related
claims:
•
•
•
•
•
•
TRuC-T cells targeting an array of tumor antigens;
TRuC-T cells targeting multiple types of antigens on the same tumor;
engineered TRuC-T cells with enhanced activity and/or modulated activity;
second generation off-the-shelf TRuC-T cells;
methods of generating TRuCs with enhanced efficacy; and
methods of using TRuC-T cells to treat human diseases, including solid tumors.
Our strategy is to pursue a variety of broad claims in the United States and foreign jurisdictions to provide multiple layers of patent protection,
including:
•
•
•
pursuing broad claims in the United States for the TRuC concept
pursuing claims to specific compositions of matter in connection with particular TRuC constructs (including specific protein and
nucleic acid sequences)
methods of generating TRuCs; and
18
•
methods of using the TRuC-T cell platform as monotherapy or in combination with other anti-cancer or immune system enhancing
therapeutics.
Many of the patent applications that we own or in-license, including our trademark filings, are still in the early stages of prosecution and no
claims have been issued yet, with the exception of nine issued U.S. patents and 12 issued foreign patents as of March 1, 2022. Examination
of many of the patent applications that we own has not yet commenced, because they are either provisional applications or Patent
Cooperation Treaty (PCT) applications that are not examined. We will need to decide whether and where to pursue protection for the
inventions disclosed in these provisional and PCT applications before applicable statutory deadlines, our applications will only be examined
in jurisdictions where we elect to pursue protection, and we will only have the opportunity to attempt to obtain patents in such jurisdictions
where we elect to pursue protection. We are seeking protection across a range of commercially important territories, including (but not limited
to) countries in North America, Europe, and Asia. As of March 1, 2022, our patent portfolio includes nine issued U.S. patents, at least 24
pending U.S. provisional or nonprovisional patent applications, at least 12 pending Patent Cooperation Treaty (PCT) international
applications, 12 issued foreign patents, and at least 120 pending foreign patent applications, which patent applications we own or in-license.
The claims of these patent applications are directed toward various aspects of our product candidates and research programs including
compositions of matter, methods of use, and processes. These owned and in-licensed patents and patent applications, if issued, are
expected to expire on various dates from 2036 through 2043, in each case without taking into account any possible patent term adjustments
or extensions.
As of March 1, 2022, our patent portfolio includes multiple patents and patent applications with claims directed to gavo-cel, including
compositions of matter, manufacturing methods, manufacturing precursors or uses thereof, of which there are (i) six issued U.S. patents, at
least seven pending U.S. provisional or U.S. nonprovisional patent applications, at least one pending PCT international application, 10 issued
foreign patents, and at least 41 pending foreign patent applications which we own and (ii) one U.S. patent, at least one pending U.S.
nonprovisional patent application, and at least 12 pending foreign patent applications for which we have a nonexclusive license from
Harpoon Therapeutics, Inc. (Harpoon). These owned and in-licensed patents and patent applications, if issued, are expected to expire on
various dates from 2036 through 2042, in each case without taking into account any possible patent term adjustment or extensions.
As of March 1, 2022, our patent portfolio includes multiple patents and patent applications with claims directed to TC-510, including
compositions of matter, manufacturing methods, manufacturing precursors or uses thereof, of which there are (i) four issued U.S. patents, at
least two pending U.S. provisional or U.S. nonprovisional patent applications, six issued foreign patents, and at least 25 pending foreign
patent applications which we own; (ii) one U.S. patent, at least one pending U.S. nonprovisional patent application, and at least 12 pending
foreign patent applications for which we have a nonexclusive license from Harpoon Therapeutics, Inc. (Harpoon) and (iii) one U.S. patent, at
least one pending U.S. nonprovisional patent application, and had an non-exclusive license to at least four pending foreign patent
applications for which we have a exclusive license from Drs. Stefan Endres and Sebastian Kobold at the Klinikum der Universität München
(the PD-1 Switch License). Pursuant to the PD-1 Switch License we have an exclusive, world-wide, royalty free, sublicensable license to
research, develop, make, use, sell, commercialize or otherwise exploit products that include a construct with a PD-1 extracellular domain with
intracellular CD28 co-stimulatory domain (the PD-1 Switch). We incorporated the PD-1 Switch into TC-510. As consideration for the PD-1
Switch License, we issued equity the Inventors equity and have a greed to certain technology access fees and patent and development
milestone payments. These owned and in-licensed patents and patent applications, if issued, are expected to expire on various dates from
2036 through 2038, in each case without taking into account any possible patent term adjustment or extensions.
Our trademark portfolio currently contains issued trademarks for TCR2, TRuC, and our logo in the United States.
Collaborations and Licenses
Harpoon License
In June 2017, we entered into a license with Harpoon (the Harpoon License) that grants us a perpetual, irrevocable, world-wide, non-
exclusive, royalty free, sublicensable license to research, develop, make, use, sell, commercialize or otherwise exploit products based on
Harpoon’s MSLN polypeptide binding proteins (the MSLN Binder). We have incorporated the MSLN Binder into gavo-cel.
As consideration for the Harpoon License, we granted Harpoon a perpetual, irrevocable, world-wide, non-exclusive, royalty free,
sublicensable license to research, develop, make, use, sell, commercialize or otherwise exploit products based on certain binding proteins
which we had developed (the Out-Licensed Binder). We do not incorporate the Out-Licensed Binder into any of our product candidates.
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Under the Harpoon License, we retain ownership of the Out-Licensed Binder and own any of our improvements to the MSLN Binder and any
of our product candidates incorporating the MSLN Binder. Similarly, Harpoon retains ownership of the MSLN Binder and owns any of its
improvements to the Out-Licensed Binder and any of its products incorporating the Out-Licensed Binder. Each party is responsible for the
prosecution and maintenance of the patent rights owned by such party.
The Harpoon License is effective through the expiration of all patents underlying the MSLN Binder and Out-Licensed Binder and it may be
terminated by either party upon a material breach that remains uncured for 60 days after receiving notice thereof, or in the event of the other
party’s bankruptcy.
Competition
We believe our novel TRuC-T cell platform, its design flexibility, superior performance over CAR-T cell and TCR-T cell therapies, emerging
enhancements, and our knowledge of cellular immunotherapy should enable us to successfully develop novel and highly effective treatments
for cancer. However, we may face intense and increasing competition from larger biotechnology and pharmaceutical companies with greater
financial resources, who are also developing immuno-oncology therapies (including cellular therapies) and more traditional treatments for
cancer. In addition, academic institutions, governmental agencies, public and private research institutions, and early stage or smaller
companies could also prove competitive.
The market opportunity in oncology has led to a number of collaborations GlaxoSmithKline plc (GlaxoSmithKline)/Adaptimmune Therapeutics
PLC (Adaptimmune), Janssen Biotech, Inc. (Janssen)/ Nanjing Legend Pharmaceutical & Chemical Co., Ltd (Legend), bluebird bio, Inc.
(bluebird)/ Regeneron Pharmaceuticals Inc. (Regeneron) and bluebird/Gritstone Oncology, Inc.) and major acquisitions (Gilead Sciences,
Inc. (Gilead)/Kite Pharma Inc. (Kite), Bristol Myers Squibb Co (BMS)/Celgene Corporation (Celgene)/Juno Therapeutics, Inc. (Juno), Takeda
Pharmaceutical Company Limited (Takeda)/GammaDelta Therapeutics Limited (GammaDelta)) among companies focused on cellular cancer
therapies. If this trend continues, which we expect, we could see further consolidation of technical expertise and human capital. This
potentially provides a partnership opportunity for us but could also make it more challenging for us to acquire complementary technology or
products and recruit and retain qualified scientific and management personnel. In addition, this competition could impact our ability to recruit
clinical trial sites and patients in a timely manner for our clinical trials. Larger companies with greater financial flexibility and global reach may
be able to obtain regulatory approvals and gain widespread market acceptance before us, which could impact our commercial launch and
could make our products obsolete or non-competitive.
We are developing one of our lead product candidates, gavo-cel, in combination with an immune checkpoint inhibitor for the treatment of
NSCLC. Others are evaluating these immune checkpoint inhibitor approaches in combination with CAR-T cells and TCR-T cells to enhance
efficacy in the treatment of solid tumors. We therefore could experience significant direct competition from this type of combination
immunotherapy. We may also face substantial competition in the future from other immunotherapies, if their use alone or in combination
demonstrates a significant improvement in efficacy. Development of more effective small molecules, antibody-based approaches, cancer
vaccines, oncolytic viruses and other products could lead to them preferentially being used as first- or second-line treatments, which would
reduce the opportunity for our product candidates.
Despite the unique approach that we have developed to address the limitations of CAR-T cells and TCR-T cells, we expect to face increasing
competition as new more effective treatments for cancer enter the market and further advancements in technologies are made. We expect
market adoption of any treatments that we develop and commercialize to be dependent on, among other things, efficacy, safety, delivery,
price and the availability of reimbursement from government and other third-party payors.
We expect the commercial opportunity for our products that we take to regulatory licensing to be reduced or eliminated if competitors develop
and commercialize products that are more effective, safer (have fewer or less severe side effects), are more convenient or are less
expensive or better reimbursed than any products that we may commercialize. We compete with larger, better-funded companies, who may
obtain regulatory approval for their products more rapidly than we may obtain licensing for ours. This could result in our competitors
establishing a strong market position for either the product or a specific indication before we are able to enter the market.
Competition for Our Product Candidates Targeting Mesothelin-Expressing Solid Tumors
The overexpression of mesothelin by numerous solid tumors, combined with its low expression on mesothelial cells lining the pleura,
peritoneum, and pericardium, has led to a number of different mesothelin-targeting agents being tested in Phase 1/2 trials. These
approaches include novel antibody therapeutics, such as unconjugated monoclonal antibodies, antibody-drug conjugates, bispecific
antibodies as well as vaccines. Antibody-based approaches are being pursued by Amgen Inc., Bayer AG, Bristol-Myers Squibb Company, F.
Hoffmann-La Roche Ltd, Harpoon Therapeutics, Inc., Morphotek, Inc., Selecta Biosciences, Inc., and Novimmune SA among others.
Antibody-based agents in development have been limited to date by immunogenicity, poor tumor
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penetration and dose-limiting toxicities associated with the therapy. Adaptimmune Therapeutics PLC, Atara Biotherapeutics, Inc., CARISMA
Therapeutics Inc., Gracell Biotechnology Inc., Kiromic Biopharma, Inc., Legend Biotech Corp, Memorial Sloan Kettering Cancer Center, the
National Institutes of Health Clinical Center, Maxcyte, Inc., Refuge Biotechnologies, Inc., Takeda Pharmaceutical Co. Ltd., Tmunity
Therapeutics, Inc., and several Chinese academic institutions are developing anti-mesothelin cell therapies.
Government Regulation and Product Licensure
Government authorities in the United States, at the federal, state, and local level, and in other countries and jurisdictions, including the EU,
extensively regulate, among other things, the research, development, testing, manufacture, pricing, quality control, approval, packaging,
storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and
export of biopharmaceutical products. The processes for obtaining marketing approvals in the United States and in foreign countries and
jurisdictions, along with compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of
substantial time and financial resources.
Licensure and Regulation of Biologics in the United States
In the United States, biological products such as our lead product candidates, are licensed for marketing by the FDA under the Public Health
Service Act (PHSA), and regulated by the FDA under the Federal Food, Drug, and Cosmetic Act (FDCA), as well as by other federal, state
and local statute and regulations. Both the FDCA and the PHSA and their corresponding regulations govern, among other things, the testing,
manufacturing, safety, potency, labeling, packaging, storage, record keeping, distribution, reporting, advertising, and other promotional
practices involving biological products. The FDA must license a biological product before it may be marketed within the United States. Within
the FDA, the Center for Biologics Evaluation and Research (CBER) regulates cell therapy products.
The failure of an applicant to comply with the applicable regulatory requirements at any time during the product development process,
including non-clinical testing, clinical testing, the approval process or post-approval process, may result in delays to the conduct of a study,
regulatory review and approval, and/or administrative or judicial sanctions. These sanctions may include, but are not limited to, the FDA’s
refusal to allow an applicant to proceed with clinical trials, refusal to approve pending applications, license suspension or revocation,
withdrawal of an approval, warning letters, adverse publicity, product recalls, product seizures, total or partial suspension of production or
distribution, injunctions, fines, and civil or criminal investigations and penalties brought by the FDA or Department of Justice (DOJ), or other
government entities, including state agencies.
An applicant seeking licensing to market and distribute a new biologic in the United States generally must satisfactorily complete each of the
following steps before the product candidate will be licensed by the FDA.
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preclinical testing including laboratory tests, animal studies, and formulation studies, which must be performed in accordance with
the FDA’s good laboratory practice (GLP) regulations and standards;
submission to the FDA of an Investigational New Drug application (IND) for human clinical testing, which must become effective
before human clinical trials may begin;
approval by an institutional review board (IRB) representing each clinical site before each clinical trial may be initiated;
performance of adequate and well-controlled human clinical trials to establish the safety, potency, and purity of the product
candidate for each proposed indication, in accordance with current good clinical practices (GCP);
preparation and submission to the FDA of a BLA for a biological product which includes not only the results of the clinical trials, but
also detailed information on the chemistry, manufacture, and quality controls for the product candidate and proposed labeling for
one or more proposed indication(s) and the payment of user fees (unless exempt);
FDA acceptance and substantive review of the BLA;
review of the product candidate by an FDA advisory committee, where appropriate or if applicable;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities, including those of third parties, at which the
product candidate or components thereof are manufactured to assess compliance with cGMP requirements and to assure that the
facilities, methods, and controls are adequate to preserve the product’s identity, strength, quality, and purity;
satisfactory completion of any FDA audits of the non-clinical and clinical trial sites to assure compliance with GCP and the integrity
of clinical data in support of the BLA;
securing FDA licensure of the BLA to allow marketing of the new biological product; and
compliance with any post-licensing requirements, including the potential requirement to implement a REMS and the potential
requirement to conduct and any post-licensing studies required by the FDA.
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Preclinical Studies and Investigational New Drug Application
Before an applicant begins testing a product candidate with potential therapeutic value in humans, the product candidate enters preclinical
testing. Preclinical tests include laboratory evaluations of product chemistry, formulation, and stability, as well as other studies to evaluate,
among other things, the toxicity of the product candidate. The conduct of the preclinical tests and formulation of the compounds for testing
must comply with federal regulations and requirements, including GLP regulations and standards. The results of the preclinical tests, together
with manufacturing information and analytical data, are submitted to the FDA a part of an IND. Some long-term preclinical testing, such as
animal tests of reproductive adverse events and carcinogenicity, and long-term toxicity studies, may continue after the IND is submitted.
The IND and IRB Processes
An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate commerce for use in an
investigational clinical trial and a request for FDA authorization to administer such investigational product to humans. Such authorization
must be secured prior to interstate shipment and administration of any product candidate that is not the subject of an approved BLA. In
support of a request for an IND, applicants must submit a protocol for each clinical trial and any subsequent protocol amendments must be
submitted to the FDA as part of the IND. In addition, the results of the preclinical tests, together with manufacturing information, analytical
data, any available clinical data or literature and plans for clinical trials, among other things, must be submitted to the FDA as part of an IND.
The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin. This waiting period is designed to allow
the FDA to review the IND to determine whether human research subjects will be exposed to unreasonable health risks. At any time during
this 30-day period, or thereafter, the FDA may raise concerns or questions about the conduct of the trials as outlined in the IND and impose a
clinical hold or partial clinical hold. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can
begin.
Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on that trial. A clinical
hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial
clinical hold is a delay or suspension of only part of the clinical work requested under the IND. For example, a specific protocol or part of a
protocol is not allowed to proceed, while other protocols may do so. No more than 30 days after imposition of a clinical hold or partial clinical
hold, the FDA will provide the sponsor a written explanation of the basis for the hold. Following issuance of a clinical hold or partial clinical
hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed. The FDA will base that
determination on information provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the
investigation can proceed.
A sponsor may choose, but is not required, to conduct a foreign clinical trial under an IND. When a foreign clinical trial is conducted under an
IND, all FDA IND requirements must be met unless waived. When a foreign clinical trial is not conducted under an IND, the sponsor must
ensure that the study complies with certain regulatory requirements of the FDA in order to use the study as support for an IND or application
for marketing approval or licensing. In particular, such studies must be conducted in accordance with GCP, including review and approval by
an independent ethics committee (IEC) and informed consent from subjects. The GCP requirements in the final rule encompass both ethical
and data integrity standards for clinical studies and the FDA must be able to validate the data through an onsite inspection, if deemed
necessary by the FDA. The FDA’s regulations are intended to help ensure the protection of human subjects enrolled in non-IND foreign
clinical studies, as well as the quality and integrity of the resulting data. They further help ensure that non-IND foreign studies are conducted
in a manner comparable to that required for IND studies.
In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial must review and approve
the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the study at
least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to
study subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its
institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product
candidate has been associated with unexpected serious harm to patients.
Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety
monitoring board or committee (DSMB). This group provides authorization as to whether or not a trial may move forward at designated check
points based on access that only the group maintains to available data from the study. Suspension or termination of development during any
phase of clinical trials can occur if it is determined that the participants or patients are being exposed to an unacceptable health risk. Other
reasons for suspension or termination may be made by us based on evolving business objectives and/or competitive climate.
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Information about clinical trials must be submitted within specific timeframes to the NIH for public dissemination on its ClinicalTrials.gov
website.
Additional Regulation for Gene Therapy Clinical Trials
In addition to the regulations discussed above, there are a number of additional standards that apply to clinical trials involving the use of
gene therapy. The FDA has issued various guidance documents regarding gene therapies, which outline additional factors that the FDA will
consider at each of the above stages of development, which relate to, among other things: the proper preclinical assessment of gene
therapies; the CMC information that should be included in an IND; the proper design of tests to measure product potency in support of an
IND or BLA; and measures to observe delayed adverse effects in subjects who have been exposed to investigational gene therapies when
the risk of such effects is high. Further, the FDA usually recommends that sponsors observe subjects for potential gene therapy-related
delayed adverse events for a 15-year period, including a minimum of five years of annual examinations followed by ten years of annual
queries, either in person or by questionnaire, although the FDA recently proposed updating its guidance on long-term follow-up after
administration of human gene therapy products.
The NIH and the FDA have a publicly accessible database, the Genetic Modification Clinical Research Information System, which includes
information on gene therapy trials and serves as an electronic tool to facilitate the reporting and analysis of adverse events on these trials.
Human Clinical Trials in Support of a BLA
Clinical trials involve the administration of the investigational product candidate to human subjects under the supervision of a qualified
investigator in accordance with GCP requirements which include, among other things, the requirement that all research subjects provide their
informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written clinical trial protocols
detailing, among other things, the objectives of the study, inclusion and exclusion criteria, the parameters to be used in monitoring safety, and
the effectiveness criteria to be evaluated.
Human clinical trials are typically conducted in three sequential phases, but the phases may overlap or be combined. Additional studies may
also be required after licensing.
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Phase 1 clinical trials are initially conducted in a limited population to test the product candidate for safety, including adverse effects,
dose tolerance, absorption, metabolism, distribution, excretion, and pharmacodynamics in healthy humans or in patients. During
Phase 1 clinical trials, information about the investigational biological product’s pharmacokinetics and pharmacological effects may
be obtained to permit the design of well-controlled and scientifically valid Phase 2 clinical trials.
Phase 2 clinical trials are generally conducted in a limited patient population to identify possible adverse effects and safety risks,
evaluate the potency or efficacy of the product candidate for specific targeted indications, and determine dose tolerance and
optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and
more costly Phase 3 clinical trials. Phase 2 clinical trials are well controlled, closely monitored and conducted in a limited patient
population.
Phase 3 clinical trials proceed if the Phase 2 clinical trials demonstrate that a dose range of the product candidate is potentially
potent or effective and has an acceptable safety profile. Phase 3 clinical trials are undertaken within an expanded patient population
to further evaluate dosage, provide substantial evidence of clinical potency or efficacy, and further test for safety in an expanded
and diverse patient population at multiple, geographically dispersed clinical trial sites. A well-controlled, statistically robust Phase 3
trial may be designed to deliver the data that regulatory authorities will use to decide whether or not to license, and, if licensed, how
to appropriately label a biologic. Such Phase 3 studies are referred to as “pivotal.”
In some cases, the FDA may approve a BLA for a product candidate but require the sponsor to conduct additional clinical trials to further
assess the product candidate’s safety and effectiveness after approval. Such post-approval trials are typically referred to as Phase 4 clinical
trials. These studies are used to gain additional experience from the treatment of a larger number of patients in the intended treatment group
and to further document a clinical benefit in the case of biologics licensed under accelerated approval regulations. Failure to exhibit due
diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for products.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA. In addition, IND safety reports must
be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal
or in vitro testing that suggest a significant risk in humans exposed to the product; and any clinically important increase in the case of a
serious suspected adverse reaction over that listed in the protocol or investigator brochure.
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Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA
or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are
being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an
institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product has been
associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP
and the integrity of the clinical data submitted.
Clinical trials sometimes require submission of an application for an Investigational Device Exemption, or IDE, to the FDA. The IDE
application, when requested, must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to
test the device in humans and that the investigational protocol is scientifically sound. The IDE application must be approved in advance by
the FDA, unless the product is deemed a non-significant risk device and eligible for more abbreviated IDE requirements. Clinical trials for a
significant risk device may begin once the IDE application is approved by the FDA as well as the appropriate institutional review boards, or
IRBs, at the clinical trial sites, and the informed consent of the patients participating in the clinical trial is obtained.
Review and Approval of a BLA
In order to obtain approval to market a biological product in the United States, a marketing application must be submitted to the FDA that
provides sufficient data establishing the safety, purity and potency of the proposed biological product for its intended indication. The
application includes all relevant data available from pertinent preclinical 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. To support marketing approval, the data submitted must be
sufficient in quality and quantity to establish the safety, purity and potency of the biological product to the satisfaction of the FDA.
The BLA is a vehicle through which applicants formally propose that the FDA license a new product for marketing and sale in the United
States for one or more indications. Every new biological product candidate must be the subject of an approved BLA before it may be
commercialized in the United States. Under federal law, the submission of most BLAs is subject to a significant application user fee. The
sponsor of an approved BLA is also subject to an annual program fee. Certain exceptions and waivers are available for some of these fees,
such as an exception from the application fee for products with orphan designation and a waiver for certain small businesses.
Following submission of a BLA, the FDA conducts a preliminary review of the application generally within 60 calendar days of its receipt and
strives to inform the sponsor by the 74th day after the FDA’s receipt of the submission whether the application is sufficiently complete to
permit substantive review. The FDA may request additional information rather than accept the application for filing. In this event, the
application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts
it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified
performance goals in the review process of the BLAs. Under that agreement, 90% of original BLA submissions are meant to be reviewed
within ten months of the 60-day filing date, and 90% of original BLAs that have been designated for “priority review” are meant to be reviewed
within six months of the 60-day filing date. The review process and the Prescription Drug User Fee Act goal date may be extended by the
FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency
identified by the FDA following the original submission.
Before approving an application, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-
approval inspections may cover all facilities associated with a BLA submission, including component manufacturing, finished product
manufacturing and control testing laboratories. The FDA will not approve an application 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 a BLA, the FDA will typically inspect one or more clinical sites to assure compliance
with GCP.
In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond
the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the
FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected
duration of treatment, seriousness of known or potential adverse events and whether the product is a new molecular entity.
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The FDA may refer an application for a novel product to an advisory committee or explain why such referral was not made. Typically, an
advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a
recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the
recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Fast Track, Breakthrough Therapy, Priority Review and Regenerative Medical Advanced Therapy Designations
The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the
treatment of a serious or life-threatening disease or condition. These programs are referred to as Fast Track designation, Breakthrough
Therapy designation, Priority Review designation and Regenerative Medical Advanced Therapy designation.
Specifically, the FDA may designate a product for Fast Track review if it is intended, whether alone or in combination with one or more other
products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical
needs for such a disease or condition. For Fast Track products, sponsors may have greater interactions with the FDA and the FDA may
initiate review of sections of a Fast Track product’s application before the application is complete. This rolling review may be available if the
FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a Fast Track product may be effective. The
sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay
applicable user fees. However, the FDA’s time period goal for reviewing a Fast Track application does not begin until the last section of the
application is submitted. In addition, the Fast Track designation may be withdrawn by the FDA if the FDA believes that the designation is no
longer supported by data emerging in the clinical trial process.
Second, a product may be designated as a Breakthrough Therapy if it is intended, either alone or in combination with one or more other
products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may
demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment
effects observed early in clinical development. The FDA may take certain actions with respect to Breakthrough Therapies, including holding
meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and
approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other
steps to design the clinical trials in an efficient manner.
Third, the FDA may designate a product for priority review if it is a product that treats a serious condition and, if licensed, would provide a
significant improvement in safety or effectiveness. The FDA determines, on a case-by-case basis, whether the proposed product represents
a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of
increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product reaction,
documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and
effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such
applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.
A product may be designated as a regenerative medicine advanced therapy if it is a regenerative medicine therapy that is intended to treat,
modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product has the
potential to address unmet medical needs for such disease or condition. The benefits of a regenerative medicine advanced therapy
designation include early interactions with FDA to expedite development and review, benefits available to breakthrough therapies, potential
eligibility for priority review and accelerated approval based on surrogate or intermediate endpoints.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a product for a serious or life-threatening condition that provides meaningful therapeutic
advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is
reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a condition when the product has an effect
on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality (IMM) and that is
reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and
the availability or lack of alternative treatments. Products granted accelerated approval must meet the same statutory standards for safety
and effectiveness as those granted traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical
sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit.
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Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a
measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on IMM.
The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints
generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for
traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a
product.
The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is
required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs
rapidly. Thus, accelerated approval has been used extensively in the development and approval of products for treatment of a variety of
cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course
requires lengthy and sometimes large trials to demonstrate a clinical or survival benefit. Thus, the benefit of accelerated approval derives
from the potential to receive approval based on surrogate endpoints sooner than possible for trials with clinical or survival endpoints, rather
than deriving from any explicit shortening of the FDA approval timeline, as is the case with priority review.
The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval
confirmatory studies to verify and describe the product’s clinical benefit. As a result, a product candidate licensed on this basis is subject to
rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on
the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would
allow the FDA to initiate expedited proceedings to withdraw approval of the product. All promotional materials for product candidates licensed
under accelerated regulations are subject to prior review by the FDA.
The FDA’s Decision on a BLA
On the basis of the FDA’s evaluation of the application and accompanying information, including the results of the inspection of the
manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial
marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the
deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application.
If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the BLA, the FDA will issue an approval
letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even
with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for
licensing.
If the FDA licenses a new product, it may limit the licensed indications for use of the product. The agency may also require testing and
surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other
risk management mechanisms, including REMS, to help ensure that the benefits of the product outweigh the potential risks. REMS can
include medication guides, communication plans for health care professionals, and elements to assure safe use (ETASU). ETASU can
include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances,
special monitoring and the use of patent registries. The FDA may prevent or limit further marketing of a product based on the results of post-
market studies or surveillance programs. After licensing, many types of changes to the licensed product, such as adding new indications,
manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.
Post-Licensing Regulation
If regulatory licensing for marketing of a product or new indication for an existing product is obtained, the sponsor will be required to comply
with all regular post-licensing regulatory requirements as well as any post-licensing requirements that the FDA may have imposed as part of
the licensing process. The sponsor will be required to report, among other things, certain adverse reactions and manufacturing problems to
the FDA, provide updated safety and potency or efficacy information and comply with requirements concerning advertising and promotional
labeling requirements. Manufacturers and certain of their subcontractors are required to register their establishments with the FDA and
certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with
ongoing regulatory requirements, including cGMP regulations, which impose certain procedural and documentation requirements upon
manufacturers. Changes to the manufacturing processes are strictly regulated and often require prior FDA approval before being
implemented. Accordingly, the sponsor and its third-party manufacturers must continue to expend time, money, and effort in the areas of
production and quality control to maintain compliance with cGMP regulations and other regulatory requirements.
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A product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the
product before it is released for distribution. If the product is subject to official release, the manufacturer must submit samples of each lot,
together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests
performed on the lot, to the FDA. The FDA may in addition perform certain confirmatory tests on lots of some products before releasing the
lots for distribution. Finally, the FDA will conduct laboratory research related to the safety, purity, potency, and effectiveness of
pharmaceutical products.
Once a license is granted, the FDA may withdraw the license if compliance with regulatory requirements is not maintained or if problems
occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of
unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in
revisions to the licensed labeling to add new safety information; imposition of post-market studies or clinical trials to assess safety risks; or
imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market, or product
recalls;
fines, warning letters, or holds on post-licensing clinical trials;
refusal of the FDA to approve pending applications or supplements to licensed applications, or suspension or revocation of product
license licenses;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placed on the market. This
regulation includes, among other things, standards and regulations for direct-to-consumer advertising, communications regarding
unapproved uses, industry-sponsored scientific and educational activities, and promotional activities involving the Internet and social media.
Promotional claims about a drug’s safety or effectiveness are prohibited before the drug is licensed. After licensing, a drug product generally
may not be promoted for uses that are not licensed by the FDA, as reflected in the product’s prescribing information. In the United States,
health care professionals are generally permitted to prescribe drugs for such uses not described in the drug’s labeling, known as off-label
uses, because the FDA does not regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’
communications, prohibiting the promotion of off-label uses. It may be permissible, under very specific, narrow conditions, for a manufacturer
to engage in nonpromotional, non-misleading communication regarding off-label information, such as distributing scientific or medical journal
information.
If a company is found to have promoted off-label uses, it may become subject to adverse public relations and administrative and judicial
enforcement by the FDA, the Department of Justice, or the Office of the Inspector General of the Department of Health and Human Services
(HHS), as well as state authorities. This could subject a company to a range of penalties that could have a significant commercial impact,
including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug
products. The federal government has levied large civil and criminal fines against companies for alleged improper promotion, and has also
requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or
curtailed.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act (PDMA) and its
implementing regulations, as well as the Drug Supply Chain Security Act (DSCSA), which regulate the distribution and tracing of prescription
drug samples at the federal level, and set minimum standards for the regulation of distributors by the states. The PDMA, its implementing
regulations and state laws limit the distribution of prescription pharmaceutical product samples, and the DSCA imposes requirements to
ensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.
Pediatric Studies and Exclusivity
Under the Pediatric Research Equity Act, a BLA or supplement thereto for a biological product with a new active ingredient, indication,
dosage form, dosing regimen or route of administration must contain data that are adequate to assess the safety and effectiveness of the
product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric
subpopulation for which the product is safe and effective. Sponsors must also submit pediatric study plans prior to the assessment data.
Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and
design, any deferral or waiver requests and other information required by regulation. The applicant, the FDA, and the FDA’s internal review
committee must then review the information submitted, consult with each other and agree upon a final plan. The FDA or the applicant may
request an amendment to the plan at any time.
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For products intended to treat a serious or life-threatening disease or condition, the FDA must, upon the request of an applicant, meet to
discuss preparation of the initial pediatric study plan or to discuss deferral or waiver of pediatric assessments. In addition, FDA will meet early
in the development process to discuss pediatric study plans with sponsors and FDA must meet with sponsors by no later than the end-of-
Phase 1 meeting for serious or life-threatening diseases and by no later than ninety (90) days after FDA’s receipt of the study plan.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after
licensing of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and
procedures relating to deferral requests and requests for extension of deferrals are contained in FDASIA. Unless otherwise required by
regulation, the pediatric data requirements do not apply to products with orphan designation.
The FDA Reauthorization Act of 2017 established new requirements to govern certain molecularly targeted cancer indications. Any company
that submits a BLA three years after the date of enactment of that statute must submit pediatric assessments with the BLA if the biologic is
intended for the treatment of an adult cancer and is directed at a molecular target that FDA determines to be substantially relevant to the
growth or progression of a pediatric cancer. The investigation must be designed to yield clinically meaningful pediatric study data regarding
the dosing, safety and preliminary potency to inform pediatric labeling for the product. Deferrals and waivers as described above are also
available.
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an
additional six months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent and orphan
exclusivity. This six-month exclusivity may be granted if a BLA sponsor submits pediatric data that fairly respond to a written request from the
FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is
deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to
and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the
product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA
cannot license another application.
Orphan Drug Designations and Exclusivity
Under the Orphan Drug Act, the FDA may designate a biological product as an “orphan drug” if it is intended to treat a rare disease or
condition, generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no
reasonable expectation that the cost of developing and making a product available in the United States for treatment of disease or condition
will be recovered from sales of the product. A company must seek orphan drug designation before submitting a BLA for the candidate
product. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan drug designation
does not shorten the PDUFA goal dates for the regulatory review and licensing process, although it does convey certain advantages such as
tax benefits and exemption from the PDUFA application fee.
If a product with orphan designation receives the first FDA approval for the disease or condition for which it has such designation or for a
select indication or use within the rare disease or condition for which it was designated, the product generally will receive orphan drug
exclusivity. Orphan drug exclusivity means that the FDA may not license another sponsor’s marketing application for the same drug for the
same condition for seven years, except in certain limited circumstances. Orphan exclusivity does not block the licensing of a different product
for the same rare disease or condition, nor does it block the licensing of the same product for different conditions. If a biologic designated as
an orphan drug ultimately receives marketing licensing for an indication broader than what was designated in its orphan drug application, it
may not be entitled to exclusivity.
Orphan drug exclusivity will not bar licensing of another product under certain circumstances, including if a subsequent product with the
same biologic for the same condition is shown to be clinically superior to the licensed product on the basis of greater potency, purity or safety,
or providing a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand. This is
the case despite an earlier court opinion holding that the Orphan Drug Act unambiguously required the FDA to recognize orphan exclusivity
regardless of a showing of clinical superiority.
Biosimilars and Exclusivity
The 2010 Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010, included a subtitle called the Biologics
Price Competition and Innovation Act of 2009 (BPCIA). The BPCIA established a regulatory scheme authorizing the FDA to license
biosimilars and interchangeable biosimilars. The FDA has licensed several biosimilar products for use in the United States. The FDA has
issued several guidance documents outlining an approach to review and licensing of biosimilars. Additional guidance is expected to be
proposed and finalized by the FDA in the near term.
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Under the BPCIA, a manufacturer may submit an application for licensure of a biological product that is “biosimilar to” or “interchangeable
with” a previously licensed biological product or “reference product.” In order for the FDA to license a biosimilar product, it must find, among
other things, that the product is “highly similar” to the reference product notwithstanding minor differences in clinically inactive components
and that there are no clinically meaningful differences between the reference product and proposed biosimilar product in terms of safety,
purity, and potency. For the FDA to license a biosimilar product as interchangeable with a reference product, the agency must find that the
biosimilar product can be expected to produce the same clinical results as the reference product, and, for products administered multiple
times, that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks
or risks of diminished potency relative to exclusive use of the reference biologic.
Under the BPCIA, an application for a biosimilar or interchangeable biological product may not be submitted to the FDA until four years
following the date of licensing of the reference product. The FDA may not license a biosimilar or interchangeable biological product until 12
years from the date on which the reference product was licensed. Even if a product is considered to be a reference product eligible for
exclusivity, another company could market a competing version of that product if the FDA licenses a full BLA for such product containing the
sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity, and potency of their
product. The BPCIA also created certain exclusivity periods for biosimilars licensed as interchangeable products. At this juncture, it is unclear
whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state
pharmacy law.
Patent Term Restoration and Extension
A patent claiming a new biological product may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a
patent restoration of up to five years for patent term lost during product development and FDA regulatory review. The restoration period
granted on a patent covering a product is typically one-half the time between the effective date of an IND and the submission date of a
marketing application (such as a BLA), plus the time between the submission date of a marketing application and the ultimate licensing date.
Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s licensing date.
Only one patent applicable to a licensed product is eligible for the extension, and the application for the extension must be submitted prior to
the expiration of the patent in question and within 60 days after approval of the relevant marketing application. A patent that covers multiple
products for which licensing is sought can only be extended in connection with one of the licenses. The USPTO reviews and licenses the
application for any patent term extension or restoration in consultation with the FDA.
Healthcare Law and Regulation
Health care providers and third-party payors play a primary role in the recommendation and prescription of biological products that are
granted marketing licensing. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable
fraud and abuse, anti-kickback, false claims laws, patient privacy laws and regulations and other health care laws and regulations that may
constrain business and/or financial arrangements. Restrictions under applicable federal and state health care laws and regulations, include
the following:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting,
offering, paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral
of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or
in part, under a federal health care program such as Medicare and Medicaid. Moreover, the government may assert that a claim
that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim
for purposes of the civil False Claims Act. On December 2, 2020, the Office of Inspector General, or OIG, published further
modifications to the federal Anti-Kickback Statute. Under the final rules, OIG added safe harbor protections under the Anti-Kickback
Statute for certain coordinated care and value-based arrangements among clinicians, providers, and others. This rule (with
exceptions) became effective January 19, 2021. Implementation of this change and new safe harbors for point-of-sale reductions in
price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the Biden
administration and may be further amended or repealed;
the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit
individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government,
claims for payment that are false, fictitious or fraudulent or knowingly making, using or causing to made or used a false record or
statement to avoid, decrease or conceal an obligation to pay money to the federal government.
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the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which created additional federal criminal laws that
prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care
benefit program or making false statements relating to health care matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing
regulations, including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory
contractual terms, on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective
business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information
with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely
manner to government programs;
the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the 2010 Patient Protection
and Affordable Care Act, as amended by the Health Care Education Reconciliation Act (collectively, the ACA), which requires
certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid
Services (CMS) within the HHS, information related to payments and other transfers of value made by that entity to physicians
(currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as
ownership and investment interests held by physicians and their immediate family members. Effective January 1, 2022, these
reporting obligations will extend to include transfers of value made during the previous year to certain non-physician providers such
as physician assistants and nurse practitioners; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to health care
items or services that are reimbursed by non-government third-party payors, including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the
relevant compliance guidance promulgated by the federal government in addition to requiring manufacturers to report information related to
payments to physicians and other health care providers or marketing expenditures. In addition, certain state and local laws require the
registration of pharmaceutical sales representatives. State and foreign laws also govern the privacy and security of health information in
some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating
compliance efforts.
Pharmaceutical Insurance Coverage and Health Care Reform
In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the
prescribed services generally rely on third-party payors to reimburse all or part of the associated health care costs. Significant uncertainty
exists as to the coverage and reimbursement status of products. Thus, even if a product candidate is licensed, sales of the product will
depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and
Medicaid, commercial health insurers and managed care organizations, provide coverage and establish adequate reimbursement levels for,
the product. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting
the price or reimbursement rate that the payor will pay for the product once coverage is licensed. Third-party payors are increasingly
challenging the prices charged, examining the medical necessity and reviewing the cost-effectiveness of medical products and services and
imposing controls to manage costs. Third-party payors may limit coverage to specific products on a licensed list, also known as a formulary,
which might not include all of the licensed products for a particular indication.
In order to secure coverage and reimbursement for any product that might be licensed for sale, a company may need to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs
required to obtain FDA or other comparable marketing licenses. Nonetheless, product candidates may not be considered medically
necessary or cost effective. A decision by a third-party payor not to cover a product could reduce physician utilization once the product is
licensed and have a material adverse effect on sales, results of operations and financial condition. Additionally, a payor’s decision to provide
coverage for a product does not imply that an adequate reimbursement rate will be licensed. Further, one payor’s determination to provide
coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of
coverage and reimbursement can differ significantly from payor to payor.
The containment of health care costs also has become a priority of federal, state and foreign governments and the prices of products have
been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including price controls,
restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment
measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company’s
revenue generated from the sale of any licensed products. Coverage policies and third-party reimbursement rates may change at any time.
Even if favorable coverage and reimbursement status is attained for one
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or more products for which a company or its collaborators receive marketing licenses, less favorable coverage policies and reimbursement
rates may be implemented in the future.
There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and
biopharmaceutical products, limiting coverage and reimbursement for drugs and biologics and other medical products, government control
and other changes to the health care system in the United States. In March 2010, the ACA was enacted, which includes measures that have
significantly changed health care financing by both governmental and private insurers. The provisions of the ACA of importance to the
pharmaceutical and biotechnology industry are, among others, the following:
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an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drug agents or biologic
agents, which is apportioned among these entities according to their market share in certain government health care programs;
an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average
manufacturer price for branded and generic drugs, respectively;
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (increased pursuant to the
Bipartisan Budget Act of 2018, effective as of 2019) point-of-sale discounts to negotiated prices of applicable brand drugs to eligible
beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare
Part D;
extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid
managed care organizations, unless the drug is subject to discounts under the 340B drug discount program;
a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs
that are inhaled, infused, instilled, implanted or injected;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to
additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the
federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such research;
establishment of the Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models
to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Other legislative changes have been proposed and adopted since the ACA was enacted:
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On August 2, 2011, the U.S. Budget Control Act of 2011, among other things, led to aggregate reductions to Medicare payments
to providers of up to 2% per fiscal year. These reductions went into effect in April 2013 and, due to subsequent legislative
amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020
through March 31, 2022 due to the COVID-19 pandemic. Following the temporary suspension, a 1% payment reduction will
occur beginning April 1, 2022 through June 30, 2022, and the 2% payment reduction will resume on July 1, 2022.
On January 2, 2013, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several
types of providers and increased the statute of limitations period for the government to recover overpayments to providers from
three to five years.
On April 13, 2017, CMS published a final rule that gives states greater flexibility in setting benchmarks for insurers in the
individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the
ACA for plans sold through such marketplaces.
On May 30, 2018, the Right to Try Act, was signed into law. The law, among other things, provides a federal framework for
certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are
undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in
clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a
pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.
On May 23, 2019, CMS published a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B
drugs beginning January 1, 2020.
On December 20, 2019, former President Trump signed into law the Further Consolidated Appropriations Act (H.R. 1865), which
repealed the Cadillac tax, the health insurance provider tax, and the medical device excise tax. It is impossible to determine
whether similar taxes could be instated in the future.
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These laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for
any of our product candidates for which we may obtain regulatory licensing or the frequency with which any such product candidate is
prescribed or used. Further, there have been several recent U.S. congressional inquiries and proposed state and federal legislation designed
to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs,
reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.
These healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions
in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure
on the price for any licensed product and/or the level of reimbursement physicians receive for administering any licensed product. Reductions
in reimbursement levels may negatively impact the prices or the frequency with which products are prescribed or administered. Any reduction
in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA,
and we expect there will be additional challenges and amendments to the ACA in the future. On June 17, 2021, the U.S. Supreme Court
dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the
ACA. Prior to the Supreme Court’s decision, President Biden issued an Executive Order to initiate a special enrollment period from February
15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The Executive Order
also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare,
including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that
create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how other
healthcare reform measures of the Biden administrations or other efforts, if any, to challenge repeal or replace the ACA, will impact our
business.
Further, there have been several recent U.S. congressional inquiries and proposed and enacted federal and state legislation designed to,
among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs,
reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. Both the Biden
Administration and Congress have indicated that they will continue to seek new legislative measures to control drug costs.
At the state level, individual states are increasingly aggressive in 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. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures
to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.
These measures could reduce the ultimate demand for our product candidates, once licensed, or put pressure on our product pricing.
Review and Approval of Medicinal Products in the EU
In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory
requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials,
marketing authorization, commercial sales and distribution of products. Whether or not it obtains FDA licensing for a product, an applicant will
need to obtain the necessary approvals by the comparable non-U.S. regulatory authorities before it can commence clinical trials or marketing
of the product in those countries or jurisdictions. Specifically, the process governing approval of medicinal products in the EU generally
follows the same lines as in the United States although the approval of a medicinal product in the United States is no guarantee of approval
of the same product in the European Union, either at all or within the same timescale as approval may be granted in the United States. It
entails satisfactory completion of preclinical studies and adequate and well-controlled clinical trials to establish the safety and efficacy of the
product for each proposed indication. It also requires the submission to the relevant competent authorities of a marketing authorization
application (MAA), and granting of a marketing authorization by these authorities before the product can be marketed and sold in the EU.
Clinical Trial Approval
The Clinical Trials Directive 2001/20/EC, the Directive 2005/28/EC on GCP and the related national implementing provisions of the individual
EU Member States govern the system for the approval of clinical trials in the EU. Under this system, an applicant must obtain prior approval
from the competent national authority of the EU Member States in which the clinical trial is to be
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conducted. Furthermore, the applicant may only start a clinical trial at a specific study site after the competent ethics committee has issued a
favorable opinion in relation to the clinical trial. The clinical trial application must be accompanied by, among other documents, an
investigational medicinal product dossier (the Common Technical Document) with supporting information prescribed by Directive 2001/20/EC,
Directive 2005/28/EC and, where relevant, the implementing national provisions of the individual EU Member States and applicable guidance
documents.
In April 2014, the new Clinical Trials Regulation, (EU) No 536/2014 (Clinical Trials Regulation) was adopted. The Regulation was published
on June 16, 2014 but is not expected to come into effect until late 2020 at the earliest. It is expected that the Clinical Trials Regulation will
apply following confirmation of full functionality of the Clinical Trials Information System (CTIS), the centralized EU portal and database for
clinical trials foreseen by the regulation, through an independent audit. The regulation becomes applicable six months after the European
Commission publishes notice of this confirmation. The Clinical Trials Regulation will be directly applicable in all the EU Member States -
meaning that no national implementing legislation will be required - and it will supersede and repeal the current Clinical Trials Directive
2001/20/EC and any national legislation that was put in place to implement the Directive. Conduct of all clinical trials performed in the EU will
continue to be governed by the Clinical Trials Directive and national implementing legislation until the new Clinical Trials Regulation becomes
applicable. The extent to which on-going clinical trials will be governed by the Clinical Trials Regulation will depend on when the Clinical
Trials Regulation becomes applicable and on the duration of the individual clinical trial. Clinical trials applications made before the entry into
force of the Clinical Trials Regulation will continue to be governed by the Clinical Trials Directive for up to three years after the Clinical Trials
Regulation becomes applicable, as will clinical trials applications made within one year of the Clinical Trials Regulation becoming applicable
where the clinical trial sponsor elects for the trial to be governed by the old regime until the end of the three year transition period. If a clinical
trial continues for more than three years from the day on which the Clinical Trials Regulation becomes applicable the Clinical Trials
Regulation will at that time begin to apply to the clinical trial.
The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the EU. The main characteristics of the
regulation include: a streamlined application procedure via a single entry point, the “EU Portal and Database”; a single set of documents to
be prepared and submitted for the application as well as simplified reporting procedures for clinical trial sponsors; and a harmonized
procedure for the assessment of applications for clinical trials, which is divided in two parts. Part I is assessed by the appointed reporting
Member State, whose assessment report is submitted for review by the sponsor and all other competent authorities of all EU Member States
in which an application for authorization of a clinical trial has been submitted (the so-called Member States concerned). Part II is assessed
separately by each Member State concerned. Strict deadlines have been established for the assessment of clinical trial applications. The role
of the relevant ethics committees in the assessment procedure will continue to be governed by the national law of the Member State
concerned. However, overall related timelines will be defined by the Clinical Trials Regulation.
PRIME Designation in the EU
EMA now offers a scheme that is intended to reinforce early dialogue with, and regulatory support from, EMA in order to stimulate innovation,
optimize development and enable accelerated assessment of PRIority MEdicines (“PRIME”). It is intended to build upon the scientific advice
scheme and accelerated assessment procedure offered by EMA. The scheme is voluntary and eligibility criteria must be met for a medicine
to qualify for PRIME.
The PRIME scheme is open to medicines under development and for which the applicant intends to apply for an initial marketing
authorization application through the centralized procedure. Eligible products must target conditions for which where is an unmet medical
need (there is no satisfactory method of diagnosis, prevention or treatment in the European Union or, if there is, the new medicine will bring a
major therapeutic advantage) and they must demonstrate the potential to address the unmet medical need by introducing new methods or
therapy or improving existing ones. Applicants will typically be at the exploratory clinical trial phase of development, and will have preliminary
clinical evidence in patients to demonstrate the promising activity of the medicine and its potential to address to a significant extent an unmet
medical need. In exceptional cases, applicants from the academic sector or SMEs (small and medium sized enterprises) may submit an
eligibility request at an earlier stage of development if compelling non-clinical data in a relevant model provide early evidence of promising
activity, and first in man studies indicate adequate exposure for the desired pharmacotherapeutic effects and tolerability.
If a medicine is selected for the PRIME scheme, EMA:
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appoints a rapporteur from the Committee for Medicinal Products for Human Use (CHMP) or from the Committee for Advanced
Therapies (CAT) to provide continuous support and to build up knowledge of the medicine in advance of the filing of a marketing
authorization application;
issues guidance on the applicant’s overall development plan and regulatory strategy;
organizes a kick-off meeting with the rapporteur and experts from relevant EMA committees and working groups;
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provides a dedicated EMA contact person; and
provides scientific advice at key development milestones, involving additional stakeholders, such as health technology assessment
bodies and patients, as needed.
Medicines that are selected for the PRIME scheme are also expected to benefit from EMA’s accelerated assessment procedure at the time of
application for marketing authorization. Where, during the course of development, a medicine no longer meets the eligibility criteria, support
under the PRIME scheme may be withdrawn.
Marketing Authorization
To obtain a marketing authorization for a product under EU regulatory systems, an applicant must submit an MAA, either under a centralized
procedure administered by the EMA or one of the procedures administered by competent authorities in EU Member States (decentralized
procedure, national procedure, or mutual recognition procedure). A marketing authorization may be granted only to an applicant established
in the EU. Regulation (EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the EU, applicants must demonstrate
compliance with all measures included in an EMA-approved Pediatric Investigation Plan (PIP) covering all subsets of the pediatric population,
unless the EMA has granted a product-specific waiver, class waiver, or a deferral for one or more of the measures included in the PIP.
The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid across the
European Economic Area (which comprises the 27 Member States of the European Union, together with Norway, Iceland and Liechtenstein).
Pursuant to Regulation (EC) No. 726/2004, the centralized procedure is compulsory for specific products, including for medicines produced
by certain biotechnological processes, products designated as orphan medicinal products, ATMPs and products with a new active substance
indicated for the treatment of certain diseases, including products for the treatment of cancer. For those products for which the use of the
centralized procedure is not mandatory, applicants may elect to use the centralized procedure where either the product contains a new active
substance indicated for the treatment of other diseases or where the applicant can show that the product constitutes a significant therapeutic,
scientific or technical innovation for which a centralized process is in the interest of patients at a European Union level. We anticipate that the
centralized procedure will be mandatory for the product candidates we are developing.
Under the centralized procedure, the Committee for Medicinal Products for Human use (or the “CHMP”), which is the EMA’s committee that
is responsible for human medicines, is responsible for conducting the assessment of whether a medicine meets the required quality, safety
and efficacy requirements, and whether the product has a positive benefit/risk profile. The CHMP is also responsible for several post-
authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization.
Under the centralized procedure in the EU, the maximum timeframe for the evaluation of an MAA is 210 days from the receipt of a valid MAA,
excluding clock stops when additional information or written or oral explanation is to be provided by the applicant in response to questions of
the CHMP. Clock stops may extend the timeframe of evaluation of an MAA considerably beyond 210 days.
Accelerated evaluation may be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of
view of public health and, in particular, from the viewpoint of therapeutic innovation. If the CHMP accepts such a request, the timeframe of
210 days for assessment will be reduced to 150 days (excluding clock stops), but it is possible that the CHMP may revert to the standard
time limit for the centralized procedure if it determines that it is no longer appropriate to conduct an accelerated assessment. At the end of
this period, the CHMP provides a scientific opinion on whether or not a marketing authorization should be granted in relation to a medicinal
product. Within 15 calendar days of receipt of a final opinion from the CHMP, the European Commission must prepare a draft decision
concerning an application for marketing authorization. This draft decision must take the opinion and any relevant provisions of EU law into
account. Before arriving at a final decision on an application for centralized authorization of a medicinal product, the European Commission
must consult the Standing Committee on Medicinal Products for Human Use. The Standing Committee is composed of representatives of the
EU Member States and chaired by a non-voting European Commission representative. The European Parliament also has a related “droit de
regard”. The European Parliament’s role is to ensure that the European Commission has not exceeded its powers in deciding to grant or
refuse to grant a marketing authorization.
The European Commission may grant a so-called “marketing authorization under exceptional circumstances”. Such authorization is intended
for products for which the applicant can demonstrate that it is unable to provide comprehensive data on the efficacy and safety under normal
conditions of use, because the indications for which the product in question is intended are encountered so rarely that the applicant cannot
reasonably be expected to provide comprehensive evidence, or in the present state of scientific knowledge comprehensive information
cannot be provided, or it would be contrary to generally accepted principles of medical ethics to collect such information. Consequently,
marketing authorization under exceptional circumstances may be granted subject to certain specific obligations, which may include the
following:
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the applicant must complete an identified program of studies within a time period specified by the competent authority, the results of
which form the basis of a reassessment of the benefit/risk profile;
the medicinal product in question may be supplied on medical prescription only and may in certain cases be administered only
under strict medical supervision, possibly in a hospital and in the case of a radiopharmaceutical, by an authorized person; and
the package leaflet and any medical information must draw the attention of the medical practitioner to the fact that the particulars
available concerning the medicinal product in question are as yet inadequate in certain specified respects.
A marketing authorization under exceptional circumstances is subject to annual review to reassess the risk-benefit balance in an annual
reassessment procedure. Continuation of the authorization is linked to the annual reassessment and a negative assessment could potentially
result in the marketing authorization being suspended or revoked. The renewal of a marketing authorization of a medicinal product under
exceptional circumstances, however, follows the same rules as a “normal” marketing authorization. Thus, a marketing authorization under
exceptional circumstances is granted for an initial five years, after which the authorization will become valid indefinitely, unless the EMA
decides that safety grounds merit one additional five-year renewal.
The European Commission may also grant a so-called “conditional marketing authorization” prior to obtaining the comprehensive clinical data
required for an application for a full marketing authorization. Such conditional marketing authorizations may be granted for product
candidates (including medicines designated as orphan medicinal products), if (i) the risk-benefit balance of the product candidate is positive,
(ii) it is likely that the applicant will be in a position to provide the required comprehensive clinical trial data, (iii) the product fulfills an unmet
medical need and (iv) the benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs
the risk inherent in the fact that additional data are still required. A conditional marketing authorization may contain specific obligations to be
fulfilled by the marketing authorization holder, including obligations with respect to the completion of ongoing or new studies, and with respect
to the collection of pharmacovigilance data. Conditional marketing authorizations are valid for one year, and may be renewed annually, if the
benefit-risk balance remains positive, and after an assessment of the need for additional or modified conditions and/or specific obligations.
The timelines for the centralized procedure described above also apply with respect to the review by the CHMP of applications for a
conditional marketing authorization.
The EU medicines rules expressly permit the EU Member States to adopt national legislation prohibiting or restricting the sale, supply or use
of any medicinal product containing, consisting of or derived from a specific type of human or animal cell, such as embryonic stem cells.
While the product candidates we have in development do not make use of embryonic stem cells, it is possible that the national laws in certain
EU Member States may prohibit or restrict us from commercializing our product candidates, even if they have been granted an EU marketing
authorization.
Unlike the centralized authorization procedure, the decentralized marketing authorization procedure requires a separate application to, and
leads to separate approval by, the competent authorities of each EU Member State in which the product is to be marketed. This application is
identical to the application that would be submitted to the EMA for authorization through the centralized procedure. The reference EU
Member State prepares a draft assessment and drafts of the related materials within 70 days after receipt of a valid application. The resulting
assessment report is submitted to the concerned EU Member States who, then seek to reach a consensus in relation to the assessment
report and related materials within a further 50 days (although there may be clock stops within this period if more information is requested,
and such clock stops would extend this time period). If approved at this stage, the application proceeds to the grant procedure at concerned
Member States level. If consensus is not reached by the relevant Member States during the initial 120 day period, the application enters a
further assessment period. If at the end of that further assessment period a concerned EU Member State cannot approve the assessment
report and related materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the
European Commission, whose decision is binding on all EU Member States.
The mutual recognition procedure similarly is based on the acceptance by the competent authorities of the EU Member States of the
marketing authorization of a medicinal product by the competent authorities of other EU Member States. The holder of a national marketing
authorization may submit an application to the competent authority of an EU Member State requesting that this authority recognize the
marketing authorization delivered by the competent authority of another EU Member State.
Regulatory Data Protection in the EU
In the EU, innovative medicinal products approved on the basis of a complete independent data package qualify for eight years of data
exclusivity upon marketing authorization and an additional two years of market exclusivity pursuant to Directive 2001/83/EC. Regulation (EC)
No 726/2004 repeats the entitlement for medicinal products authorized in accordance with the centralized authorization procedure. Data
exclusivity prevents applicants for authorization of generics of these innovative products from
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referencing the innovator’s data to assess a generic (abridged) application for a period of eight years. During the additional two-year period
of market exclusivity, a generic marketing authorization application can be submitted and authorized, and the innovator’s data may be
referenced, but no generic medicinal product can be placed on the EU market until the expiration of the market exclusivity. The overall ten-
year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder
obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are
held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical entity
so that the innovator gains the prescribed period of data exclusivity, another company may market another version of the product if such
company obtained marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, non-
clinical tests and clinical trials.
Periods of Authorization and Renewals
A marketing authorization has an initial validity for five years in principle. The marketing authorization may be renewed after five years on the
basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the EU Member State. To this end, the
marketing authorization holder must provide the EMA or the competent authority with a consolidated version of the file in respect of quality,
safety, and efficacy, including all variations introduced since the marketing authorization was granted, at least nine months before the
marketing authorization ceases to be valid.
The European Commission or the competent authorities of the EU Member States may decide, on justified grounds relating to
pharmacovigilance, to proceed with one further five-year period of marketing authorization. Once subsequently definitively renewed, the
marketing authorization shall be valid for an unlimited period. Any authorization which is not followed by the actual placing of the medicinal
product on the EU market (in case of centralized procedure) or on the market of the authorizing EU Member State within three years after
authorization ceases to be valid (the so-called sunset clause).
Orphan Drug Designation and Exclusivity
Regulation (EC) No. 141/2000, as implemented by Regulation (EC) No. 847/2000 provides that a drug can be designated as an orphan drug
by the European Commission if its sponsor can establish: that the product is intended for the diagnosis, prevention or treatment of (1) a life-
threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the EU when the application is made,
or (2) a life-threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives it is unlikely that the
marketing of the drug in the EU would generate sufficient return to justify the necessary investment. For either of these conditions, the
applicant must also demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question
that has been authorized in the EU or, if such method exists, the drug will be of significant benefit to those affected by that condition.
Once authorized, orphan medicinal products are entitled to 10 years of market exclusivity in all EU Member States and in addition a range of
other benefits during the development and regulatory review process including scientific assistance for study protocols, authorization through
the centralized marketing authorization procedure covering all member countries and a reduction or elimination of registration and marketing
authorization fees. During this market exclusivity period, neither the EMA nor the European Commission or the Member States can accept an
application or grant a marketing authorization for the same therapeutic indication in respect of a “similar medicinal product”. A “similar
medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized
orphan medicinal product, and which is intended for the same therapeutic indication. However, marketing authorization may be granted to a
similar medicinal product with the same orphan indication during the 10-year period with the consent of the marketing authorization holder for
the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities.
Marketing authorization may also be granted to a similar medicinal product with the same orphan indication if this product is safer, more
effective or otherwise clinically superior to the original orphan medicinal product. The period of market exclusivity may, in addition, be
reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan drug designation
because, for example, the product is sufficiently profitable not to justify market exclusivity.
Regulatory Requirements after a Marketing Authorization has been Obtained
In case an authorization for a medicinal product in the EU is obtained, the holder of the marketing authorization is required to comply with a
range of requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products. These include:
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Compliance with the European Union’s stringent pharmacovigilance or safety reporting rules must be ensured. These rules can
impose post-authorization studies and additional monitoring obligations.
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The manufacturing of authorized medicinal products, for which a separate manufacturer’s license is mandatory, must also be
conducted in strict compliance with the applicable EU laws, regulations and guidance, including Directive 2001/83/EC, Directive
2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice. These
requirements include compliance with EU cGMP standards when manufacturing medicinal products and active pharmaceutical
ingredients, including the manufacture of active pharmaceutical ingredients outside of the EU with the intention to import the active
pharmaceutical ingredients into the EU.
The marketing and promotion of authorized drugs, including industry-sponsored continuing medical education and advertising
directed toward the prescribers of drugs and/or the general public, are strictly regulated in the EU notably under Directive
2001/83EC, as amended, and EU Member State laws. Direct-to-consumer advertising of prescription medicines is prohibited across
the EU.
Pricing Decisions for Approved Products
In the EU, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed
only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-
effectiveness of a particular product candidate to currently available therapies or so-called health technology assessments, in order to obtain
reimbursement or pricing approval. For example, the EU provides options for its Member States to restrict the range of products for which
their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. Member
States may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the
company placing the product on the market. Other Member States allow companies to fix their own prices for products, but monitor and
control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in the EU have increased the
amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage health care expenditures,
especially in light of the severe fiscal and debt crises experienced by many countries in the EU. The downward pressure on health care costs
in general, particularly prescription products, has become intense. As a result, increasingly high barriers are being erected to the entry of new
products. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may
continue after reimbursement has been obtained. Reference pricing used by various Member States, and parallel trade, or arbitrage,
between low-priced and high-priced Member States, can further reduce prices. There can be no assurance that any country that has price
controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any
products, if approved in those countries.
Human Capital
At TCR2, passion is our primary identity. It is at the center of who we are and who we hire. Our employees are passionate about the
possibility of curing cancer, are our most important asset, and the key to our success. We treat employees with respect, foster an innovative
and supportive culture, and continually invest in their growth and development.
As of March 1, 2022, we had 137 full-time employees, of which 32 of our employees have Ph.D. or M.D. degrees and 118 of our employees
are engaged in research and development activities. Our headcount grew by 31% in 2021.
Diversity and Inclusion
TCR2 is committed to a culture of diversity, inclusion and belonging. This commitment is reflected in our corporate goals and underpins our
social, cultural, and philanthropic initiatives. We focus on diverse recruiting strategies and partner with external organizations that develop
and supply diverse talent. In 2021, 77% of our new hires came from underrepresented categories (defined as women, ethnic minorities,
LGBTQ+, those with disabilities, and veterans). As of March 1, 2022, approximately 58% of the Company's workforce was female and 46%
of the Company's employees in managerial roles were female. In 2021, 59% of promotions were female. As of March 1, 2022, racial and
ethnic minorities represented approximately 34% of the Company's workforce, of which 24% of our employees in managerial roles were
minorities. In 2021, 41% of promotions were racial and ethnic minorities.
Our active, employee-led Culture Committee focuses on celebrating and supporting our inclusive community. Events, education and
awareness campaigns encourage active listening and open and passionate dialogues among our employees and reinforces that we all play a
role in prioritizing diversity, inclusion and belonging. All employees are encouraged to get involved in the Culture Committee and participate
in regular programming.
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Retention, Training and Development
The development, attraction and retention of our employees is a critical success factor for TCR2 and is reflected in our corporate goals. We
cultivate a culture of learning and offer formal and informal training and development opportunities for employees at all levels. These
programs include Insights Discovery® training, delivered with a custom curriculum designed to match our five core competencies: Team
Work, Emotional Intelligence, Technical Expertise, Leadership, and Results Orientation. We take special care to ensure our managers are
well-trained. Programming for managers includes a monthly thematic meet-up as well as our 3-month Manager Essentials Course. We
actively promote from within and continue to fill our team with strong and experienced management talent.
We measure engagement through routine employee surveys and keep the lines of communication open through monthly all-Company
meetings, weekly office hours with the TCR2 People Team, and manager one-on-ones. Overall attrition was down 17% in 2021 (from 22% to
18%).
Compensation and Benefits
An important part of attracting and retaining key talent is competitive pay and benefits. To ensure our compensation and benefits programs
are competitive, we engage nationally recognized outside compensation and benefits consulting firms to independently evaluate the
effectiveness of our programs and to provide benchmarking against our peers within the industry. Our pay for performance philosophy seeks
to motivate and reward employees while accomplishing the Company’s short and long-term strategic goals. As part of a robust performance
management process, employees are evaluated both on what they accomplished and how they demonstrated our core competencies.
Annual salary increases and incentive bonuses are based on merit and include individual and corporate performance factors.
To encourage our employees to think like owners and share in the Company’s success, all employees are granted stock options, certain
employees are granted restricted stock units and all employees can elect to participate in our employee stock purchase plan. All full-time
employees are eligible for health insurance, paid and unpaid leaves including paid parental leave, retirement plan with an employer
contribution match, life and disability/accident coverage, parking or commuter assistance, dependent care accounts, an employee assistance
program providing mental health, wellness support, legal and financial health resources, and access to free and convenient COVID-19
testing.
We celebrate successes through our STAR Recognition Program as well as kudos posted to our internal newsfeed, employee events, and
employee meet-ups multiple times per month (now virtual).
Social Responsibility
At TCR², we are very active in giving back to our local and patient communities. TCR² Cares is an initiative established by employees in 2017
that focuses on giving back to our community in ways that connect to our corporate goal of curing cancer. Fundraising and volunteer
programs support cancer-related charities and those involved in educating children and young adults about science, especially those from
underserved communities.
Our Corporate Information
We were incorporated under the laws of the State of Delaware on May 29, 2015 under the name TCR2, Inc. In November 2016, we changed
our name to TCR2 Therapeutics Inc. Our principal executive offices are located at 100 Binney Street, Suite 710, Cambridge, MA 02142, and
our telephone number is (617) 949-5200. Our website address is www.tcr2.com. Our website and the information contained on, or that can
be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report
on Form 10-K.
We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth
company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we
have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the
market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (ii) the date on which
we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
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Available Information
Our Internet address is www.tcr2.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
including exhibits, proxy and information statements and amendments to those reports filed or furnished pursuant to Sections 13(a), 14, and
15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available through the "Investors" portion of our website
free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Information on our
website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein by
reference. In addition, our filings with the SEC may be accessed through the SEC’s Interactive Data Electronic Applications system at
www.sec.gov. All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the
date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those
statements or documents unless we are required to do so by law.
Our code of conduct, corporate governance guidelines and the charters of our Audit Committee, Compensation Committee and Nominating
and Corporate Governance Committee are available through our website at www.tcr2.com.
Item 1A. Risk Factors
Careful consideration should be given to the following risk factors, in addition to the other information set forth in this Annual Report on Form
10‑K and in other documents that we file with the Securities and Exchange Commission, or SEC, in evaluating the Company and our
business. Investing in our common stock involves a high degree of risk. If any of the following risks and uncertainties actually occurs, our
business, prospects, financial condition and results of operations could be materially and adversely affected. The risks described below are
not intended to be exhaustive and are not the only risks facing the Company. Additional risks and uncertainties not presently known to us or
that we currently deem immaterial also may impact our business, prospects, financial condition and results of operations.
Risks Related to the Development of Our Product Candidates
Risks Related to Clinical Development
Our approach to the discovery and development of product candidates based on our TRuC-T cell platform represents a novel
approach to cancer treatment, which creates significant challenges for us.
Our future success depends on the successful development of our product candidates, which target solid tumors and hematologic
malignancies using the complete T cell receptor (TCR) complex without the need for human leukocyte antigen (HLA) matching. Advancing
our product candidates based on our innovative TRuC-T cell platform creates significant challenges for us, including:
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educating medical personnel about the administration of TRuC-T cell therapies on a stand-alone basis or in combination with built-
in immune and tumor modulators;
educating medical personnel regarding the potential side effect profile of our product candidates, such as the potential adverse side
effects related to cytokine release syndrome (CRS), neurotoxicity or autoimmune or rheumatologic disorders;
administering chemotherapy to patients in advance of administering our product candidates, which may increase the risk of adverse
side effects;
sourcing clinical and, if licensed, commercial, supplies for the materials used to manufacture and process our product candidates;
manufacturing viral vectors to deliver TRuC constructs to T cells;
developing a robust and reliable TRuC-T cell manufacturing process and manufacturing capacity as well as a complete shipment
lifecycle and supply chain, including efficiently managing shipment of patient cells from and to clinical sites;
minimizing potential contamination to the cell product during production and effectively scaling manufacturing capacity to meet
demand;
managing costs of inputs and other supplies while scaling production;
using medicines to manage adverse side effects of our product candidates, which may not adequately control the side effects
and/or may have a detrimental impact on the potency of the treatment;
obtaining and maintaining regulatory approval from the US Food and Drug Administration (FDA) for our product candidates; and
establishing sales and marketing capabilities upon obtaining any regulatory approval to gain market acceptance of a novel therapy.
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In developing our product candidates, we have not exhaustively explored different options in the design of the TRuC construct and in the
method for manufacturing TRuC-T cells. We may find our existing TRuC-T cells and manufacturing process may be substantially improved
with future design or process changes, necessitating development of new or additional TRuC constructs and further clinical testing and
delaying commercial launch of our first products. For example:
• We have made several TRuC constructs and used preclinical studies to select product candidates to advance into clinical trials. The
preclinical studies are limited in their ability to predict behavior of our product candidates in patients. As we gain experience working
with TRuC constructs, we may decide to select other TRuC constructs for clinical development.
• We have used a lentiviral vector to deliver the TRuC construct to T cells. In the future, we may find that another viral vector or non-
viral transfer process offers advantages. Switching from lentiviral to another delivery system would necessitate additional process
development and clinical testing and delay the development of existing product candidates.
The process by which patient cells are converted into a TRuC-T cell has many steps that can influence quality and activity. We have
explored a subset of variables and expect to continue to improve and optimize the manufacturing process. Depending upon the
nature of the process changes, we may be compelled to perform bridging studies and/or to re-start clinical development, causing
delays in time to market and potentially introducing a risk of failure if new processes do not perform as expected.
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We are early in our development efforts. Most of our product candidates are still in preclinical development. If we are unable to
advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our
product candidates, or experience significant delays in doing so, our business will be materially harmed.
We are early in our development efforts. Most of our product candidates are still in preclinical development, and gavo-cel, our most advanced
product candidate, is in a Phase 1/2 clinical trial. Our ability to generate product revenues, which we do not expect will occur for many years,
if ever, will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. The
success of our product candidates will depend on several factors, including the following:
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successful completion of preclinical studies;
successful initiation and completion of clinical trials;
successful patient enrollment in and completion of clinical trials;
receipt and related terms of marketing approvals and licensures from applicable regulatory authorities;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
making arrangements with third-party manufacturers, or establishing manufacturing capabilities, for both clinical and commercial
supply of our product candidates;
establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved,
whether alone or in collaboration with others;
acceptance of our products, if and when approved, by patients, the medical community and third-party payors;
obtaining and maintaining third-party coverage and adequate reimbursement;
maintaining a continued acceptable safety profile of our products following licensure; and
effectively competing with other therapies.
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or be unable to
successfully commercialize our product candidates, which would materially harm our business.
We have limited experience as a company in conducting clinical trials.
We have limited experience as a company in conducting clinical trials. Our Phase 1/2 clinical trial for gavo-cel began in 2019. Because of this
limited experience, and other factors, we cannot be certain that our planned and ongoing preclinical studies will be completed on time, or that
our planned and ongoing clinical trials will begin, enroll sufficient patients, produce data on expected timelines or be completed on expected
timelines, if at all. Large-scale clinical trials require significant additional financial and management resources and reliance on third-party
clinical investigators, contract research organizations (CROs) and consultants. Relying on third-party clinical investigators, CROs and
consultants may force us to encounter delays that are outside of our control.
Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials
may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient
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to support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing,
or ultimately be unable to complete, the development of such product candidate.
We cannot be certain that our preclinical studies and clinical trial results will be sufficient to support regulatory approval of our product
candidates. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Human clinical trials
are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Failure or delay
can occur at any time during the clinical trial process.
We may experience delays in obtaining the FDA’s authorization to initiate clinical trials under future INDs, completing ongoing clinical studies
of our product candidates due to a variety of factors, including the impact of COVID-19 at our clinical sites, and initiating our planned
preclinical studies and clinical trials. Additionally, we cannot be certain that preclinical studies or clinical trials for our product candidates will
begin on time, not require redesign, enroll an adequate number of subjects on time, or be completed on schedule, if at all. Clinical trials can
be delayed or terminated for a variety of reasons, including delays or failures related to:
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the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical trials;
delays in obtaining regulatory approval to commence a clinical trial;
reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to
extensive negotiation and may vary significantly among different CROs and clinical trial sites;
obtaining institutional review board (IRB) approval at each clinical trial site;
recruiting an adequate number of suitable patients to participate in a clinical trial;
having subjects complete a clinical trial or return for post-treatment follow-up;
clinical trial sites deviating from clinical trial protocol or dropping out of a clinical trial;
addressing subject safety concerns that arise during the course of a clinical trial;
adding a sufficient number of clinical trial sites; or
obtaining sufficient product supply of product candidate for use in preclinical studies or clinical trials from third-party suppliers.
For example, in February 2019, we received a request from the FDA’s Center for Devices and Radiological Health (CDRH) for the
submission of an investigational device exemption (IDE) application regarding our use of a commercially available in vitro diagnostic assay
for screening mesothelin expression in tumors. The CDRH subsequently determined that we did not need to submit an IDE application, but
such a requirement, or other unexpected FDA requests, could lead to future delays of our clinical trials. We may experience numerous
adverse or unforeseen events during, or as a result of, preclinical studies and clinical trials that could delay or prevent our ability to receive
marketing approval or commercialize our product candidates, including:
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we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials;
clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require
us, to conduct additional clinical trials or abandon our research efforts for our other product candidates;
the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these
clinical trials may be slower than we anticipate or participants may drop out of our clinical trials at a higher rate than we anticipate;
our third-party contractors may fail to comply with regulatory requirements, fail to maintain adequate quality controls or be unable to
provide us with sufficient product supply to conduct and complete preclinical studies or clinical trials of our product candidates in a
timely manner, or at all;
we or our investigators might have to suspend or terminate clinical trials of our product candidates for various reasons, including
non-compliance with regulatory requirements, a finding that our product candidates have undesirable side effects or other
unexpected characteristics or a finding that the participants are being exposed to unacceptable health risks;
the cost of clinical trials of our product candidates may be greater than we anticipate;
the quality of our product candidates or other materials necessary to conduct preclinical studies or clinical trials of our product
candidates may be insufficient or inadequate;
regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate;
and
future collaborators may conduct clinical trials in ways they view as advantageous to them but that are suboptimal for us.
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if
we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not
positive or are only moderately positive or if there are safety concerns, our business and results of
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operations may be adversely affected and we may incur significant additional costs. In addition, costs to treat patients with relapsed or
refractory cancer and to treat potential side effects that may result from our product candidates can be significant. Accordingly, our clinical
trial costs are likely to be significantly higher than those for more conventional therapeutic technologies or drug product candidates.
We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such clinical trials
are being conducted, by the Data Safety Monitoring Board (DSMB) for such clinical trial or by the FDA or other regulatory authorities. Such
authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with
regulatory requirements or our clinical trial protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory
authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from
the product candidates, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical
trial.
If we experience delays in the completion, or termination, of any preclinical study or clinical trial of our product candidates, the commercial
prospects of our product candidates may be harmed, and our ability to generate revenues from any of these product candidates will be
delayed or not realized at all. In addition, any delays in completing our preclinical studies or clinical trials may increase our costs, slow down
our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any
of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or
lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our
product candidates. If one or more of our product candidates generally prove to be ineffective, unsafe or commercially unviable, our entire
pipeline and TRuC-T cell platform would have little, if any, value, which would have a material and adverse effect on our business, financial
condition, results of operations and prospects.
Our business is highly dependent on our clinical trial for our lead product candidate, gavo-cel, and we must complete IND-enabling
studies and clinical testing before we can seek regulatory approval and begin commercialization of any of our product candidates.
We cannot be certain that we will be able to complete ongoing clinical trials, initiate future planned clinical trials, or advance our
product candidates into additional trials, or to successfully develop, or obtain regulatory approval for, or successfully
commercialize, any of our product candidates.
Our business depends heavily on our ability to complete clinical development and non-clinical studies of our lead product candidate, gavo-
cel, and our other product candidates, and to obtain regulatory approval of and successfully commercialize these and any future product
candidates. There is no guarantee that any of our product candidates will proceed in preclinical or clinical development or achieve regulatory
approval. The process for obtaining marketing approval for any product candidate is very long and risky and there will be significant
challenges for us to address in order to obtain marketing approval as planned or, if at all.
There is no guarantee that the results obtained in current preclinical studies, our Phase 1/2 clinical trial of gavo-cel, or our planned clinical
trials will be sufficient to obtain regulatory approval or marketing authorization for such product candidates. The FDA may ultimately decide
that the design, number and type of clinical trials, number of patients studied or results of our clinical trial for gavo-cel, even if positive, are
not sufficient for regulatory approval in their respective target indications. Changes in the manufacturing process as we scale-up and optimize
our process for manufacturing our product candidates could also delay development or require us to conduct additional clinical trials or non-
clinical studies or could lead to different results than achieved with the earlier processes. We may not be able to initiate or complete our
clinical trials or announce results from our clinical trials on the timelines we expect. We may experience slower than expected enrollment and
randomization of patients in our clinical trials. These types of delays can lead to delays in completion of a trial and announcement of results.
There is also the potential for slower than expected clinical site initiation, delays or problems in analyzing data, and the potential need for
additional analysis or data or the need to enroll additional patients in any of our clinical trials. We may also encounter delays arising from
unexpected adverse events in a trial or other unexpected hurdles or issues in the conduct of any trial. Negative results in the development of
our lead product candidate may also impact our ability to obtain regulatory approval for our other product candidates, either at all or within
anticipated timeframes because, although other product candidates may target different indications, the underlying technology platform,
manufacturing process and development process is the same for all of our product candidates. Accordingly, a failure in any one program may
affect the ability to obtain regulatory approval to continue or conduct clinical programs for other product candidates.
In addition, because we have limited financial and personnel resources and are placing significant focus on the development of our lead
product candidate, we may forgo or delay pursuit of opportunities with other future product candidates that later prove to have greater
commercial potential, or may need to divert resources to other programs. For example, in October 2021, in alignment with our pipeline
prioritization on solid tumors, we deprioritized the development of TC-110, a product candidate in a Phase 1 clinical trial. Our resource
allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market
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opportunities or limit the opportunities we are able to pursue. Our spending on current and future research and development programs and
other future product candidates for specific indications may not yield any commercially viable future product candidates. If we do not
accurately evaluate the commercial potential or target market for a particular future product candidate, we may relinquish valuable rights to
those future product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been more
advantageous for us to retain sole development and commercialization rights to such future product candidates.
Our preclinical studies and clinical trials may fail to demonstrate adequately the safety and efficacy of any of our product
candidates, which would prevent or delay development, regulatory approval and commercialization.
Before obtaining regulatory approvals for the commercial sale of our product candidates, including gavo-cel, we must demonstrate through
lengthy, complex and expensive preclinical studies and clinical trials that our product candidates are both safe and effective for use in each
target indication. We may not be able to demonstrate the efficacy and safety of gavo-cel or any of our other product candidates or any future
product candidate at each stage of clinical development or we may encounter issues with any non-clinical studies required for regulatory
submissions. Success in preclinical studies or in earlier stage clinical trials may not be repeated or observed in ongoing or future clinical trials
involving TRuCs or other product candidates. The results of clinical trials or non-clinical studies of our product candidates at any stage may
not support further development or may not be sufficient to obtain regulatory approval.
In the Phase 1 dose escalation portion of our Phase 1/2 clinical trial, gavo-cel was generally well tolerated with a manageable adverse event
profile up until dose level (DL) 5, with no patients experiencing on-target, off-tumor toxicities. Two dose limiting toxicities (DLTs) were
observed: one case of Grade 3 pneumonitis at DL1 that resolved with anti-cytokine therapy, and one case of Grade 5 bronchoalveolar
hemorrhage at DL5. Furthermore, all three patients treated at DL5 experienced Grade ≥3 CRS which resulted in 5x108 cells/m2 following
lymphodepletion being declared the maximum tolerated dose (MTD) by the safety review team (SRT). While our data in the Phase 1/2
clinical trial has been positive with a manageable safety profile, these results may not be repeated or observed in future cohorts of patients
treated in the currently ongoing clinical trial or in future clinical trials and may not be predictive of the results of later-stage clinical trials.
The drug-development process, including preclinical and clinical testing is expensive, can take many years to complete, and may include
post-marketing studies and surveillance, which will require the expenditure of substantial resources. The outcome of the drug development
process is inherently uncertain. Of the large number of drugs in development in the U.S., only a small percentage will successfully complete
the FDA regulatory approval process and will be commercialized. Failure can occur at any time during the preclinical study and clinical trial
processes, and, because our product candidates are in an early stage of development, there is a high risk of failure and we may never
succeed in developing marketable products. Clinical trials of our product candidates are, and the manufacturing and marketing of our product
candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the U.S. and in other
countries where we intend to test and, if approved, market any product candidate. Accordingly, even if we have the requisite financial
resources, when needed, to continue to fund our development efforts, we cannot assure you that any of our product candidates will be
successfully developed or commercialized either in the U.S. or in any country outside the U.S. Even if we gain approval of any of our other
product candidates, we may never be able to successfully commercialize the product or to meet our expectations with respect to revenues or
profits.
The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical
trials. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through preclinical studies and
clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having
progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered
significant setbacks in advanced clinical trials due to lack of potency or efficacy, insufficient durability of potency or efficacy or unacceptable
safety issues, notwithstanding promising results in earlier trials. Most product candidates that commence preclinical studies and clinical trials
are never approved as products.
Any preclinical studies or clinical trials that we may conduct may not demonstrate the safety and efficacy necessary to obtain regulatory
approval to market our product candidates. If the results of our ongoing or future preclinical studies and clinical trials are inconclusive with
respect to the safety and efficacy of our product candidates, if we do not meet the clinical endpoints with statistical and clinically meaningful
significance, or if there are safety concerns associated with our product candidates, we may be prevented or delayed in obtaining marketing
approval for such product candidates. There can be significant variability in safety and efficacy results between different preclinical studies
and clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols,
differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout
among clinical trial participants. Additionally, our preclinical studies comparing our product candidates to chimeric antigen receptor T (CAR-T)
cells utilized CAR-T cells that we
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engineered, rather than the CAR-T cell therapies that are currently approved by the FDA. Although we believe, based on the results we
observed in these preclinical studies, that our product candidates have the potential to improve upon the safety and efficacy of currently
approved CAR-T cell therapies, these results may not be predictive of the outcome of our future preclinical studies and clinical trials,
including any potential preclinical studies and clinical trials that may compare our product candidates to FDA-approved CAR-T cells.
Since the number of patients that we plan to dose in our Phase 1/2 clinical trial for gavo-cel is small, the results from this clinical
trial, once completed, may be less reliable than results achieved in a larger clinical trial, which may hinder our efforts to obtain
regulatory approval.
The number of patients we plan to treat in our clinical trial for gavo-cel is small and the results from this clinical trial, once completed, may be
less reliable that results achieved in larger clinical trials. For example, in the Phase 1 portion of our Phase 1/2 clinical trial of gavo-cel, we
plan to evaluate the safety profile of gavo-cel and establish the recommended Phase 2 dose. In Phase 2, we intend to treat approximately 50
patients with non-small cell lung cancer (NSCLC), ovarian cancer, malignant pleural/peritoneal mesothelioma and cholangiocarcinoma. The
preliminary results of clinical trials with smaller sample sizes, such as our Phase 1/2 clinical trial of gavo-cel, can be disproportionately
influenced by various biases associated with the conduct of small clinical trials, such as the potential failure of the smaller sample size to
accurately depict the features of the broader patient population, which limits the ability to generalize the results across a broader community,
thus making the clinical trial results less reliable than clinical trials with a larger number of patients. As a result, there may be less certainty
that such product candidates would achieve a statistically significant effect in any future clinical trials. If we conduct any future clinical trials of
gavo-cel, we may not achieve a statistically significant result or the same level of statistical significance, if any, that we might have anticipated
based on the results observed in our initial Phase 1/2 clinical trial.
We may not be able to file INDs or IND amendments to commence additional clinical trials on the timelines we expect, and even if
we are able to, the FDA may not permit us to proceed.
We may not be able to file INDs on the timelines we expect. For example, we may experience manufacturing delays or other delays with
IND-enabling studies. Moreover, we cannot be sure that submission of an IND will result in the FDA allowing further clinical trials to begin, or
that, once begun, issues will not arise that suspend or terminate clinical trials. Additionally, even if such regulatory authorities agree with the
design and implementation of the clinical trials set forth in an IND, we cannot guarantee that such regulatory authorities will not change their
requirements in the future. These considerations also apply to new clinical trials we may submit as amendments to existing INDs.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise
adversely affected.
We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including impacts that have resulted or may
result from the ongoing COVID-19 pandemic. The timely completion of clinical trials in accordance with their protocols depends on, among
other things, our ability to enroll a sufficient number of patients who remain in the clinical trial until its conclusion. The enrollment of patients
depends on many factors, including:
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the patient eligibility criteria defined in the clinical trial protocol;
the size of the patient population required for analysis of the clinical trial’s primary endpoints;
the proximity of patients to clinical trial sites;
the design of the clinical trial;
our ability to recruit clinical trial investigators with the appropriate competencies and experience;
our ability to obtain and maintain patient consents;
reporting of the preliminary results of any of our clinical trials; and
the risk that patients enrolled in clinical trials will drop out of the clinical trials before the manufacturing and infusion of our product
candidates or clinical trial completion.
Our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product
candidates, and this competition will reduce the number and types of patients available to us because some patients who might have opted
to enroll in our clinical trials may instead opt to enroll in a clinical trial being conducted by one of our competitors. In addition, patients may be
unwilling to participate in our studies because of negative publicity from adverse events in the biotechnology industry or for other reasons.
Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that
some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites.
Moreover, because our product candidates represent a departure from more commonly used methods for cancer treatment, potential patients
and their doctors may be inclined to use conventional
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therapies, such as chemotherapy and hematopoietic stem cell transplantation, rather than enroll patients in any future clinical trial.
Additionally, because some of our clinical trials are in patients with relapsed/refractory cancer, the patients are typically in the late stages of
their disease and may experience disease progression independent from our product candidates, making them unevaluable for purposes of
the clinical trial and requiring additional patient enrollment.
Delays in completing patient enrollment may result in increased costs or may affect the timing or outcome of our ongoing and planned clinical
trials, which could prevent completion or commencement of these clinical trials and adversely affect our ability to advance the development of
our product candidates.
Our product candidates may cause undesirable side effects or have other properties that could halt their clinical development,
prevent their regulatory approval, require expansion of the trial size, limit their commercial potential, or result in significant
negative consequences.
Undesirable side effects caused by our product candidates could cause us or regulatory authorities, including IRBs, to interrupt, delay, or halt
clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign
regulatory authorities. Further, clinical trials by their nature utilize a sample of the potential patient population. With a limited number of
subjects and limited duration of exposure, rare and severe side effects of our product candidates may only be uncovered with a significantly
larger number of patients exposed to the drug. Because of our planned dose escalation design for our clinical trials, undesirable side effects
could also result in an expansion in the size of our clinical trials, increasing the expected costs and timeline of our clinical trials. Additionally,
results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics, which
may stem from our product candidates specifically or may be due to an illness from which the clinical trial subject is suffering. In the Phase 1
dose escalation portion of our Phase 1/2 clinical trial, gavo-cel was generally well tolerated with a manageable adverse event profile up until
DL5, with no patients experiencing on-target, off-tumor toxicities. Two DLTs were observed: one case of Grade 3 pneumonitis at DL1 that
resolved with anti-cytokine therapy, and one case of Grade 5 bronchoalveolar hemorrhage at DL5. Furthermore, all three patients treated at
DL5 experienced Grade ≥3 CRS which resulted in 5x108 cells/m2 following lymphodepletion being declared the MTD by the SRT. While our
data in the Phase 1/2 clinical trial has been positive with a manageable safety profile, these results may not be repeated or observed in future
cohorts of patients treated in the currently ongoing clinical trial or in future clinical trials and may not be predictive of the results of later-stage
clinical trials.
Autoimmunity may occur after TRuC-T cell treatment. TRuC-T cells are generated from a patient’s own T cells isolated from their peripheral
blood. There is a theoretical risk that this process will expand a patient’s own T cell that has autoreactivity, or that may recognize healthy
cells, and upon re-infusion may trigger an autoimmune reaction resulting in damage to normal tissues and potentially even death.
Autoimmune reaction triggered by an interaction between a patient’s naturally occurring antibodies and engineered T cells is a theoretical
safety risk of product candidates we develop using our TRuC-T cell platform. If a patient’s self-generated antibodies were directed to a target
expressed on the surface of cells in normal tissue (autoantibodies), engineered T cells would be directed to attack these same tissues,
potentially resulting in off-tumor effects. These autoantibodies may be present whether or not the patient has an active autoimmune disease.
In our clinical testing, we plan to take steps to minimize the likelihood that this occurs, for example by excluding patients with a history of
severe autoimmune disease from our trials. There is no guarantee, however, that we will not observe autoimmune reactions in the future and
no guarantee that if we do, that we will be able to implement interventions to address the risk.
Immunogenicity, which is the reaction between a patient’s immune system and a foreign protein outside of the autoimmune context, is an
additional theoretical safety risk of product candidates we develop using our TRuC-T cell platform. Patients’ immune systems may recognize
the TRuC construct on the TRuC-T cell as a foreign protein and fight against it, potentially rendering it ineffective, or even provoking an
allergic/anaphylactoid response or other adverse side effects. The immunogenic potential of novel therapeutics like TRuC-T cells is difficult to
predict. There is no guarantee that we will not observe immunogenic reactions in the future and no guarantee that if we do, that we will be
able to implement interventions to address the risk.
If unacceptable toxicities arise in the development of our product candidates, we could suspend or terminate our clinical trials or the FDA or
comparable foreign regulatory authorities, or local regulatory authorities such as IRBs, could order us to cease clinical trials. Competent
national health authorities, such as the FDA, could also deny approval of our product candidates for any or all targeted indications.
Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the clinical trial or result in
potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff,
as toxicities resulting from T cell therapy are not normally encountered in the general patient population and by medical personnel. We
expect to have to train medical personnel using our product candidates to understand the side effect profile of our product candidates for
both our planned clinical trials and upon any commercialization of any product candidates, if licensed. Inadequate training in recognizing or
managing the potential side effects of our product
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candidates could result in patient deaths. Any of these occurrences may significantly harm our business, financial condition and prospects.
Our product candidates may target healthy cells expressing target antigens leading to potentially fatal adverse effects.
Our product candidates target specific antigens that are also expressed on healthy cells. For example, our lead product candidate, gavo-cel,
targets mesothelin, an antigen commonly found on mesotheliomas, ovarian cancers, and NSCLC, as well in healthy cells that line the pleura,
pericardium and peritoneum. Our product candidates may target healthy cells, leading to serious and potentially fatal adverse effects. In our
Phase 1/2 clinical trial of gavo-cel, we are using a dose escalation model to closely monitor the effect of gavo-cel on vital organs and other
potential side effects. Even though we intend to closely monitor the side effects of our product candidates in both preclinical studies and
clinical trials, we cannot guarantee that products will not target and kill healthy cells.
Our product candidates may have serious and potentially fatal cross-reactivity to other peptides or protein sequences within the
body.
Our product candidates may recognize and bind to a peptide unrelated to the target antigen to which it is designed to bind. If this peptide is
expressed within normal tissues, our product candidates may target and kill the normal tissue in a patient, leading to serious and potentially
fatal adverse effects. Detection of any cross-reactivity may halt or delay any ongoing clinical trials for any TRuC-T cell based product
candidate and prevent or delay regulatory approval. Unknown cross-reactivity of the TRuC-T cell binding domain to related proteins could
also occur. We have also developed a preclinical screening process to identify cross-reactivity of the TRuC-T cell binders. Any cross-
reactivity that impacts patient safety could materially impact our ability to advance our product candidates into clinical trials or to proceed to
marketing approval and commercialization.
Our product candidates rely on the use of protein binding domains, or binders, to target specific cancers, which we may develop
or which may be developed by third parties. We are limited in our ability to apply our product candidates to a wider range of
potential target cancers by our ability to develop, partner for or acquire these binders on commercially reasonable terms.
TRuC-T cell therapies require the use of antigen-specific protein binding domains, or binders, which guide the TRuC-T cells and bind to the
antigens on the surface of a tumor to target specific types of cancers. Our ability to develop and commercialize our product candidates will
depend on our ability to develop these binders or partner for such binders on commercially reasonable terms for use in clinical trials as well
as the availability of such binders for use in commercialized products, if licensed. For example, we have a non-exclusive license for the
mesothelin binder incorporated into the TRuC construct for gavo-cel from Harpoon Therapeutics, Inc. (Harpoon). However, we cannot be
certain that our Harpoon license or potential future collaborations will provide us with a steady supply of binders that we can utilize in
combination with the TRuC construct to develop future product candidates. If we are unable to enter into such collaborations on commercially
reasonable terms or fail to realize the benefits of any such collaboration, we may be limited to using antibody fragments that we are able to
independently develop which may limit the ability of our product candidates to target and kill cancer cells.
The failure to enter into a successful collaboration or to develop our own binders may delay our development timelines, increase our costs
and jeopardize our ability to develop future product candidates as a commercially viable drug, which could result in delays in product
development and harm our business.
Co-administering our TRuC-T cell product candidates with other approved therapies or enhancing our TRuC-T cells with new
constructs may increase the risk of severe adverse events, including cytokine release syndrome and other toxicities, which could
interrupt, delay, or halt our clinical trials.
We believe that co-administration and/or enhancing our TRuC-T cell product candidates may lead to better efficacy, durability and patient
outcomes. However, enhancements and co-administration may increase the occurrence of severe adverse side effects, such as cytokine
release syndrome (CRS). Undesirable side effects caused by our product candidates could cause us or regulatory authorities, including
IRBs, to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the
FDA or other comparable foreign regulatory authorities.
We plan to evaluate gavo-cel in combination with the checkpoint inhibitors Opdivo® (nivolumab), an anti-PD-1 checkpoint inhibitor, and
Yervoy® (ipilimumab), an anti-CTLA-4 checkpoint inhibitor, in the planned Phase 2 portion of our Phase 1/2 clinical trial. Nivolumab and
ipilimumab are FDA approved therapies, but each has its own risks and side effects. Providing these
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therapies in combination with gavo-cel may increase gavo-cel’s efficacy, but it may also increase undesirable side effects from gavo-cel,
nivolumab or ipilimumab.
Our first enhanced TRuC-T cell is TC-510, which is a TRuC-T cell targeting mesothelin-expressing solid tumors which incorporates a PD-
1:CD28 chimeric switch receptor (PD-1 Switch). The PD-1 Switch is designed to translate the inhibition of a cancer cell’s PD-1 signal into a
costimulatory CD28 signal, causing cell activity to increase rather than be suppressed by the hostile tumor microenvironment. Based on our
preclinical studies, we believe that TC-510’s unique way of engaging and powering T cells could lead to improved T cell function and
persistence, and result in better clinical outcomes for patients. However, increased T cell function may also lead to greater risk of severe
adverse side effects. We have observed adverse side effects with gavo-cel in the Phase 1 portion of our Phase 1/2 clinical trial, including
several patients that developed grade 3 or higher CRS and one patient with Grade 5 bronchoalveolar hemorrhage. It is possible that TC-
510, which is similar to gavo-cel plus the PD-1 Switch, will have a greater risk of triggering CRS and other undesirable side effects.
We may not be successful in our efforts to identify or discover additional product candidates.
The success of our business depends primarily upon our ability to identify, develop and commercialize products based on our TRuC-T cell
platform. Our research programs may fail to identify other potential product candidates for clinical development for a number of reasons. We
may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side
effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval. Research
programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and
resources on potential programs or product candidates that ultimately prove to be unsuccessful. If any of these events occur, we may be
forced to abandon our research, development or commercialization efforts for a program or programs, which would have a material adverse
effect on our business and could potentially cause us to cease operations.
Risks Related to Manufacturing
Manufacturing and administering our product candidates are complex and we may encounter difficulties in production, particularly
with respect to process development or scaling up of our manufacturing capabilities. If we encounter such difficulties, our ability
to provide supply of our TRuC-T cells for clinical trials or for commercial purposes could be delayed or stopped.
The process of manufacturing and administering our product candidates is complex and highly regulated. The manufacture of our product
candidates involves complex processes, including the manufacture of a lentiviral delivery vector containing the genetic information for our
TRuC construct and manufacturing T cells containing the TRuC construct for the final product candidates. More specifically, the manufacture
of our product candidates includes harvesting white blood cells from the patient, isolating certain T cells from the white blood cells, combining
patient T cells with our lentiviral delivery vector through a process known as transduction, expanding the transduced T cells to obtain the
desired dose, and ultimately infusing the modified T cells back into the patient’s body. As a result of the complexities entailed in this process,
our manufacturing and supply costs are likely to be higher than those at more traditional manufacturing processes and the manufacturing
process is less reliable and more difficult to reproduce. Additionally, the number of facilities that are capable of harvesting patients’ cells for
the manufacture of our product candidates and other autologous cell therapy products and product candidates is limited. As the number of
autologous cell therapy products and product candidates increases, the limited number of facilities capable of harvesting patients’ cells could
result in delays in the manufacture and administration of our product candidates and/or require us to prioritize among our clinical programs,
potentially resulting in clinical trial delays.
We rely on third parties for the manufacture of our lentiviral vectors and our product candidates. These third-party manufacturers may
incorporate their own proprietary processes into our lentiviral vector and product candidate manufacturing processes. We have limited control
and oversight of a third party’s proprietary process, and a third party may elect to modify its process without our consent or knowledge.
These modifications could negatively impact our manufacturing, including product loss or failure that requires additional manufacturing runs
or a change in manufacturer, both of which could significantly increase the cost of and significantly delay the manufacture of our product
candidates. In addition these third parties may have limited manufacturing capacity and we have less control over production methods,
staffing and product quality when produced with third party manufacturers. In both cases, this can cause delays in planned manufacturing
runs, require remanufacture due to failed runs and limit our ability to manufacture lentiviral vector and our product candidates as needed,
resulting in delays for IND filings, clinical trials and non-clinical studies.
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Our manufacturing process is and will be susceptible to product loss or failure due to logistical issues, including manufacturing issues
associated with the differences in patients’ white blood cells, interruptions in the manufacturing process, contamination, equipment or reagent
failure, power failures, supplier error and variability in patient characteristics. For example, in July 2018, a power failure that occurred during
a manufacturing run to produce virus for our Phase 1/2 clinical trial of gavo-cel caused us to abandon that run, and resulted in a month-long
delay in the process of manufacturing the requisite virus to support our IND filing for gavo-cel and consequently a delay in the IND filing itself.
Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply
disruptions. If for any reason we lose a patient’s white blood cells, or such material gets contaminated or processing steps fail at any point,
the manufacturing process of the TRuC-T cells for that patient will need to be restarted and the resulting delay may adversely affect that
patient’s outcome. If microbial, viral or other contaminations are discovered in our product candidates or in the manufacturing facilities in
which our product candidates are made or administered, such manufacturing facilities may need to be closed for an extended period of time
to investigate and remedy the contamination.
As our product candidates progress through preclinical studies and clinical trials towards potential licensure and commercialization, it is
expected that various aspects of the manufacturing and administration process will be altered in an effort to optimize processes and results.
We have already identified some improvements to our manufacturing and administration processes, but these changes may not achieve the
intended objectives, and could cause our product candidates to perform differently and affect the results of planned clinical trials or other
future clinical trials. In addition, such changes may require amendments to be made to regulatory applications which may further delay the
timeframes under which modified manufacturing processes can be used for any of our product candidates.
Developing a commercially viable process is a difficult and uncertain task, and there are risks associated with scaling to the level required for
advanced clinical trials or commercialization, including, among others, increased costs, potential problems with process scale-out, process
reproducibility, stability issues, lot consistency, and timely availability of reagents or raw materials. In addition, changes to our manufacturing
process may also require further review and approval by the FDA, leading to delays in our clinical trials. Competitors have had difficulty
reliably producing T-cell therapies in the commercial setting. If we experience similar challenges manufacturing product candidates to
approved specifications, this may limit our product candidates’ utilization and our ability to receive payment for these product candidates
once approved. We may ultimately be unable to reduce the expenses associated with our product candidates to levels that will allow us to
achieve a profitable return on investment.
We do not have our own clinical-scale manufacturing facility and are currently reliant on a limited number of manufacturers for our lentiviral
vector and TRuC-T cell product candidates. Despite closing our manufacturing facility in Stevenage, UK, we are in the process of adding
manufacturing capacity to support larger clinical trials for our product candidates both with additional third party manufacturers, our
partnership with Elevate Bio and with our own manufacturing operations in Rockville, Maryland. We plan to continue to pursue additional
manufacturing capacity to meet the patient demand for our product candidates. These third-party manufacturing providers may not be able to
provide adequate resources or consistent capacity to meet our clinical trial or commercial needs.
We rely on third parties to manufacture our product candidates for our clinical trials.
We rely on third parties for the manufacture of our lentiviral vectors and our product candidates. We do not currently have a facility that can
be used as our clinical scale manufacturing facility for our product candidates or lentiviral vector and we expect to rely on outside vendors to
meet these manufacturing needs. We have added to our third-party manufacturing capacity for our product candidates through our
partnership with ElevateBio. This partnership reserves us two of our own GMP manufacturing suites with our own equipment and staffed
with ElevateBio’s employees at ElevateBio BaseCamp, a 140,000 square foot, world-class cell and gene therapy manufacturing facility based
in Waltham, Massachusetts. However, this additional capacity may not be enough to support our clinical trials, and our own employees will
not be controlling and operating the facility. To mitigate the risk of third-party manufacturers we are also developing our own controlled and
operated manufacturing facilities for our product candidates at our 85,000 square foot manufacturing facility in Rockville, Maryland. The
BaseCamp partnership enables us to establish additional near-term manufacturing capacity and technical capabilities in the United States,
and the Rockville, Maryland facility, once operational, will support clinical and commercial production of our product candidates. However, we
still continue to rely on third-party manufacturers to meet our clinical trial demands. We have not yet caused any product candidates to be
manufactured or processed on a commercial scale and may not be able to do so for any of our product candidates. We plan to make
changes as we work to optimize the manufacturing process. For example, we may switch or be required to switch from research-grade
materials to commercial-grade materials in order to get regulatory approval of our product candidates. We cannot be sure that even minor
changes in the process will result in therapies that are safe and effective and licensed for commercial sale.
The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA, as part of our BLA,
or other foreign regulatory authorities following inspections by the FDA or other foreign regulatory authorities. We do not
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control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with cGMPs and
any other regulatory requirements of the FDA or other regulatory authorities for the manufacture of our product candidates. We have no
control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the
FDA or a comparable foreign regulatory authority finds deficiencies with or does not approve these facilities for the manufacture of our
product candidates or if it finds deficiencies or withdraws any approval in the future, we may need to find alternative manufacturing facilities,
which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates. In addition, these
third parties may have limited manufacturing capacity and we have less control over production methods, staffing and product quality when
produced with third-party manufacturers. In both cases, this can cause delays in planned manufacturing runs, require remanufacture due to
failed runs and limit our ability to manufacture lentiviral vector and our product candidates as needed, resulting in delays for IND filings,
clinical trials and non-clinical studies.
We plan to establish our own manufacturing facility and infrastructure in addition to or in lieu of relying on third parties for the
manufacture of our product candidates and the use of third-party manufacturing suites, which will be costly, time-consuming, and
which may not be successful.
We are adding to our capacity for our larger clinical trials with third-party manufacturing capacity with ElevateBio. We are also planning to
establish our own commercial manufacturing facility for the manufacture of our product candidates at our 85,000 square foot facility in
Rockville, Maryland. Adding capacity with our own company-operating manufacturing facility should mitigate our reliance on third-party
vendors for the manufacture of TRuC-T cells and ensure we can effectively manage our supply chain, quality, manufacturing costs and other
associated production areas. We anticipate that the partnership with ElevateBio will significantly increase our total manufacturing capacity.
The establishment of our own commercial manufacturing facility in Rockville, Maryland will be a costly and time-consuming process that will
require significant additional capital to fund and we do not expect it to be operational in the near term. We have no experience as a company
in setting up, building or managing a manufacturing facility or manufacturing suite, and may never be successful in developing our own
manufacturing suite, manufacturing facility or manufacturing capability. We will need to hire additional personnel to manage our operations
and facilities and develop the necessary infrastructure to continue the research and development, and eventual commercialization, if
approved, of our product candidates. If we fail to recruit the required personnel and generally manage our growth effectively or fail to select
the correct location, the development and production of our product candidates could be curtailed or delayed. Even if we are successful in
establishing a manufacturing suite or manufacturing facility, our manufacturing capabilities could be affected by cost-overruns, unexpected
delays, equipment failures, labor shortages, natural disasters, power failures and numerous other factors that could prevent us from realizing
the intended benefits of our manufacturing strategy and have a material adverse effect on our business.
In addition, the FDA, the European Medicines Agency (EMA) and other foreign regulatory authorities may require us to submit samples of
any lot of any licensed product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the
FDA, the EMA or other foreign regulatory authorities may require that we not distribute a lot until the relevant agency authorizes its release.
Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in
the product that could result in lot failures or product recalls. Lot failures or product recalls could cause us to delay product launches or
clinical trials, which could be costly to us and otherwise harm our business, financial condition, results of operations and prospects. Problems
in our manufacturing process could restrict our ability to meet market demand for our products. The establishment of our own commercial
manufacturing facility in the United States will result in our operations being subject to review and oversight by the FDA and the FDA could
object to our use of our manufacturing facility. We must first receive approval from the FDA prior to licensure to manufacture our product
candidates, which we may never obtain. Even if licensed, we would be subject to ongoing periodic unannounced inspection by the FDA and
corresponding state agencies to ensure strict compliance with cGMPs and other government regulations. Our license to manufacture product
candidates will be subject to continued regulatory review.
We also may encounter problems hiring and retaining the experienced scientific, quality-control and manufacturing personnel needed to
operate our manufacturing processes, which could result in delays in production or difficulties in maintaining compliance with applicable
regulatory requirements.
Any problems in our manufacturing process or facilities could make us a less attractive collaborator for potential partners, including larger
pharmaceutical companies and academic research institutions, which could limit our access to additional attractive development programs.
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We may have difficulty validating our manufacturing process as we manufacture TRuC-T cells from an increasingly diverse patient
population for our clinical trials.
During our development of the manufacturing process, our TRuC-T cells have demonstrated consistency from lot to lot and from donor to
donor. However, our sample size is small and the starting material is from healthy donors. Once we have experience with working with white
blood cells taken from our patient population, we may encounter unforeseen difficulties due to starting with material from donors who are not
healthy, including challenges inherent in harvesting white blood cells from unhealthy patients.
Although we believe our current manufacturing process is scalable for commercialization, we may encounter challenges in validating our
process due to the heterogeneity of the product starting material. However, we anticipate that during the early phases of our clinical trials we
will be able to adapt our process to account for these differences resulting in a more robust process. We cannot guarantee that any other
issues relating to the heterogeneity of the starting material will not impact our ability to commercially manufacturing our product candidates.
The viral vectors used to manufacture our TRuC-T cells may incorrectly modify the genetic material of a patient’s T cells,
potentially triggering the development of a new cancer or other adverse events.
Our TRuC-T cells are manufactured by using a viral vector to insert genetic information encoding the TRuC construct into the patient’s T
cells. The TRuC construct is then integrated into the natural TCR complex and transported to the surface of the patient’s T cells. Because the
viral vector modifies the genetic information of the T cell, there is a theoretical risk that modification will occur in the wrong place in the T
cell’s genetic code, leading to vector-related insertional oncogenesis, and causing the T cell to become cancerous. If the cancerous T cell is
then administered to the patient with the TRuC-T cells, the cancerous T cell could trigger the development of a new cancer in the patient. We
use lentiviral vectors to insert genetic information into T cells, which we believe have a lower risk of insertional oncogenesis as opposed to
other types of viral vectors. However, the risk of insertional oncogenesis remains a concern for gene therapy and we cannot assure that it will
not occur in any of our ongoing or planned preclinical studies or clinical trials. There is also the potential risk of delayed adverse events
following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of vectors used
to carry the genetic material. The FDA has stated that lentiviral vectors possess characteristics that may pose high risks of delayed adverse
events. If any such adverse events occur, further advancement of our preclinical studies or clinical trials could be halted or delayed, which
would have a material adverse effect on our business and operations.
Risks Related to Commercialization
The market opportunities for our product candidates may be relatively small as it will be limited to those patients who are ineligible
for or have failed prior treatments and our estimates of the prevalence of our target patient populations may be inaccurate.
Cancer therapies are sometimes characterized as first line, second line, or third line, and the FDA often approves new therapies initially only
for a particular line of use. When cancer is detected early enough, first line therapy is sometimes adequate to cure the cancer or prolong life
without a cure. Whenever first line therapy, usually chemotherapy, antibody drugs, tumor-targeted small molecules, hormone therapy,
radiation therapy, surgery, or a combination of these, proves unsuccessful, second line therapy may be administered. Second line therapies
often consist of more chemotherapy, radiation, antibody drugs, tumor-targeted small molecules, or a combination of these. Third line
therapies can include hematopoietic stem cell transplantation in certain cancers, chemotherapy, antibody drugs and small molecule tumor-
targeted therapies, more invasive forms of surgery and new technologies. We expect to initially seek approval of our product candidates in
most instances at least as a second or third line therapy, for use in patients with relapsed or refractory metastatic cancer. Subsequently, for
those product candidates that we believe prove to be sufficiently safe and beneficial, if any, we would expect to seek approval as a second
line therapy and potentially as a first line therapy, but there is no guarantee that our product candidates, even if licensed as a second or third
or subsequent line of therapy, would be licensed for an earlier line of therapy, and, prior to any such approvals, we may have to conduct
additional clinical trials. Consequently, the potentially addressable patient population for our product candidates may be extremely limited or
may not be amenable to treatment with our product candidates.
Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers in a
position to receive a particular line of therapy and who have the potential to benefit from treatment with our product candidates, are based on
our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics,
patient foundations or market research, and may prove to be incorrect. Further, new therapies may change the estimated incidence or
prevalence of the cancers that we are targeting. Consequently, even if our product candidates are approved for a second or third line of
therapy, the number of patients that may be eligible for treatment with our product candidates may turn out to be much lower than expected.
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We face significant competition, and our operating results will suffer if we fail to compete effectively.
The biopharmaceutical industry is characterized by intense competition and rapid innovation. Our competitors may be able to develop other
products or drugs that are able to achieve similar or better results. Our potential competitors include larger biotechnology and pharmaceutical
companies with greater resources than us, academic institutions, governmental agencies, public and private research institutions and early
stage or smaller companies. Many of our competitors have substantially greater financial, technical and other resources, such as larger
research and development staff, experienced marketing and manufacturing organizations and well-established sales forces. In addition,
many of these competitors are active in seeking patent protection and licensing arrangements in anticipation of collecting royalties for use of
technology that they have developed. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more
resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of
technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners,
may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily
commercialized or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may
need for the development of our technologies and products. We believe the key competitive factors that will affect the development and
commercial success of our product candidates are safety, potency, purity, tolerability, reliability, convenience of use, price and
reimbursement.
The market opportunity in oncology has led to a number of collaborations GlaxoSmithKline plc (GlaxoSmithKline)/Adaptimmune Therapeutics
PLC (Adaptimmune), Janssen Biotech, Inc. (Janssen)/ Nanjing Legend Pharmaceutical & Chemical Co., Ltd (Legend), bluebird bio, Inc.
(bluebird)/ Regeneron Pharmaceuticals Inc. (Regeneron) and bluebird/Gritstone Oncology, Inc.) and major acquisitions (Gilead Sciences,
Inc. (Gilead)/Kite Pharma Inc. (Kite), Bristol Myers Squibb Co (BMS)/Celgene Corporation (Celgene)/Juno Therapeutics, Inc. (Juno), Takeda
Pharmaceutical Company Limited (Takeda)/GammaDelta Therapeutics Limited (GammaDelta)) among companies focused on cellular cancer
therapies. If this trend continues, which we expect, we could see further consolidation of technical expertise and human capital. This
potentially provides a partnership opportunity for us but could also make it more challenging for us to acquire complementary technology or
products and recruit and retain qualified scientific and management personnel. In addition, this competition could impact our ability to recruit
clinical trial sites and patients in a timely manner for our clinical trials. Larger companies with greater financial flexibility and global reach may
be able to obtain regulatory approvals and gain widespread market acceptance before us, which could impact our commercial launch and
could make our products obsolete or non-competitive. Even if we obtain regulatory approval of our product candidates, the availability and
price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates. We may not be able
to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to
switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose
to reserve our product candidates for use in limited circumstances. For additional information regarding our competition, see “Business—
Competition.”
Even if we obtain regulatory approval of our product candidates, the products may not gain market acceptance among physicians,
patients, hospitals, cancer treatment centers and others in the medical community.
The use of engineered T cells as a potential cancer treatment is a recent development and may not become broadly accepted by physicians,
patients, hospitals, cancer treatment centers and others in the medical community. Various factors will influence whether our product
candidates are accepted in the market, including:
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the clinical indications for which our product candidates are licensed;
physicians, hospitals, cancer treatment centers and patients considering our product candidates as a safe and effective treatment;
the potential and perceived advantages of our product candidates over alternative treatments;
our ability to demonstrate the advantages of our product candidates over other engineered TCR-T cell and CAR-T cell therapies;
the prevalence and severity of any side effects;
the prevalence and severity of any side effects for other adoptive cell therapies, engineered TCR-T cell and CAR-T cell products
and public perception of other adoptive cell therapies, engineered TCR-T cell and CAR-T cell products;
product labeling or product insert requirements of the FDA or other regulatory authorities;
limitations or warnings contained in the labeling approved by the FDA;
the timing of market introduction of our product candidates as well as competitive products;
the cost of treatment in relation to alternative treatments;
the availability of adequate coverage, reimbursement and pricing by third-party payors and government authorities;
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the willingness of patients to pay out-of-pocket in the absence of coverage by third-party payors and government authorities;
relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and
the effectiveness of our sales and marketing efforts.
In addition, although we are not utilizing embryonic stem cells or replication competent vectors, adverse publicity due to the ethical and social
controversies surrounding the therapeutic use of such technologies, and reported side effects from any clinical trials using these technologies
or the failure of such clinical trials to demonstrate that these therapies are safe and effective may limit market acceptance of our product
candidates. If our product candidates are licensed but fail to achieve market acceptance among physicians, patients, hospitals, cancer
treatment centers or others in the medical community, we will not be able to generate significant revenue.
In addition, although our product candidates differ in certain ways from other engineered TCR-T cell and CAR-T cell approaches, serious
adverse events or deaths in other clinical trials involving engineered TCR, CAR-T or other T cell products or with our use of licensed
engineered TCR-T cell or CAR-T cell products, even if not ultimately attributable to our product or product candidates, could result in
increased government regulation, unfavorable public perception and publicity, potential regulatory delays in the testing or licensing of our
product candidates, stricter labeling requirements for those product candidates that are licensed, and a decrease in demand for any such
product candidates.
Even if our products achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or
technologies are introduced that are more favorably received than our products, are more cost effective or render our products obsolete.
Risks Related to Our Reliance On Third Parties
Third Party Risks Related to Our Product Development
We plan to rely on third parties to conduct our clinical trials. If these third parties do not properly and successfully carry out their
contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product
candidates.
We plan to utilize and depend upon independent investigators and collaborators, such as medical institutions, CROs, CMOs and strategic
partners to conduct our preclinical studies and clinical trials under agreements with us. We expect to have to negotiate budgets and contracts
with CROs, trial sites and CMOs which may result in delays to our development timelines and increased costs. We will rely heavily on these
third parties over the course of our clinical trials, and we control only certain aspects of their activities. As a result, we will have less direct
control over the conduct, timing and completion of these clinical trials and the management of data developed through clinical trials than
would be the case if we were relying entirely upon our own staff. Nevertheless, we are responsible for ensuring that each of our studies is
conducted in accordance with applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on third
parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with good clinical practices
(GCPs), which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in
clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and
trial sites. If we or any of these third parties fail to comply with applicable GCP regulations, the clinical data generated in our clinical trials may
be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before
approving our marketing applications. We cannot assure you that, upon inspection, such regulatory authorities will determine that any of our
clinical trials comply with the GCP regulations. In addition, our clinical trials must be conducted with biologic product produced under cGMP
regulations, including cGTP regulations, and will require a large number of test patients. Our failure or any failure by these third parties to
comply with these regulations or to recruit a sufficient number of patients may require us to repeat clinical trials, which would delay the
regulatory approval process. Moreover, our business may be implicated if any of these third parties violates federal or state fraud and abuse
or false claims laws and regulations or healthcare privacy and security laws.
Any third parties conducting our clinical trials are not and will not be our employees and, except for remedies available to us under our
agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our ongoing, clinical and
non-clinical product candidates. These third parties may also have relationships with other commercial entities, including our competitors, for
whom they may also be conducting clinical trials or other drug development activities, which could affect their performance on our behalf. If
these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced
or if the quality or accuracy of the clinical data they obtain is compromised
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due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended,
delayed or terminated and we may not be able to complete development of, obtain regulatory approval of or successfully commercialize our
product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs
could increase and our ability to generate revenue could be delayed.
Switching or adding third parties to conduct our clinical trials involves substantial cost and requires extensive management time and focus. In
addition, there is a natural transition period when a new third party commences work. As a result, delays occur, which can materially impact
our ability to meet our desired clinical development timelines.
If or until we develop our own manufacturing facility, we expect to rely on the use of manufacturing suites in third-party GMP
facilities or third parties to manufacture our product candidates. Our business could be harmed if we are unable to use third-party
manufacturing suites or if the third-party manufacturers fail to provide us with sufficient quantities of our product candidates or
fail to do so at acceptable quality levels or prices.
We do not currently own any facility that may be used as our clinical-scale manufacturing and processing facility and must currently rely on
outside vendors to manufacture and process our product candidates, which is and will need to be done on a patient-by-patient basis.
Although we plan to establish our own manufacturing facility in Rockville, Maryland, we will also continue to rely on third parties like Miltenyi
and ElevateBio in part for our manufacturing capacity and may, in any event, never be successful in developing our own manufacturing
facilities. Our anticipated reliance on a limited number of third-party manufacturers exposes us to the following risks:
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we may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited
and the FDA must inspect any manufacturers for current cGMP and cGTP compliance as part of our marketing application;
a new manufacturer would have to be educated in, or develop substantially equivalent processes for, the production of our product
candidates, which can take several months or more, and we will need to demonstrate to regulatory authorities that clinical trial
product manufactured at a new supplier is comparable to clinical trial product being produced by current manufacturers;
our manufacturers may have little or no experience with autologous cell products, which are products made from a patient’s own
cells, and therefore may require a significant amount of support from us in order to implement and maintain the infrastructure and
processes required to manufacture our product candidates;
our third-party manufacturers might be unable to timely manufacture our product candidates or produce the quantity and quality
required to meet our clinical and commercial needs, if any;
contract manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements
appropriately, affecting quality of our product and requiring additional runs to remanufacture product that is suitable for use in
clinical trials;
our future contract manufacturers may not perform as agreed, may not devote sufficient resources to our product candidates or
may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce,
store, and distribute our products, if any;
manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure
strict compliance with cGMP, cGTP and other government regulations and corresponding foreign standards. We do not have
control over third-party manufacturers’ compliance with these regulations and standards;
we may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers
in the manufacturing process for our product candidates;
our third-party manufacturers could breach or terminate their agreements with us;
raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier,
may not be available or may not be suitable or acceptable for use due to material or component defects;
our contract manufacturers and critical reagent suppliers may be subject to inclement weather, pandemics and natural or man-
made disasters; and
our contract manufacturers may have unacceptable or inconsistent product quality success rates and yields, and we have no direct
control over our contract manufacturers’ ability to maintain adequate quality control, quality assurance and qualified personnel.
Each of these risks could delay or prevent the completion of our clinical trials or the approval of any of our product candidates by the FDA,
result in higher costs or adversely impact commercialization of our product candidates. In addition, we will rely on third parties to perform
certain specification tests on our product candidates prior to delivery to patients. If these tests are not appropriately done and test data are
not reliable, patients could be put at risk of serious harm and the FDA could place significant restrictions on our company until deficiencies
are remedied.
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The manufacture of biological drug products is complex and requires significant expertise and capital investment, including the development
of advanced manufacturing techniques and process controls. Manufacturers of biologic products often encounter difficulties in production,
particularly in scaling up or out, validating the production process and assuring high reliability of the manufacturing process (including the
absence of contamination). These problems include logistics and shipping, difficulties with production costs and yields, quality control,
including stability of the product, product testing, operator error and availability of qualified personnel, as well as compliance with strictly
enforced federal, state and foreign regulations. Furthermore, if contaminants are discovered in our supply of our product candidates or in the
manufacturing facilities, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the
contamination. We cannot assure you that any stability failures or other issues relating to the manufacture of our product candidates will not
occur in the future.
We may fail to manage the logistics of collecting and shipping patient material to the manufacturing site and shipping the product candidate
back to the patient. Logistical and shipment delays and problems caused by us, our vendors or other factors not in our control, such as
weather, could prevent or delay the delivery of product candidates to patients. Additionally, we have to maintain a complex chain of identity
and chain of custody with respect to patient material as it moves to the manufacturing facility, through the manufacturing process and back to
the patient. Failure to maintain chain of identity and chain of custody could result in patient death, loss of product or regulatory action.
Our manufacturing process needs to comply with FDA regulations relating to the quality and reliability of such processes. Any
failure to comply with relevant regulations could result in delays in or termination of our clinical programs and suspension or
withdrawal of any regulatory approvals.
In order to commercially produce our products either at our own facility or at a third party’s facility, we will need to comply with the FDA’s
cGMP regulations and guidelines, including cGTPs. We may encounter difficulties in achieving quality control and quality assurance and may
experience shortages in qualified personnel. We are subject to inspections by the FDA and comparable foreign regulatory authorities to
confirm compliance with applicable regulatory requirements. Any failure to follow cGMP, cGTP or other regulatory requirements or delay,
interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our TRuC-T cells as a result of a failure of our
facilities or the facilities or operations of third parties to comply with regulatory requirements or pass any regulatory authority inspection could
significantly impair our ability to develop and commercialize our TRuC-T cell programs, including leading to significant delays in the
availability of our TRuC-T cells for our clinical trials or the termination of or suspension of a clinical trial, or the delay or prevention of a filing
or approval of marketing applications for our TRuC-T cell product candidates. Significant non-compliance could also result in the imposition
of sanctions, including warning or untitled letters, fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing
approvals for our TRuC-T cell product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of
products, operating restrictions and criminal prosecutions, any of which could damage our reputation and our business.
If our third-party manufacturers use hazardous and biological materials in a manner that causes injury or violates applicable law,
we may be liable for damages.
Our research and development activities involve the controlled use of potentially hazardous substances, including chemical and biological
materials, by our third-party manufacturers. Our manufacturers are subject to federal, state and local laws and regulations in the United
States governing the use, manufacture, storage, handling and disposal of medical and hazardous materials. Although we believe that our
manufacturers’ procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we cannot
completely eliminate the risk of contamination or injury resulting from medical or hazardous materials. As a result of any such contamination
or injury, we may incur liability or local, city, state or federal authorities may curtail the use of these materials and interrupt our business
operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our
resources. We do not have any insurance for liabilities arising from medical or hazardous materials. Compliance with applicable
environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and
production efforts, which could harm our business, prospects, financial condition or results of operations.
Risks Related to Third Party Agreements
We have and may in the future form or seek collaborations or strategic alliances or enter into additional licensing arrangements in
the future, and we may not realize the benefits of such collaborations, alliances or licensing arrangements.
We have and may in the future form or seek strategic alliances, create joint ventures or collaborations, or enter into additional licensing
arrangements with third parties that we believe will complement or augment our development and commercialization
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efforts with respect to our product candidates and any future product candidates that we may develop. Any of these relationships may require
us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing
stockholders or disrupt our management and business.
In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and
complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our
product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may
not view our product candidates as having the requisite potential to demonstrate safety and efficacy and obtain marketing approval.
Further, collaborations involving our product candidates are subject to numerous risks, which may include the following:
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collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;
collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew
development or commercialization of our product candidates based on clinical trial results, changes in their strategic focus due to
the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts
resources or creates competing priorities;
collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product
candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product
candidates;
a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing
and distribution;
collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary
information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or
proprietary information or expose us to potential liability;
disputes may arise between us and a collaborator that cause 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 attention and
resources;
collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or
commercialization of the applicable product candidates; and
collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in
such cases, we would not have the exclusive right to commercialize such intellectual property.
As a result, if we enter into additional collaboration agreements and strategic partnerships or license our product candidates, we may not be
able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company
culture, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic
transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new
collaborations or strategic partnership agreements related to our product candidates could delay the development and commercialization of
our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition and
results of operations.
Our product candidates rely on the availability of specialty raw materials, which may not be available to us on acceptable terms or
at all.
Our product candidates require many specialty raw materials, some of which are manufactured by small companies with limited resources
and experience to support a commercial product. In addition, those suppliers normally support blood-based hospital businesses and
generally do not have the capacity to support commercial products manufactured under cGMP by biopharmaceutical firms. The suppliers
may be ill-equipped to support our needs, especially in non-routine circumstances like an FDA inspection or medical crisis, such as
widespread contamination. We also do not have contracts with many of these suppliers and may not be able to contract with them on
acceptable terms or at all. Accordingly, we may experience delays in receiving key raw materials to support clinical or commercial
manufacturing.
In addition, some of our raw materials are currently available from a single supplier, or a small number of suppliers. The type of cell culture
media and cryopreservation buffer that we currently use in our manufacturing process for the TRuC-T cells for gavo-cel are each only
available from a single supplier. In addition, the cell processing equipment and tubing that we use in our current manufacturing process is
only available from a single supplier. We also use certain biologic materials, including certain activating antibodies, that are available from
multiple suppliers, but each version may perform differently, requiring us to characterize them and potentially modify some of our protocols if
we change suppliers. We cannot be sure that these suppliers will remain in
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business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to produce
these materials for our intended purpose. Accordingly, if we no longer have access to these suppliers, we may experience delays in our
clinical or commercial manufacturing which could harm our business or results of operations.
Risks Related to Our Financial Condition and Capital Requirements
Risks Related to Operating History
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future
viability.
We are a clinical-stage immunotherapy company with a limited operating history. We commenced operations in May 2015, and our
operations to date have been limited to organizing and staffing our company, business planning, raising capital, conducting discovery and
research activities, filing patent applications, identifying potential product candidates, undertaking preclinical studies, establishing
arrangements with third parties for the manufacture of initial quantities of our product candidates and component materials and initiating and
conducting our first clinical trials. We have one product candidate in a Phase 1/2 clinical trial and our other product candidates are still in
preclinical development. We have not yet demonstrated our ability to successfully conduct or complete any clinical trials, obtain marketing
approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales, marketing and
distribution activities necessary for successful product commercialization. Consequently, any predictions you make about our future success
or viability may not be as accurate as they could be if we had a longer operating history.
In addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown
factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting
commercial activities. We may not be successful in such a transition.
We expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a
variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods
as indications of future operating performance.
We have incurred significant losses since inception, and we expect to incur losses over the next several years and may not be able
to achieve or sustain revenues or profitability in the future.
Investment in biopharmaceutical product development is a highly speculative undertaking and entails substantial upfront capital expenditures
and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain
regulatory approval and become commercially viable. We are still in the early stages of development of our product candidates. We have no
products licensed for commercial sale and have not generated any revenue from product sales to date, and we continue to incur significant
research and development and other expenses related to our ongoing operations. We have financed our operations primarily through private
placements of our preferred stock, our initial public offering and subsequent public offerings.
We have incurred significant net losses in each period since our inception in May 2015. For the year to date period ended December 31,
2021, we incurred a net loss of $99.8 million. As of December 31, 2021, we had an accumulated deficit of $349.5 million. We expect to
continue to incur significant losses for the foreseeable future, and we expect these losses to increase substantially if and as we:
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conduct clinical trials and preclinical studies and clinical trials for our current and future product candidates based on our TRuC-T
cell platform;
continue our research and development efforts and submit IND applications for our lead product candidates;
establish and expand our manufacturing capabilities for both clinical and commercial supplies of our product candidates;
seek marketing approvals for any product candidates that successfully complete clinical trials;
build commercial infrastructure to support sales and marketing for our product candidates;
expand, maintain and protect our intellectual property portfolio;
hire additional clinical, regulatory and scientific personnel; and
continue to operate as a public company.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict
the timing or amount of increased expenses we will incur or when, if ever, we will be able to achieve profitability. Even if we succeed in
commercializing one or more of our product candidates, we will continue to incur substantial research and
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development and other expenditures to develop, seek regulatory approval for, and market additional product candidates. We may encounter
unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our
future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and
expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.
We have not generated any revenue from our product candidates and may never be profitable.
Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue from any of our
product candidates. We do not expect to generate significant revenue unless or until we successfully complete clinical development and
obtain regulatory approval of, and then successfully commercialize, at least one of our product candidates. Other than gavo-cel, all of our
product candidates are in the preclinical stages of development and will require additional preclinical studies, clinical development, regulatory
review and approval, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before
we can generate any revenue from product sales. Gavo-cel, our most advanced mono TRuC-T cell product candidate targeting mesothelin-
positive solid tumors, is in the early stages of a Phase 1/2 clinical trial and will require additional regulatory review and approval, substantial
investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue
from product sales. Many of our TRuC-T cell product candidates are in early preclinical stages. We are in the early stages of our clinical trial
for gavo-cel and we have not yet administered any of our other product candidates in humans and, as such, we face significant translational
risk as our product candidates advance to the clinical stage. Our ability to generate revenue depends on a number of factors, including, but
not limited to:
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timely completion of our preclinical studies and clinical trials, which may be significantly slower or cost more than we currently
anticipate and will depend substantially upon the performance of third-party contractors;
our ability to complete IND-enabling studies and successfully submit INDs or comparable applications;
whether we are required by the FDA or similar foreign regulatory authorities to conduct additional clinical trials or other studies
beyond those planned to support the approval and commercialization of our product candidates or any future product candidates;
our ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities the safety, potency, purity, of which
potency and purity the FDA interprets to mean effectiveness, and acceptable risk to benefit profile of our product candidates or any
future product candidates;
the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates or
future product candidates, if any;
the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities;
the willingness of physicians, operators of clinics and patients to utilize or adopt any of product candidates or future product
candidates to treat solid tumors and hematological malignancies;
our ability and the ability of third parties with whom we contract to manufacture adequate clinical and commercial supplies of our
product candidates or any future product candidates, remain in good standing with regulatory authorities and develop, validate and
maintain commercially viable manufacturing processes that are compliant with current good manufacturing practices (cGMP);
our ability to successfully develop a commercial strategy and thereafter commercialize our product candidates or any future product
candidates in the United States and internationally, if licensed for marketing, reimbursement, sale and distribution in such countries
and territories, whether alone or in collaboration with others;
patient demand for our product candidates and any future product candidates, if licensed; and
our ability to establish and enforce intellectual property rights in and to our product candidates or any future product candidates.
Many of the factors listed above are beyond our control and could cause us to experience significant delays or prevent us from obtaining
regulatory approvals or commercialize our product candidates. Even if we are able to commercialize our product candidates, we may not
achieve profitability soon after generating product sales, if ever. If we are unable to generate sufficient revenue through the sale of our
product candidates or any future product candidates, we may be unable to continue operations without continued funding.
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Risks Related to Raising Additional Capital
If we fail to obtain additional financing, we may be unable to continue our research and product development programs.
Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts (including
net proceeds from public offerings of our common stock) to continue the clinical development of our product candidates, including our Phase
1/2 clinical trial of gavo-cel and ongoing and planned IND-enabling studies for our other product candidates. If licensed, we will require
significant additional amounts in order to launch and commercialize our product candidates.
In February 2019, we completed our initial public offering (IPO) raising gross proceeds of approximately $86.3 million, inclusive of the
exercise of the underwriters' overallotment option. On July 31, 2020, we completed a stock offering raising gross proceeds of approximately
$142.6 million. On January 22, 2021, we completed a stock offering raising gross proceeds of $140.0 million. As of December 31, 2021, we
had cash, cash equivalents and short-term investments of approximately $265.6 million. Our existing cash, cash equivalents and short-term
investments may not be sufficient to fund all of our efforts that we plan to undertake.
We believe that our existing cash, cash equivalents and investments, including our net proceeds from the IPO and secondary offerings, will
be sufficient to fund our operations through 2023. However, we have based this estimate on assumptions that may prove to be wrong.
Additionally, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to
spend more money than currently expected because of circumstances beyond our control. Accordingly, we will need to obtain substantial
additional funding in connection with our continuing operations. We cannot be certain that additional funding will be available on acceptable
terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly
delay, scale back or discontinue our research and development initiatives. We could be required to seek collaborators for our product
candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or
relinquish or license on unfavorable terms our rights to our product candidates in markets where we otherwise would seek to pursue
development or commercialization ourselves.
Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of
our common stock to decline.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights
to our technologies or product candidates.
We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and
alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities,
your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a
stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive
covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights
and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic
partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or
product candidates, or grant licenses on terms unfavorable to us.
Risks Related to the Current Novel Coronavirus (COVID-19) Pandemic on the Company
The current outbreak of novel coronavirus, or COVID-19, has caused, and could continue to cause, severe disruptions in the U.S.,
regional and global economies and could seriously harm our development efforts, increase our costs and expenses and have a
material adverse effect on our business, financial condition and results of operations.
Public health pandemics or outbreaks could adversely impact our business. In December 2019, a novel strain of coronavirus (COVID-19)
emerged in Wuhan, Hubei Province, China and has since spread to several other countries, including the United States and European
countries, with infections and deaths reported globally. To date, the ongoing COVID-19 pandemic has caused widespread disruptions to the
U.S. and global economy and has contributed to significant volatility and negative pressure in financial markets. The global impact of the
pandemic is continually evolving, particularly in light of new variants of COVID-19, and, as additional cases of the virus are identified, many
countries, including the U.S., have reacted by instituting quarantines, restrictions on travel and mandatory closures of businesses. Certain
states and cities, including where we or the third parties with whom we engage operate, have also reacted by instituting quarantines,
restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate and/or restrictions on the types of
construction projects that may continue.
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The extent to which the ongoing COVID-19 pandemic impacts our business, financial condition and results of operations will depend on
future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the
pandemic, the actions taken to contain the pandemic or mitigate its impact, as well as the effect of any relaxation of current restrictions within
the Cambridge community or regions in which our partners and clinical sites are located, and the direct and indirect economic effects of the
pandemic and containment measures, among others. The rapid development and fluidity of this situation precludes any prediction as to the
full adverse impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic may adversely affect our business, financial condition
and results of operations, and it has had, and may continue to have, the effect of heightening many of the risks described in this Annual
Report, including but not limited to the below.
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The COVID-19 pandemic has had, and will likely continue to have, an impact on various aspects of our ongoing clinical trials. We
remain in active dialog with our CROs, and clinical sites to minimize the impact of this pandemic to our gavo-cel Phase 1/2 clinical
trial without adversely impacting the safety of patients. Despite our best efforts, it may prove difficult to continue to treat patients in a
timely manner and activation of new sites could be delayed, particularly for our clinical trial sites in areas with high rates of
community spread.
Other potential impacts of the COVID-19 pandemic on our Phase 1/2 clinical trial include patient dosing and study monitoring, which
may be paused or delayed due to changes in policies at various clinical sites, federal, state, local or foreign laws, rules and
regulations, including quarantines or other travel restrictions, prioritization of healthcare resources toward pandemic efforts,
including diminished attention of physicians serving as our clinical trial investigators and reduced availability of site staff supporting
the conduct of our clinical trials, interruption or delays in the operations of the FDA or other reasons related to the COVID-19
pandemic. As the COVID-19 pandemic evolves, other aspects of our current and future clinical trials may be adversely affected,
delayed or interrupted, including, for example, site initiation, patient recruitment and enrollment, availability of clinical trial materials
and data analysis. Some patients and clinical investigators may not be able to comply with clinical trial protocols and patients may
choose to withdraw from our studies or we may have to pause enrollment or we may choose to or be required to pause enrollment
and or patient dosing in our ongoing clinical trials in order to preserve health resources and protect trial participants. It is unknown
how long these pauses or disruptions could continue.
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contractors and consultants to, among other things, conduct our preclinical studies and clinical trials, manufacture raw materials,
manufacture and supply our product candidates, ship clinical trial samples, perform quality testing and supply other goods and
services to run our business. If any such third party is adversely impacted by restrictions resulting from the COVID-19 pandemic,
including staffing shortages, production slowdowns and disruptions in delivery systems, our supply chain may be disrupted, which
could limit our ability to manufacture our product candidates for our clinical trials and conduct our research and development
operations. For example, since the beginning of the COVID-19 pandemic three vaccines for COVID-19 were granted Emergency
Use Authorization by the FDA and two of those later received marketing approval. Additional vaccines may be authorized or
approved in the future. The resultant demand for vaccines and potential for manufacturing facilities and materials to be
commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain
materials for the manufacture of our product candidates, which could lead to delays in these trials.
Governmental authorities may modify or expand current “shelter-in-place” advisories or other similar local restrictions and further
limit our laboratory operations in response to the emergence of new variants. Our employees may have limited or no access to our
laboratory for an extended period of time and, as a result, this could delay timely completion of preclinical activities, including
conducting IND-enabling studies or our ability to select future development candidates, and initiation of additional clinical trials for
our other product candidates.
Material shortages may affect our research and development and manufacturing activities and timelines. Increased demand for
personal protective equipment, plastics used for pipettes and other laboratory consumables, and other laboratory supplies has led
to shortages of some of these materials that we need for our research and development activities, and that our third-party
manufacturers need to produce our product candidates. In addition, COVID-19 restrictions on manufacturers and their employees
has led to a shortage of personnel to manufacture, package and ship laboratories supplies and consumables, further limiting the
available supply. If we, our CROs, our vendors and our third-party manufacturers are not able to obtain materials needed for our
laboratory operations, our research and development and the manufacture of our product candidates could be delayed.
Certain government agencies, such as health regulatory agencies and patent offices, within the U.S. or internationally may
experience disruptions in their operations as a result of the COVID-19 pandemic. The FDA, and comparable foreign regulatory
agencies may have slower response times or be under-resourced to continue to monitor our clinical trials and, as a result, review,
inspection and other timelines may be materially delayed. It is unknown how long these disruptions could continue, were they to
occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could
materially affect the development and study of our product candidates.
The trading prices for our common stock and those of other biopharmaceutical companies have been highly volatile as a result of
the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock
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or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event resulting
from the COVID-19 pandemic could materially and adversely affect our business and the value of our common stock.
Risks Related to Our Intellectual Property
Risks Related to Protecting Our Intellectual Property
If we are unable to obtain and maintain patent protection for any products we develop and for our technology, or if the scope of the
patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology
similar or identical to ours, and our ability to commercialize any product candidates we may develop, and our technology may be
adversely affected.
Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with
respect to our product candidates, their respective components, formulations, combination therapies, methods used to manufacture them
and methods of treatment and development that are important to our business. If we do not adequately protect our intellectual property rights,
competitors may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve
profitability. To protect our proprietary position, we file patent applications in the United States and abroad related to our novel product
candidates that are important to our business; we may in the future also license or purchase patent applications filed by others. If we are
unable to secure or maintain patent protection with respect to our technology and any proprietary products and technology we develop, our
business, financial condition, results of operations, and prospects could be materially harmed.
We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued
patents will include, claims with a scope sufficient to protect our current and future product candidates or otherwise provide any competitive
advantage. In addition, to the extent that we license intellectual property in the future, we cannot assure you that those licenses will remain in
force. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Furthermore,
patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions
may be available; however, the life of a patent, and the protection it affords, is limited. 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.
Patent positions of life sciences companies can be uncertain and involve complex factual and legal questions. No consistent policy governing
the scope of claims allowable in the field of cellular therapy has emerged in the United States. The scope of patent protection in jurisdictions
outside of the United States is also uncertain. Changes in either the patent laws or their interpretation in any jurisdiction that we seek patent
protection may diminish our ability to protect our inventions, maintain and enforce our intellectual property rights; and, more generally, may
affect the value of our intellectual property, including the narrowing of the scope of our patents and any that we may license.
The patent prosecution process is complex, expensive, time-consuming and inconsistent across jurisdictions. We may not be able to file,
prosecute, maintain, enforce, or license all necessary or desirable patent rights at a commercially reasonable cost or in a timely manner. In
addition, we may not pursue or obtain patent protection in all relevant markets. It is possible that we will fail to identify important patentable
aspects of our research and development efforts in time to obtain appropriate or any patent protection. While we enter into non-disclosure
and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development efforts,
including for example, our employees, corporate collaborators, external academic scientific collaborators, CROs, contract manufacturers,
consultants, advisors and other third parties, any of these parties may breach the agreements and disclose such output before a patent
application is filed, thereby endangering our ability to seek patent protection. In addition, publications of discoveries in the scientific and
scholarly literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically
not published until 18 months after filing, or in some cases not at all. Consequently, we cannot be certain that we were the first to file for
patent protection on the inventions claimed in our patents or pending patent applications.
The issuance or grant of a patent is not irrefutable as to its inventorship, scope, validity or enforceability, and our patents may be challenged
in the courts or patent offices in the United States and abroad. 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. We may in the future,
become subject to a third-party pre-issuance submission of prior art or opposition, derivation, revocation, re-examination, post-grant and inter
partes review, or interference proceeding and other similar proceedings challenging our patent rights or the patent rights of others in the U.S.
Patent and Trademark Office (USPTO) or other
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foreign patent office. An unfavorable determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate,
our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or
extinguish our ability to manufacture or commercialize products without infringing third-party patent rights.
In addition, 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 intellectual property may
not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Moreover, some of our owned
and in-licensed patents and patent applications are, and may in the future be, co-owned with third parties. Any of the foregoing could have a
material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.
If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not
be able to compete effectively in our market.
Biotechnology and pharmaceutical companies generally, and we in particular, compete in a crowded competitive space characterized by
rapidly evolving technologies and aggressive defense of intellectual property. The USPTO and various foreign governmental patent agencies
require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are
situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of
patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have
been the case.
We rely upon a combination of patents, confidentiality agreements, trade secret protection and license agreements to protect the intellectual
property related to our technologies. Any disclosure to or misappropriation by third parties of our confidential proprietary information could
enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market. We,
or any future partners, collaborators, or licensees, may 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. Therefore, we may miss potential opportunities to
strengthen our patent position.
It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for
example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If we or our partners,
collaborators, licensees or licensors fail to establish, maintain or protect such patents and other intellectual property rights, such rights may
be reduced or eliminated. If our partners, collaborators, licensees or licensors 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. If there are material defects in the
form, preparation, prosecution, or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and
such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to prevent competition from
third parties, which may have an adverse impact on our business.
Currently, our patents and patent applications are directed to our TRuC-T cells and accompanying technologies. We seek or plan to seek
patent protection for our TRuC-T cell platform and product candidates by filing and prosecuting patent applications in the United States and
other countries as appropriate. The claims of our patent applications are directed toward various aspects of our product candidates and
research programs including compositions of matter, methods of use, and processes. These patent applications, if issued, are expected to
expire on various dates from 2036 through 2041, in each case without taking into account any possible patent term adjustments or
extensions.
We anticipate additional patent applications will be filed both in the United States and in other countries, as appropriate. However, we cannot
predict:
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if and when patents will be issued;
the degree and range of protection any issued patents will afford us against competitors including whether third parties will find
ways to invalidate or otherwise circumvent our patents;
whether any of our intellectual property will provide any competitive advantage;
whether any of our patents that may be issued may be challenged, invalidated, modified, revoked, circumvented, found to be
unenforceable or otherwise may not provide any competitive advantage;
whether or not others will obtain patents claiming aspects similar to those covered by our patents and patent applications; or
whether we will need to initiate or defend litigation or administrative proceedings which may be costly regardless of whether we win
or lose.
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Additionally, we cannot be certain that the claims in our pending patent applications covering composition of matter of our product candidates
will be considered patentable by the USPTO, or by patent offices in foreign countries, or that the claims in any of our issued patents will be
considered patentable by courts in the United States or foreign countries.
The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain.
The patent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates or uses
thereof in the United States or in other foreign countries. Even if the patents do successfully issue, third parties may challenge the validity,
enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if
they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from
designing around our claims. If the breadth or strength of protection provided by the patent applications we hold with respect to our product
candidates is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our
product candidates. Further, if we encounter delays in our clinical trials, the period of time during which we could market our product
candidates under patent protection would be reduced. Since patent applications in the United States and most other countries are
confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product
candidates.
Recent or future patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications
and the enforcement or defense of our issued patents. In March 2013, under the recently enacted Leahy-Smith America Invents Act, or
America Invents Act, the United States moved from a “first to invent” to a “first-to-file” system. Under a “first-to-file” system, assuming the
other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to a patent on the invention
regardless of whether another inventor had made the invention earlier. The America Invents Act includes a number of other significant
changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted, redefine prior art and establish a new
post-grant review system. The effects of these changes are currently unclear as the USPTO only recently developed new regulations and
procedures in connection with the America Invents Act and many of the substantive changes to patent law, including the “first-to-file”
provisions, only became effective in March 2013. In addition, the courts have yet to address many of these provisions and the applicability of
the act and new regulations on specific patents discussed herein have not been determined and would need to be reviewed. However, the
America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications
and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial
condition.
The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not
adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
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others may be able to make or use compounds or cells that are similar to the biological compositions of our product candidates but
that are not covered by the claims of our patents;
the active biological ingredients in our current product candidates will eventually become commercially available in biosimilar drug
products, and no patent protection may be available with regard to formulation or method of use;
we or our licensors, as the case may be, may fail to meet our obligations to the U.S. government in regards to any in-licensed
patents and patent applications funded by U.S. government grants, leading to the loss of patent rights;
we or our licensors, as the case may be, might not have been the first to file patent applications for these inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies;
it is possible that our pending patent applications will not result in issued patents;
it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents, as the case may be, or parts of
our or their patents;
it is possible that others may circumvent our owned or in-licensed patents;
it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims
covering our products or technology similar to ours;
the laws of foreign countries may not protect our or our licensors’, as the case may be, proprietary rights to the same extent as the
laws of the United States;
the claims of our owned or in-licensed issued patents or patent applications, if and when issued, may not cover our product
candidates;
our owned or in-licensed issued patents may not provide us with any competitive advantages, may be narrowed in scope, or be
held invalid or unenforceable as a result of legal challenges by third parties;
the inventors of our owned or in-licensed patents or patent applications may become involved with competitors, develop products or
processes which design around our patents, or become hostile to us or the patents or patent applications on which they are named
as inventors;
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it is possible that our owned or in-licensed patents or patent applications omit individual(s) that should be listed as inventor(s) or
include individual(s) that should not be listed as inventor(s), which may cause these patents or patents issuing from these patent
applications to be held invalid or unenforceable;
we have engaged in scientific collaborations in the past and will continue to do so in the future, and such collaborators may develop
adjacent or competing products to ours that are outside the scope of our patents;
we may not develop additional proprietary technologies for which we can obtain patent protection;
it is possible that product candidates or diagnostic tests we develop may be covered by third parties’ patents or other exclusive
rights; or
the patents of others may have an adverse effect on our business.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to the protection afforded by patents, we seek to rely on trade secret protection, confidentiality agreements, and license
agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other
elements of our product discovery and development processes that involve proprietary know-how, information, or technology that is not
covered by patents. For example, significant elements of our products, including aspects of sample preparation, methods of manufacturing,
cell culturing conditions, computational-biological algorithms, and related processes and software, are based on unpatented trade secrets
that are not publicly disclosed. Although we require all of our employees to assign their inventions to us, and require all of our employees,
consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into
confidentiality agreements, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or
that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and
techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as
the laws of the United States. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we will
not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating
results and financial condition.
Courts outside the United States are sometimes less willing to protect trade secrets. If we choose to go to court to stop a third party from
using any of our trade secrets, we may incur substantial costs. These lawsuits may consume our time and other resources even if we are
successful. For example, significant elements of our products, including aspects of sample preparation, methods of manufacturing, cell
culturing conditions, computational-biological algorithms, and related processes and software, are based on unpatented trade secrets that
are not publicly disclosed. Although we take steps to protect our proprietary information and trade secrets, including through contractual
means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or disclose our technology.
Thus, we may not be able to meaningfully protect our trade secrets. It is our policy to require our employees, consultants, outside scientific
collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or
consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs
developed or made known to the individual or entity during the course of the party’s relationship with us is to be kept confidential and not
disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by
the individual, and which are related to our current or planned business or research and development or made during normal working hours,
on our premises or using our equipment or proprietary information, are our exclusive property. In addition, we take other appropriate
precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary technology by third
parties. We have also adopted policies and conduct training that provides guidance on our expectations, and our advice for best practices, in
protecting our trade secrets.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our marks
of interest and our business may be adversely affected.
Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other
marks. We rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these
trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or
customers in our markets of interest. During the trademark registration process, we may receive Office Actions from the USPTO objecting to
the registration of our trademark. Although we would be given an opportunity to respond to those objections, we may be unable to overcome
such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to
oppose pending trademark applications and/or to seek the cancellation of registered trademarks. Opposition or cancellation proceedings may
be filed against our trademarks, and our
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trademarks may not survive such proceedings. If we are unable to establish name recognition based on our trademarks and trade names, we
may not be able to compete effectively and our business may be adversely affected.
Risks Related to Third Party Intellectual Property
We depend on intellectual property licensed from third parties and termination of any of these licenses could result in the loss of
significant rights, which would harm our business.
We are dependent on patents, know-how and proprietary technology, both our own and licensed from others. For example, we have a non-
exclusive license for the mesothelin binder incorporated into the TRuC construct for gavo-cel from Harpoon. Harpoon has the ability to
terminate our license in the event we materially breach our agreement with Harpoon and fail to cure this breach within sixty days. If the
license with Harpoon is terminated, we would need to partner for another mesothelin binder or independently develop our own mesothelin
binder. In addition, we cannot prevent Harpoon from also licensing the mesothelin binder we use in gavo-cel to a third-party. If Harpoon
licenses the mesothelin binder to another immuno-oncology company, that company could develop a competitive product to gavo-cel.
We are currently, and expect in the future to be, party to material license or collaboration agreements. These agreements typically impose
numerous obligations, such as diligence and payment obligations. Any termination of these licenses could result in the loss of significant
rights and could harm our ability to commercialize our product candidates. These licenses do and future licenses may include provisions that
impose obligations and restrictions on us. This could delay or otherwise negatively impact a transaction that we may wish to enter into.
Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including:
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the scope of rights granted under the license agreement and other interpretation-related issues;
whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to
the licensing agreement;
our right to sublicense patent and other rights to third parties under collaborative development relationships;
our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of
our product candidates, and what activities satisfy those diligence obligations; and
the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us
and our partners.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on
acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
We are generally also subject to all of the same risks with respect to protection of intellectual property that we license, as we are for
intellectual property that we own, which are described below. If we or our licensors fail to adequately protect this intellectual property, our
ability to commercialize products could suffer.
If we fail to comply with our obligations under our patent licenses with third parties, we could lose license rights that are important
to our business.
We are a party to a license agreement with Harpoon, pursuant to which we in-license key patent and patent applications for use in one or
more of our product candidates. This existing license imposes various diligence, milestone payment, royalty, insurance and other obligations
on us. If we fail to comply with these obligations, Harpoon may have the right to terminate the license, in which event we would not be able to
develop or market the products covered by such licensed intellectual property.
We rely on certain of our licensors to file and prosecute patent applications and maintain patents and otherwise protect the intellectual
property we license from them and may continue to do so in the future. We have limited control over these activities or any other intellectual
property that may be related to our in-licensed intellectual property. For example, we cannot be certain that such activities by these licensors
have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other
intellectual property rights. We have limited control over the manner in which our licensors initiate an infringement proceeding against a third-
party infringer of the intellectual property rights, or defend certain of the intellectual property that is licensed to us. It is possible that any
licensors’ infringement proceeding or defense activities may be less vigorous than had we conducted them ourselves.
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Third-party claims of intellectual property infringement may prevent or delay our product discovery and development efforts.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a
substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as
well as administrative proceedings for challenging patents, including interference, reexamination, and post grant review proceedings before
the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. We may be exposed to, or threatened with, future
litigation by third parties having patent or other intellectual property rights alleging that our product candidates and/or proprietary technologies
infringe their intellectual property rights. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by
third parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries
expand and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent
rights of others. Moreover, it is not always clear to industry participants, including us, which patents cover various types of drugs, products or
their methods of use or manufacture. Thus, because of the large number of patents issued and patent applications filed in our fields, there
may be a risk that third parties may allege they have patent rights encompassing our product candidates, technologies or methods.
Third parties may assert that we are employing their proprietary technology without authorization. Generally, conducting preclinical and
clinical trials and other development activities in the United States is not considered an act of infringement. If gavo-cel or another product
candidate is licensed by the FDA, a third party may then seek to enforce its patent by filing a patent infringement lawsuit against us. While we
do not believe that any claims that could otherwise have a materially adverse effect on the commercialization of our product candidates, if
licensed, are valid and enforceable, we may be incorrect in this belief, or we may not be able to prove it in litigation. In this regard, patents
issued in the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is “clear and convincing,” a
heightened standard of proof. There may be issued third-party patents of which we are currently unaware with claims to compositions,
formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Patent
applications can take many years to issue. There may be currently pending patent applications which may later result in issued patents that
our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes
upon these patents. Moreover, we may fail to identify relevant patents or incorrectly conclude that a patent is invalid, not enforceable,
exhausted, or not infringed by our activities. If any third-party patents were held by a court of competent jurisdiction to cover the
manufacturing process of our product candidates, constructs or molecules used in or formed during the manufacturing process, or any final
product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate unless we obtained a
license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly,
if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or
methods of use, including combination therapy or patient selection methods, the holders of any such patent may be able to block our ability
to develop and commercialize the product candidate unless we obtained a license or until such patent expires or is finally determined to be
held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If we are unable
to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize our product
candidates may be impaired or delayed, which could in turn significantly harm our business. Even if we obtain a license, it may be non-
exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, if the breadth or strength of protection
provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or
commercialize current or future product candidates.
Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further
develop and commercialize our product candidates. Defense of these claims, regardless of their merit, could involve substantial litigation
expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement
against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or
more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and
monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on
commercially reasonable terms. Furthermore, even in the absence of litigation, we may need or may choose to obtain licenses from third
parties to advance our research or allow commercialization of our product candidates. We may fail to obtain any of these licenses at a
reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize our product
candidates, which could harm our business significantly.
We may not be successful in obtaining or maintaining necessary rights to product components and processes for our
development pipeline through acquisitions and in-licenses.
Presently we have rights to certain intellectual property, through licenses from third parties and under patent applications that we own or will
own, related to gavo-cel and certain other product candidates. Because additional product candidates may require the
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use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license or use
these proprietary rights. In addition, while we have patent rights directed to certain TRuC constructs we may not be able to obtain intellectual
property to broad TRuC-T cell or engineered TCR-T cell constructs.
Our product candidates may also require specific formulations to work effectively and efficiently and these rights may be held by others.
Similarly, efficient production or delivery of our product candidates may also require specific compositions or methods, and the rights to these
may be owned by third parties. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party
intellectual property rights from third parties that we identify as necessary or important to our business operations. We may fail to obtain any
of these licenses at a reasonable cost or on reasonable terms, if at all, which would harm our business. We may need to cease use of the
compositions or methods covered by such third-party intellectual property rights, and may need to seek to develop alternative approaches
that do not infringe on such intellectual property rights which may entail additional costs and development delays, even if we were able to
develop such alternatives, which may not be feasible. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our
competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to
develop or license replacement technology. Moreover, the specific antibodies that will be used with our product candidates may be covered
by the intellectual property rights of others.
Additionally, we sometimes collaborate with academic institutions to accelerate our preclinical research or development under written
agreements with these institutions. In certain cases, these institutions provide us with an option to negotiate a license to any of the
institution’s rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within
the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property
rights to others, potentially blocking our ability to pursue our program. If we are unable to successfully obtain rights to required third-party
intellectual property or to maintain the existing intellectual property rights we have, we may have to abandon development of such program
and our business and financial condition could suffer.
The licensing and acquisition of third-party intellectual property rights is a competitive area, and companies, which may be more established,
or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we
may consider necessary or attractive in order to commercialize our product candidates. More established companies may have a competitive
advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.
Risks Related to Intellectual Property Litigation
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-
consuming and unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file
infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or
more of our patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds
that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of
our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent applications at risk of not
issuing. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion
of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial
damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or
redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.
Post-grant proceedings provoked by third parties or brought by the USPTO may be necessary to determine the validity or priority of
inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could result in a loss of our
current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing party.
Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or post-grant
proceedings may result in a decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our
management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our trade secrets or
confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments. If securities
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analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Risks Related to Intellectual Property Laws
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.
Some of our patent applications have been allowed or may be allowed in the future. We cannot be certain that an allowed patent application
will become an issued patent. There may be events that cause withdrawal of the allowance of a patent application. For example, after a
patent application has been allowed, but prior to being issued, material that could be relevant to patentability may be identified. In such
circumstances, the applicant may pull the application from allowance in order for the USPTO to review the application in view of the new
material. We cannot be certain that the USPTO will re-allow the application in view of the new material. Further, periodic maintenance 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 and following the issuance of a patent. While an inadvertent lapse can in many
cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which
noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in
the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are
not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and
submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect
on our business.
Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court or the USPTO.
If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of our product
candidates, the defendant could counterclaim that the patent covering our product candidate, as applicable, is invalid and/or unenforceable.
In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are
numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims
before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination,
inter partes review, post grant review and equivalent proceedings in foreign jurisdictions (such as opposition proceedings). Such proceedings
could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. The outcome
following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be
certain that there is no invalidating prior art, of which we, our patent counsel and the patent examiner were unaware during prosecution. If a
defendant were to prevail on a legal assertion of invalidity and/or unenforceability, or if we are otherwise unable to adequately protect our
rights, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could
have a material adverse impact on our business and our ability to commercialize or license our technology and product candidates.
Changes to patent law in the United States and in foreign jurisdictions could diminish the value of patents in general, thereby
impairing our ability to protect our products.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents.
Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly,
time-consuming and inherently uncertain. In addition, the United States continues to adapt to wide-ranging patent reform legislation that
became effective starting in 2012. Moreover, recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in
certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our
ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.
Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change
in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain
in the future. For example, in the case Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain
claims to DNA molecules are not patentable. While we do not believe that any of the patents owned or licensed by us will be found invalid
based on this decision, we cannot predict how future decisions by the courts, Congress or the USPTO may impact the value of our patents.
Similarly, any adverse changes in the patent laws of other jurisdictions could have a material adverse effect on our business and financial
condition. Changes in the laws and regulations governing patents in other jurisdictions could similarly have an adverse effect on our ability to
obtain and effectively enforce our patent rights.
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We have limited foreign intellectual property rights and may not be able to protect our intellectual property rights throughout the
world.
Certain of our key patent families have been filed in the United States, however, we have less robust intellectual property rights outside the
United States, and, in particular, we may not be able to pursue generic coverage of the TRuC-T cell platform outside of the United States.
Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and
our intellectual property rights in some countries outside the 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 may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from
selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our
technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise
infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These
products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent
them from competing. Most of our patent portfolio is at the very early stage. We will need to decide whether and in which jurisdictions to
pursue protection for the various inventions in our portfolio prior to applicable deadlines.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The
legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other
intellectual property protection, particularly those relating to biopharmaceutical products, which could make it difficult for us to stop the
infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our
patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business,
could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke
third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if
any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be
inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
We generally enter into confidentiality and intellectual property assignment agreements with our employees, consultants, and contractors.
These agreements generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive
property. However, those agreements may not be honored and may not effectively assign intellectual property rights to us. Moreover, there
may be some circumstances, where we are unable to negotiate for such ownership rights. Disputes regarding ownership or inventorship of
intellectual property can also arise in other contexts, such as collaborations and sponsored research. If we are subject to a dispute
challenging our rights in or to patents or other intellectual property, such a dispute could be expensive and time consuming. If we were
unsuccessful, we could lose valuable rights in intellectual property that we regard as our own.
The intellectual property landscape around adoptive cell therapy is crowded, and third parties may initiate legal proceedings alleging that we
are infringing, misappropriating, or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could
have a material adverse effect on the success of our business. We are aware of certain third-party patents and third-party patent applications
in this landscape that may, if issued as patents, be asserted to encompass our technology.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed
confidential information of third parties.
We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously
employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or
independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’
former employers or our consultants’ or contractors’ current or former clients or customers. Litigation may be necessary to defend against
these claims. Even if we are successful in defending against these claims, litigation could result in substantial cost and be a distraction to our
management and employees. If we are not successful, we could lose access or exclusive access to valuable intellectual property.
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We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade
secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.
Many of our employees were previously employed at other pharmaceutical companies, including our competitors or potential competitors, in
some cases until recently. We may be subject to claims that we or our employees have inadvertently or otherwise used or disclosed trade
secrets or other proprietary information of these former employers or competitors. In addition, we have been and may in the future be subject
to claims that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement. Litigation may be
necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial
costs and could be a distraction to management. If our defense to those claims fails, in addition to paying monetary damages, we may lose
valuable intellectual property rights or personnel. Any litigation or the threat thereof may adversely affect our ability to hire employees. A loss
of key personnel or their work product could hamper or prevent our ability to commercialize product candidates, which could have an adverse
effect on our business, results of operations and financial condition.
If we do not obtain patent term extension and data exclusivity for any of our current or future product candidates, our business
may be materially harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of any of our current or future product candidates, one or
more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act
of 1984, or the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as
compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a
patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the
approved drug, a method for using it, or a method for manufacturing it may be extended. However, we may not be granted an extension
because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within
applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover,
the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term
extension or term of any such extension is less than we request, our competitors may obtain approval of competing products following our
patent expiration, and our business, financial condition, results of operations, and prospects could be materially harmed.
Risks Related to Government Regulation
Risks Related to Regulatory Approval
The FDA regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical
development and regulatory approval of our product candidates.
We have not previously submitted a Biologics License Application (BLA) to the FDA or similar licensure applications to comparable foreign
regulatory authorities. A BLA must include extensive preclinical and clinical data and supporting information to establish the product
candidate’s safety, purity and potency for each desired indication. The BLA must also include significant information regarding the
manufacturing controls for the product. We expect the novel nature of our product candidates to create further challenges in obtaining
regulatory approval. Accordingly, the regulatory approval pathway for our product candidates may be uncertain, complex, expensive and
lengthy, and licensure may not be obtained.
We may also experience delays in completing planned clinical trials for a variety of reasons, including delays related to:
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the availability of financial resources to commence and complete the planned trials;
reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to
extensive negotiation and may vary significantly among different CROs and clinical trial sites;
obtaining approval at each clinical trial site by an IRB or ethics committee;
recruiting suitable patients to participate in a clinical trial;
having patients complete a clinical trial or return for post-treatment follow-up;
clinical trial sites deviating from trial protocol or dropping out of a trial;
adding new clinical trial sites; or
manufacturing sufficient quantities of qualified materials under cGMPs, including current Good Tissue Practices (cGTPs), and
applying them on a subject by subject basis for use in clinical trials.
We could also experience delays if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our
product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles. Further,
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a clinical trial may be suspended or terminated by us, the IRBs for the institutions in which such trials are being conducted, the Data
Monitoring Committee for such trial, or by the FDA or other regulatory authorities due to a number of factors, including failure to conduct the
clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the
FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to
demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate
funding to continue the clinical trial. If we experience termination of, or delays in the completion of, any clinical trial of our product candidates,
the commercial prospects for our product candidates will be harmed, and our ability to generate product revenue will be delayed. In addition,
any delays in completing our clinical trials will increase our costs, slow down our product development and approval process and jeopardize
our ability to commence product sales and generate revenue.
Securing regulatory approval also requires the submission of information about the biologic manufacturing process and inspection of
manufacturing facilities by the relevant regulatory authority. The FDA or comparable foreign regulatory authorities may find deficiencies or fail
to approve our manufacturing processes or facilities, whether run by us or our commercial manufacturing organizations (CMOs). In addition,
if we make manufacturing changes to our product candidates in the future, we may need to conduct additional preclinical studies to bridge
our modified product candidates to earlier versions.
Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may ultimately lead to the denial of
regulatory approval of our product candidates.
Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and
continued regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to
comply with regulatory requirements or experience unanticipated problems with our product candidates.
Any regulatory approvals that we receive for our product candidates will require surveillance to monitor the safety and efficacy of the product
candidate. The FDA may also require a risk evaluation and mitigation strategy, or REMS, program in order to license our product candidates,
which could entail requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as
restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory
authority approves our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage,
advertising, promotion, import, export and recordkeeping for our product candidates will be subject to extensive and ongoing regulatory
requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as
continued compliance with cGMPs, cGTPs and good clinical practices (GCPs) for any clinical trials that we conduct post-licensure.
Manufacturers and manufacturer’ facilities are required to comply with extensive FDA and comparable regulatory authority requirements,
including ensuring that quality control and manufacturing procedures conform to cGMP regulations and applicable product tracking and
tracing requirements. Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated
severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements,
may result in, among other things:
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restrictions on the marketing or manufacturing of our product candidates, withdrawal of the product from the market or voluntary or
mandatory product recalls;
revisions to the labeling, including limitation on approved uses or the addition of additional warnings, contraindications or other
safety information, including boxed warnings;
imposition of a REMS, which may include distribution or use restrictions;
requirements to conduct additional post-market clinical trials to assess the safety of the product;
fines, warning letters or holds on clinical trials;
refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation
of license approvals;
product seizure or detention, or refusal to permit the import or export of our product candidates; and
injunctions or the imposition of civil or criminal penalties.
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that
may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes
in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose
any marketing approval that we may have obtained and we may not achieve or sustain profitability.
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We may be unable to obtain regulatory approval for our product candidates under applicable regulatory requirements. The denial
or delay of any such approval would delay commercialization of our product candidates and adversely impact our potential to
generate revenue, our business and our results of operations.
The research, testing, manufacturing, labeling, licensure, sale, marketing and distribution of biologic products are subject to extensive
regulation by the FDA and other regulatory authorities in the United States and other countries, and such regulations differ from country to
country. We are not permitted to market our product candidates in the United States or in any foreign countries until they receive the requisite
licensure from the applicable regulatory authorities of such jurisdictions.
The FDA or any foreign regulatory authorities can delay, limit or deny licensure of our product candidates for many reasons, including:
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our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory authority that any of our product
candidates are safe, potent and pure;
the FDA’s or the applicable foreign regulatory agency’s disagreement with our trial protocol or the interpretation of data from
preclinical studies or clinical trials;
our inability to demonstrate that the clinical and other benefits of any of our product candidates outweigh any safety or other
perceived risks;
the FDA’s or the applicable foreign regulatory agency’s requirement for additional preclinical studies or clinical trials;
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory
authorities for licensure;
the FDA’s or the applicable foreign regulatory agency’s findings of deficiencies or failure to approve the manufacturing processes or
facilities of third-party manufacturers upon which we rely;
the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable
foreign regulatory authorities to support the submission of a BLA or other comparable submission in foreign jurisdictions or to obtain
licensure of our product candidates in the United States or elsewhere; or
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner
rendering our clinical data insufficient for approval.
Any of these factors, many of which are beyond our control, may result in our failing to obtain regulatory approval to market any of our
product candidates, which would significantly harm our business, results of operations, and prospects. Of the large number of biological
products in development, only a small percentage successfully complete the FDA or other regulatory approval processes and are
commercialized. Even if we eventually complete clinical testing and receive licensure from the FDA or applicable foreign regulatory
authorities for any of our product candidates, the FDA or the applicable foreign regulatory agency may grant licensure contingent on the
performance of costly additional clinical trials which may be required after licensure. The FDA or the applicable foreign regulatory agency
also may license our product candidates for a more limited indication or a narrower patient population than we originally requested, and the
FDA, or applicable foreign regulatory agency, may not license our product candidates with the labeling that we believe is necessary or
desirable for the successful commercialization of such product candidates.
In addition, even if the trials are successfully completed, preclinical and clinical data are often susceptible to varying interpretations and
analyses, and we cannot guarantee that the FDA or comparable foreign regulatory authorities will interpret the results as we do, and more
clinical trials could be required before we submit our product candidates for approval. To the extent that the results of the clinical trials are not
satisfactory to the FDA or comparable foreign regulatory authorities for support of a marketing application, approval of our product candidates
may be significantly delayed, or we may be required to expend significant additional resources, which may not be available to us, to conduct
additional clinical trials in support of potential approval of our product candidates.
Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of our product
candidates and would materially adversely impact our business and prospects.
A variety of risks associated with marketing our product candidates, if approved, internationally could materially adversely affect
our business.
We plan to seek regulatory approval of our product candidates outside of the United States and, accordingly, we expect that we will be
subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:
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unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;
economic weakness, including inflation, or political instability in particular foreign economies and markets;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
foreign taxes, including withholding of payroll taxes;
foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations
incident to doing business in another country;
difficulties staffing and managing foreign operations;
workforce uncertainty in countries where labor unrest is more common than in the United States;
potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;
challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and
protect intellectual property rights to the same extent as the United States;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
business interruptions resulting from geo-political actions, including war and terrorism.
These and other risks associated with international operations may materially adversely affect our ability to attain or maintain profitable
operations.
We have obtained orphan drug designation for gavo-cel in certain indications and in the future we may pursue orphan drug
designation for some of our other future product candidates. We may be unable to obtain such future designations or to maintain
the benefits associated with the orphan drug designations we obtain, including market exclusivity, which may cause our revenue,
if any, to be reduced.
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined
as a disease or condition with a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in
the United States when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United
States will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before
submitting a BLA. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding
towards clinical trial costs, tax advantages and user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the
drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten
the duration of, the regulatory review and approval process.
If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease
for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other
applications, including a BLA, to market the same biologic for the same indication for seven years, except in limited circumstances such as a
showing of clinical superiority to the product with orphan drug exclusivity or if FDA finds that the holder of the orphan drug exclusivity has not
shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition
for which the drug was designated. As a result, even if one of our product candidates receives orphan exclusivity, the FDA can still approve
other drugs that have a different active ingredient for use in treating the same indication or disease. Furthermore, the FDA can waive orphan
exclusivity if we are unable to manufacture sufficient supply of our product.
We received orphan drug designation from the FDA for the treatment of mesothelioma and cholangiocarcinoma with gavo-cel. We may seek
orphan drug designation for some or all of our other future product candidates in additional orphan indications in which there is a medically
plausible basis for the use of these products. Even when we obtain orphan drug designation, exclusive marketing rights in the United States
may be limited if we seek licensure for an indication broader than the orphan designated indication and may be lost if the FDA later
determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the
product to meet the needs of patients with the rare disease or condition. In addition, although we intend to seek orphan drug designation for
other product candidates, we may never receive such designations.
The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change
the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what
changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.
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A Breakthrough Therapy designation by the FDA, even if granted for any of our product candidates, may not lead to a faster
development or regulatory review or approval process and it does not increase the likelihood that our product candidates will
receive marketing approval.
We plan to seek a Breakthrough Therapy designation for gavo-cel and may seek Breakthrough Therapy designation for some or all of our
future product candidates. A Breakthrough Therapy is defined as a drug or biologic that is intended, alone or in combination with one or more
other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug, or
biologic, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as
substantial treatment effects observed early in clinical development. For product candidates that have been designated as Breakthrough
Therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical
development while minimizing the number of patients placed in ineffective control regimens. Biologics designated as breakthrough therapies
by the FDA may also be eligible for other expedited approval programs, including Accelerated Approval.
Designation as a Breakthrough Therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates
meets the criteria for designation as a Breakthrough Therapy, the FDA may disagree and instead determine not to make such designation. In
any event, the receipt of a Breakthrough Therapy designation for a product candidate may not result in a faster development process, review
or licensure compared to candidate products considered for licensure under non-expedited FDA review procedures and does not assure
ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may
later decide that the product no longer meets the conditions for qualification. Thus, even though we intend to seek Breakthrough Therapy
designation for gavo-cel and some or all of our future product candidates for the treatment of various cancers, there can be no assurance
that we will receive breakthrough therapy designation.
A Fast Track designation by the FDA, even if granted for gavo-cel or any other future product candidate(s), may not lead to a faster
development or regulatory review or approval process, and does not increase the likelihood that our product candidates will
receive marketing approval.
If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet
medical needs for this condition, the drug sponsor may apply to FDA for Fast Track designation for a particular indication. We plan to seek
Fast Track designation for gavo-cel and may seek Fast Track designation for certain of our future product candidates, but there is no
assurance that the FDA will grant this status to any of our proposed product candidates. Marketing applications filed by sponsors of products
in Fast Track development may qualify for priority review under the policies and procedures offered by the FDA, but the Fast Track
designation does not assure any such qualification or ultimate marketing approval by the FDA. The FDA has broad discretion whether or not
to grant Fast Track designation, so even if we believe a particular product candidate is eligible for this designation, there can be no
assurance that the FDA would decide to grant it. Even if we do receive Fast Track designation, we may not experience a faster development
process, review or licensure compared to conventional FDA procedures, and receiving a Fast Track designation does not provide assurance
of ultimate FDA approval. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported
by data from our clinical development program. In addition, the FDA may withdraw any Fast Track designation at any time.
Accelerated approval by the FDA, even if granted for gavo-cel or any other future product candidates, may not lead to a faster
development or regulatory review or approval process and it does not increase the likelihood that our product candidates will
receive marketing approval.
We plan to seek approval of gavo-cel , and may seek approval of future product candidates using FDA’s accelerated approval pathway. A
product may be eligible for accelerated approval if it treats a serious or life-threatening condition and generally provides a meaningful
advantage over available therapies. In addition, it must demonstrate an effect on a surrogate endpoint that is reasonably likely to predict
clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality (IMM) that is reasonably likely to
predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA may require that a sponsor of a drug or biologic
receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. These confirmatory trials must be
completed with due diligence. In addition, for products being considered for accelerated approval, the FDA generally requires, unless
otherwise informed by the agency, pre-approval of promotional materials, which could adversely impact the timing of the commercial launch
of the product. Even if we do receive accelerated approval, we may not experience a faster development or regulatory review or approval
process, and receiving accelerated approval does not provide assurance of ultimate FDA approval.
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Regulatory requirements in the United States and abroad governing cell therapy products have changed frequently and may
continue to change in the future, which could negatively impact our ability to complete clinical trials and commercialize our
product candidates in a timely manner, if at all.
Regulatory requirements in the United States and abroad governing cell therapy products have changed frequently and may continue to
change in the future. The FDA has established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and
Research to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies
Advisory Committee, among others, to advise this review. Recently, the National Institutes of Health proposed to revise its guidelines for
overseeing gene therapy research, including deleting the protocol registration and reporting requirements for certain therapies and
eliminating Recombinant DNA Advisory Committee review and reporting requirements for human gene transfer research.
Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could
make it difficult for us to sell our product candidates, if licensed, profitably.
In both domestic and foreign markets, successful sales of our product candidates, if licensed, will depend on the availability of adequate
coverage and reimbursement from third-party payors. In addition, because our product candidates represent new approaches to the
treatment of cancer, we cannot accurately estimate the potential revenue from our product candidates. See the section entitled, “Business —
Government Regulation — Pharmaceutical Insurance Coverage and Health Care Reform.”
Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs
associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and
Medicaid, and commercial payors is critical to new product acceptance.
Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which
drugs and treatments they will cover and the amount of reimbursement. Reimbursement by a third-party payor may depend upon a number
of factors, including, but not limited to, the third-party payor’s determination that use of a product is:
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a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
Obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly
process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products.
Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve or
sustain profitability or may require co-payments that patients find unacceptably high. Patients are unlikely to use our product candidates
unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our product candidates.
In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage
and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-
consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor
separately, with no assurance that coverage and adequate reimbursement will be obtained.
We intend to seek approval to market our product candidates in both the United States and in selected foreign jurisdictions. If we obtain
licensure in one or more foreign jurisdictions for our product candidates, we will be subject to rules and regulations in those jurisdictions. In
some foreign countries, particularly those in the European Union (EU), the pricing of biologics is subject to governmental control. In these
countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product
candidate. In addition, market acceptance and sales of our product candidates will depend significantly on the availability of adequate
coverage and reimbursement from third-party payors for our product candidates and may be affected by existing and future healthcare
reform measures.
Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of
controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and
regulatory changes to the healthcare system that could impact our ability to sell our products profitably.
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At the state level, individual states are increasingly aggressive in 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. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures
to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.
These measures could reduce the ultimate demand for our products, once licensed, or put pressure on our product pricing.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product
candidates or additional pricing pressures.
The impact of recent healthcare reform legislation and other changes in the healthcare industry and in healthcare spending on us
is currently unknown, and may adversely affect our business model.
Our revenue prospects could be affected by changes in healthcare spending and policy in the United States and abroad. We operate in a
highly regulated industry and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions,
related to healthcare availability, the method of delivery or payment for healthcare products and services could negatively impact our
business, operations and financial condition. See the section entitled, “Business — Government Regulation — Pharmaceutical Insurance
Coverage and Health Care Reform.”
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at
broadening the availability of healthcare and containing or lowering the cost of healthcare. For example, on July 9, 2021, President Biden
issued an executive order directing the FDA to, among other things, continue to clarify and improve the approval framework for biosimilars,
including the standards for interchangeability of biological products, facilitate the development and approval of biosimilar and interchangeable
products, clarify existing requirements and procedures related to the review and submission of BLAs, and identify and address any efforts to
impede biosimilar competition. We cannot predict the initiatives that may be adopted in the future, including repeal, replacement or significant
revisions to the ACA. The continuing efforts of the government, insurance companies, managed care organizations and other payors of
healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
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the demand for our product candidates, if we obtain regulatory approval;
our ability to set a price that we believe is fair for our products;
our ability to obtain coverage and reimbursement approval for a product;
our ability to generate revenue and achieve or maintain profitability;
the level of taxes that we are required to pay; and
the availability of capital.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private
payors, which may adversely affect our future profitability.
Disruptions at the FDA, the SEC and other government agencies caused by funding shortages or global health concerns could
hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed
or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which
the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding
levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average
review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government
agencies on which our operations may rely, including those that fund research and development activities is subject to the political process,
which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary
government agencies, which would adversely affect our business. For example, over the last several years the U.S. government has shut
down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other
government employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the
FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our
operations as a public company, future government shutdowns could
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impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Since March 2020 when foreign and domestic inspections were largely placed on hold, the FDA has been working to resume routine
surveillance, bioresearch monitoring and pre-approval inspections on a prioritized basis. Since April 2021, the FDA has conducted limited
inspections and employed remote interactive evaluations, using risk management methods, to meet user fee commitments and goal dates.
Ongoing travel restrictions and other uncertainties continue to impact oversight operations both domestic and abroad and it is unclear when
standard operational levels will resume. The FDA is continuing to complete mission-critical work, prioritize other higher-tiered inspectional
needs (e.g., for-cause inspections), and carry out surveillance inspections using risk-based approaches for evaluating public health. Should
FDA determine that an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to
restrictions on travel, and the FDA does not determine a remote interactive evaluation to be adequate, FDA has stated that it generally
intends to issue, depending on the circumstances, a complete response letter or defer action on the application until an inspection can be
completed. During the COVID-19 public health emergency, a number of companies announces receipt of complete repose letters due to the
FDA’s inability to complete requires inspections for their applications. Additionally, as of May 26, 2021, the FDA noted it is continuing to
ensure timely reviews of applications for medical products during the ongoing COVID-19 pandemic in line with its user fee performance goals
and conducting mission critical domestic and foreign inspections to ensure compliance of manufacturing facilities with FDA quality standards.
However, the FDA may not be able to continue its current pace and approval timelines could be extended, including where a pre-approval
inspection or an inspection of clinical sites is required and due to the ongoing COVID-19 pandemic and travel restrictions FDA is unable to
complete such required inspections during the review period. Regulatory authorities outside the U.S. may adopt similar restrictions or other
policy measures in response to the ongoing COVID-19 pandemic and may experience delays in their regulatory activities.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or
incur costs that could have a material adverse effect on the success of our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the
handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and
flammable materials, including chemicals and biological and radioactive materials. Our operations also produce hazardous waste products.
We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury
from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any
resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines
and penalties.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees
resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not
maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of
biological, hazardous or radioactive materials.
Even if we are able to commercialize any product candidates, the products may become subject to unfavorable pricing regulations,
third-party reimbursement practices or healthcare reform initiatives, which would harm our business.
The regulations that govern marketing approvals, pricing, 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. To obtain reimbursement or pricing
approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to
other available therapies. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control
even after initial approval is granted. As a result, we might obtain marketing approval for a product candidate in a particular country, but then
be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the
revenues, if any, we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to
recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.
Our ability to commercialize any product candidates successfully also will depend in part on the extent to which coverage and adequate
reimbursement for these products and related treatments will be available from government healthcare programs, private health insurers and
other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance
organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry
and elsewhere is cost containment. Government authorities and third-party payors
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have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, government
authorities and third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are
challenging the prices charged for medical products. Coverage and reimbursement may not be available for any product that we
commercialize and, even if these are available, the level of reimbursement may not be satisfactory. Reimbursement may affect the demand
for, or the price of, any product candidate for which we obtain marketing approval. Obtaining and maintaining adequate reimbursement for
our products may be difficult. We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement
or the level of reimbursement relative to other therapies. If coverage and adequate reimbursement are not available or reimbursement is
available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing
approval.
There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than
the purposes for which the drug is approved by the FDA or similar regulatory authorities outside of the United States. 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, intellectual property, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable,
may also not be sufficient to cover our costs and may not be made permanent. 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. Third-party payors often rely upon Medicare coverage policy and payment
limitations in setting their own reimbursement policies. 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 a material adverse effect on our operating
results, our ability to raise capital needed to commercialize products and our overall financial condition.
Risks Related to Government Regulations Internationally
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be
successful in obtaining regulatory approval of our product candidates in other jurisdictions.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain
or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have
a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product
candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the
product candidate in those countries. Approval and licensure procedures vary among jurisdictions and can involve requirements and
administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical
trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions
outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In
some cases, the price that we intend to charge for our products is also subject to approval.
We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the United States have
requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign
regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and
could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in
international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full
market potential of our product candidates will be harmed.
Risks Related to Employee Matters and Managing Growth
Risks Related to Employee Matters
We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel,
we may not be able to successfully implement our business strategy.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain
highly qualified managerial, scientific and medical personnel. We are highly dependent on our management, scientific and medical
personnel, including our Chief Executive Officer and President, our Chief Financial Officer, our Chief Scientific Officer, our Chief Medical
Officer, our Chief Technical Officer, our Chief Business and Strategy Officer and our Chief People
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Officer. The loss of the services of any of our executive officers, other key employees and other scientific and medical advisors, and an
inability to find suitable replacements could result in delays in product development and harm our business.
We conduct our operations at our facility in Cambridge, Massachusetts. This region is headquarters to many other biopharmaceutical
companies and many academic and research institutions. Competition for skilled personnel in our market is intense and may limit our ability
to hire and retain highly qualified personnel on acceptable terms or at all. Changes to U.S. immigration and work authorization laws and
regulations, including those that restrain the flow of scientific and professional talent, can be significantly affected by political forces and
levels of economic activity. Our business may be materially adversely affected if legislative or administrative changes to immigration or visa
laws and regulations impair our hiring processes and goals or projects involving personnel who are not U.S. citizens.
To encourage valuable employees to remain at our company, in addition to salary and cash incentives, we have provided stock options and
restricted stock units that vest over time. The value to employees of stock options and restricted stock units that vest over time may be
significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more
lucrative offers from other companies. Despite our efforts to retain valuable employees, members of our management, scientific and
development teams may terminate their employment with us on short notice. Although we have employment agreements with our key
employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our
employment at any time, with or without notice. Our success also depends on our ability to continue to attract, retain and motivate highly
skilled junior, mid-level and senior managers as well as junior, mid-level and senior scientific and medical personnel.
Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other
improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of employee fraud or other illegal activity by our employees, independent contractors, consultants, commercial
partners and vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to: comply with the
regulations of the FDA and other similar foreign regulatory authorities, provide true, complete and accurate information to the FDA and other
similar foreign regulatory authorities, comply with manufacturing standards we have established, comply with healthcare fraud and abuse
laws in the United States and similar foreign fraudulent misconduct laws or report financial information or data accurately or to disclose
unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the
United States, our potential exposure under such laws and regulations will increase significantly, and our costs associated with compliance
with such laws and regulations are also likely to increase. These laws may impact, among other things, our current activities with principal
investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion,
sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to
extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or
prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs
and other business arrangements generally. See the section entitled, “Business — Government Regulation — Healthcare Law and
Regulation.”
The distribution of biotechnology and biopharmaceutical products is subject to additional requirements and regulations, including extensive
record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of biotechnology and
biopharmaceutical products.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform,
especially in light of the lack of applicable precedent and regulations. Ensuring business arrangements comply with applicable healthcare
laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a
company’s attention from other aspects of its business.
We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter employee misconduct, and the
precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or
in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or
regulations.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve
substantial costs. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is
possible that some of our business activities could be subject to challenge under one or more of such laws. It is possible that governmental
authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving
applicable fraud and abuse or other healthcare laws and regulations. If our operations are found
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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 criminal,
civil and administrative sanctions including monetary penalties, damages, fines, disgorgement, diminished profits and future earnings,
individual imprisonment, and exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid,
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, reputational harm, and we may be required to curtail or restructure our operations, any of
which could adversely affect our ability to operate our business and our results of operations.
The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions
with different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of
the requirements. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur
significant legal expenses and divert our management’s attention from the operation of our business.
The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase,
supply, order or use of medicinal products is also prohibited in the EU. The provision of benefits or advantages to physicians is governed by
the national anti-bribery laws of EU Member States, such as the U.K. Bribery Act 2010, or the Bribery Act. Infringement of these laws could
result in substantial fines and imprisonment. Payments made to physicians in certain EU Member States must be publicly disclosed.
Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her
competent professional organization and/or the regulatory authorities of the individual EU Member States. These requirements are provided
in the national laws, industry codes or professional codes of conduct, applicable in the EU Member States. Failure to comply with these
requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.
The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data,
is subject to the EU General Data Protection Regulation (GDPR), which became effective on May 25, 2018. The GDPR is wide-ranging in
scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health
and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals
regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing
notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the
transfer of personal data to countries outside the EU, including the United States, and permits data protection authorities to impose large
penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The
GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities,
seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. Compliance with the GDPR will be a
rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite
those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with our European
activities. This and other future developments regarding the flow of data across borders could increase the cost and complexity of delivering
our products, if approved, in some markets and may lead to governmental enforcement actions, litigation, fines and penalties or adverse
publicity, which could have an adverse effect on our reputation and business.
Risks Related to Growing Our Organization
We will need to grow the size of our organization, and we may experience difficulties in managing this growth.
As of March 1, 2022, we had 137 full-time employees. As our development and commercialization plans and strategies develop, we expect to
need additional managerial, operational, sales, marketing, financial and other personnel, as well as additional facilities to expand our
operations. Future growth would impose significant added responsibilities on members of management, including:
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managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates,
while complying with our contractual obligations to contractors and other third parties; and
improving our operational, financial and management controls, reporting systems and procedures.
Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively
manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day
activities in order to devote a substantial amount of time to managing these growth activities.
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We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and
consultants to provide certain services, including substantially all aspects of regulatory approval, clinical trial management and
manufacturing. There can be no assurance that the services of independent organizations, advisors and consultants will continue to be
available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage
our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials
may be extended, delayed or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise
advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside
contractors and consultants on economically reasonable terms, or at all.
Further, we anticipate growth in our business operations, which would necessitate the addition of new laboratory and/or office space. This
future growth could create strain on our organizational, administrative, and operational infrastructure, including laboratory operations and
quality control. There is no guarantee that we will be able to manage the expansion of our facilities and operations, or that our systems,
procedures or controls will be adequate to support our expanded facilities and operations. There is also no guarantee that we will be able to
build out, acquire, or enter into agreements to lease facilities to support our growth.
If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors,
or we are not able to effectively build out new facilities to accommodate this expansion, we may not be able to successfully implement the
tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development
and commercialization goals.
We currently have no marketing and sales organization and have no experience in marketing products. If we are unable to
establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, if
licensed, we may not be able to generate product revenue.
We currently have no sales, marketing or distribution capabilities and have no experience in marketing products. We intend to develop an in-
house marketing organization and sales force, which will require significant capital expenditures, management resources and time. We will
have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.
If we are unable or decide not to establish internal sales, marketing and distribution capabilities, we will pursue collaborative arrangements
regarding the sales and marketing of our products, if licensed. However, there can be no assurance that we will be able to establish or
maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive will
depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales
efforts of such third parties and our revenue from product sales may be lower than if we had commercialized our product candidates
ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates.
There can be no assurance that we will be able to develop in-house sales and distribution capabilities or establish or maintain relationships
with third-party collaborators to commercialize any product in the United States or overseas.
Risks Related to our Common Stock
Risks Related to Volatility in the Trading of Our Common Stock
Our stock price has been and will likely continue to be volatile. Securities class action or other litigation involving our company or
members of our management team could also substantially harm our business, financial condition and results of operations.
The trading price of our common stock is likely to be highly volatile. The stock market in general and the market for smaller pharmaceutical
and biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of
particular companies. The market price of our common stock may be influenced by many factors, including:
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preclinical studies, clinical trials or clinical development programs;
the commencement, enrollment, or results of clinical trials of our product candidates or any future clinical trials we may conduct, or
changes in the development status of our product candidates;
adverse results or delays in preclinical studies and clinical trials;
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our decision to initiate a clinical trial, not to initiate a clinical trial, or to terminate an existing clinical trial;
any delay in our regulatory filings or any adverse regulatory decisions, including failure to receive regulatory approval of our product
candidates;
changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;
adverse developments concerning our manufacturers or our manufacturing plans;
our inability to obtain adequate product supply for any licensed product or inability to do so at acceptable prices;
our inability to establish collaborations if needed;
our failure to commercialize our product candidates;
additions or departures of key scientific or management personnel;
unanticipated serious safety concerns related to the use of our product candidates;
introduction of new products or services offered by us or our competitors;
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
our ability to effectively manage our growth;
the size and growth of our initial cancer target markets;
our ability to successfully treat additional types of cancers or at different stages;
actual or anticipated variations in quarterly operating results;
our cash position;
our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;
publication of research reports about us or our industry, or immunotherapy in particular, or positive or negative recommendations or
withdrawal of research coverage by securities analysts;
changes in the market valuations of similar companies;
overall performance of the equity markets;
sales of our common stock by us or our stockholders in the future;
trading volume of our common stock;
changes in accounting practices;
ineffectiveness of our internal controls;
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent
protection for our technologies;
significant lawsuits, including patent or stockholder litigation;
general political and economic conditions; and
other events or factors, many of which are beyond our control.
In addition, the stock market in general, and The Nasdaq Global Select Market and biopharmaceutical companies in particular, have
experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these
companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual
operating performance. If the market price of our common stock does not exceed your purchase price, you may not realize any return on
your investment in us and may lose some or all of your investment. In the past, securities class action litigation has often been instituted
against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result
in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results, or financial
condition.
An active, liquid and orderly trading market for our common stock may not be sustained.
In February 2019, we closed our IPO and our common stock began trading on The Nasdaq Global Select Market. Prior to our IPO, there was
no public trading market for shares of our common stock. Although we completed our IPO and our common stock is listed and trading on The
Nasdaq Global Select Market, an active trading market for our shares may not be sustained. If an active market for our common stock does
not continue, it may be difficult for our stockholders to sell their shares without depressing the market price for the shares or sell their shares
at or above the prices at which they acquired their shares or sell their shares at the time they would like to sell. Any inactive trading market
for our common stock may also impair our ability to raise capital to continue to fund our operations by selling shares of our common stock
and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as
consideration.
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Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our
stock price to fall.
If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market the trading
price of our common stock could decline. As of December 31, 2021, we have a total of 38,496,484 shares of common stock outstanding. In
addition, shares of common stock that are either subject to outstanding options or reserved for future issuance under our 2018 Plan, our
2018 Employee Stock Purchase Plan and our 2022 Inducement Plan will become eligible for sale in the public market to the extent permitted
by the provisions of various vesting schedules, Rule 144 and Rule 701 under the Securities Act of 1933, as amended (the Securities Act). If
these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our
common stock could decline.
The holders of 7,421,847 shares of our common stock are entitled to rights with respect to the registration of their shares under the Securities
Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the
Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by these
stockholders could have a material adverse effect on the trading price of our common stock.
Risks Related to Our Status as an “Emerging Growth Company” and a Smaller Reporting Company
We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging
growth companies will make our common stock less attractive to investors.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (JOBS Act) enacted in April 2012. For as long
as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are
applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (Sarbanes-Oxley Act), reduced disclosure
obligations regarding executive compensation in our Annual Report, our other periodic reports and proxy statements, and exemptions from
the requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute
payments not previously approved. We could be an emerging growth company for up to five years following our IPO, although circumstances
could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a)
following the fifth anniversary of the closing of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which
we are deemed to be a large accelerated filer, which requires the market value of our common stock that is held by non-affiliates to exceed
$700 million as of the prior June 30th, and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior
three-year period.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those
standards apply to private companies. We have elected to avail ourselves of this exemption from complying with new or revised accounting
standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not
emerging growth companies.
Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us
to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in
our Annual Report, our other periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive
because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active
trading market for our common stock and our stock price may be more volatile.
We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may
make our common stock less attractive to investors.
We are considered a “smaller reporting company” under Rule 12b-2 of the Exchange Act. We are therefore entitled to rely on certain reduced
disclosure requirements, such as an exemption from providing selected financial data and executive compensation information. These
exemptions and reduced disclosures in our SEC filings due to our status as a smaller reporting company also mean our auditors are not
required to review our internal control over financial reporting and may make it harder for investors to analyze our results of operations and
financial prospects. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If
some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our
common stock prices may be more volatile. We will
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remain a smaller reporting company until our public float exceeds $250 million if or our annual revenues are $100 million or more, or until our
public float exceeds $700 million if our annual revenues are less than $100 million.
Risks Related to Insider Control
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant
influence over matters subject to stockholder approval.
As of March 7, 2022, our executive officers, directors, and 5% stockholders beneficially owned approximately 38% of our voting stock.
Therefore, these stockholders will have the ability to influence us through this ownership position. These stockholders may be able to
determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors,
amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may
prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of
our stockholders.
Risks Related to Operating as a Public Company
We incur significant increased costs as a result of operating as a public company, and our management devotes substantial time
to new compliance initiatives.
As a public company, we have incurred and will continue to incur significant legal, accounting, and other expenses that we did not incur as a
private company. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, which require, among
other things, that we file with the Securities and Exchange Commission (SEC), annual, quarterly, and current reports with respect to our
business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and The Nasdaq
Global Select Market to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including
requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.
Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) was enacted. There are
significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt
additional rules and regulations in these areas, such as “say on pay” and proxy access. Recent legislation permits emerging growth
companies to implement many of these requirements over a longer period and up to five years from the pricing of our IPO. We are taking
advantage of this legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or
planned and thereby incur unexpected expenses. Stockholder activism, the current political environment, and the current high level of
government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to
additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.
The rules and regulations applicable to public companies have substantially increased our legal and financial compliance costs and to made
some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other
business concerns, they could have a material adverse effect on our business, financial condition, and results of operations. The increased
costs increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or
services. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer
liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate
the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it
more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees, or as executive officers.
Risks Related to Our Charter and Bylaws
Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control, which could
limit the market price of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our
current management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a
change of control of our company or changes in our Board of Directors that our stockholders might consider favorable. Some of these
provisions include:
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a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our
stockholders;
a requirement that special meetings of stockholders be called only by the chairperson of the Board of Directors, the chief executive
officer, or by a majority of the total number of authorized directors;
advance notice requirements for stockholder proposals and nominations for election to our Board of Directors;
a requirement that no member of our Board of Directors may be removed from office by our stockholders except for cause and, in
addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of our voting stock
then entitled to vote in the election of directors;
a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws by
stockholder action or to amend specific provisions of our certificate of incorporation; and
the authority of the Board of Directors to issue preferred stock on terms determined by the Board of Directors without stockholder
approval and which preferred stock may include rights superior to the rights of the holders of common stock.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporate
Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These anti-
takeover provisions and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could
make it more difficult for stockholders or potential acquirers to obtain control of our Board of Directors or initiate actions that are opposed by
the then-current Board of Directors and could also delay or impede a merger, tender offer, or proxy contest involving our company. These
provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing
or cause us to take other corporate actions you desire.
Any delay or prevention of a change of control transaction or changes in our Board of Directors could cause the market price of our common
stock to decline.
Our amended bylaws designate certain courts as the exclusive forum for certain litigation that may be initiated by our
stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of
Delaware is the sole and exclusive forum for state law claims for (i) any derivative action or proceeding brought on our behalf, (ii) any action
asserting a claim of breach of fiduciary duty owed by any of our directors, officers, and employees to us or our stockholders, (iii) any action
asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of
incorporation or our amended and restated bylaws (including the interpretation, validity or enforceability thereof) or (iv) any action asserting a
claim that is governed by the internal affairs doctrine (Delaware Forum Provision). The Delaware Forum Provision will not apply to any
causes of action arising under the Securities Act or the Exchange Act. In addition, our amended and restated bylaws will further provide that
unless we consent in writing to the selection of an alternate forum, the federal district courts of the United States shall be the sole and
exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (Federal Forum Provision). In
addition, our amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our
common stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided,
however, that stockholders cannot and will not be deemed to have waived our compliance with U.S. federal securities laws and the rules and
regulations thereunder.
We recognize that the Delaware Forum Provision and the Federal Forum Provision in our amended and restated bylaws may impose
additional litigation costs on stockholders in pursuing any such claims. Additionally, the forum selection clauses in our amended and restated
bylaws may limit our stockholders’ ability to bring a claim in a forum that they find favorable for disputes with us or our directors, officers or
employees, which may discourage such lawsuits against us and our directors, officers and employees even though an action, if successful,
might benefit our stockholders. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions
purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as
to whether other courts will enforce our Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable, we may incur
additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on
stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware and the federal
district courts of the United States may also reach different judgments or results than would other courts, including courts where a
stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less
favorable to us than our stockholders.
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Risks Related to Tax and Accounting
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, 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 and other pre-change tax attributes to offset its post-change taxable income may be limited.
As a result of our most recent private placements and other transactions that have occurred over the past three years, we may have
experienced, and, may experience, an “ownership change.” We may also experience ownership changes in the future as a result of
subsequent shifts in our stock ownership. As of December 31, 2021, we have cumulative net operating loss carryforwards of approximately
$218.9 million and $217.6 million available to reduce federal and state taxable income, respectively, of which $214.8 million of federal net
operating losses will carryforward indefinitely, with the remaining federal and state losses beginning to expire in 2035. In addition, we have
cumulative federal and state tax credit carryforwards of $8.1 million and $3.1 million, respectively, available to reduce federal and state
income taxes which will begin to expire in 2035 and 2031, respectively. Our net operating loss carryforwards and tax credit carryforwards
may be limited as a result of certain ownership changes, as defined under Sections 382 and 383 of the Code. This limits the annual amount
of these tax attributes that can be utilized to offset future taxable income or tax liabilities. The amount of the annual limitation is determined
based on our value immediately prior to an ownership change. Subsequent ownership changes may affect the limitation in future years.
Under the Tax Cuts and Jobs Act, federal net operating losses generated after December 31, 2017 will not be subject to expiration.
If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our
ability to operate our business could be harmed.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate
disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties
encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in
connection with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, or any subsequent testing by our
independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be
material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further
attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which
could have a negative effect on the trading price of our stock.
We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will be
required to assess the effectiveness of these controls annually. However, for as long as we are an “emerging growth company” under the
Jumpstart Our Business Startups Act, or the JOBS Act, enacted in April 2012, our independent registered public accounting firm will not be
required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We
could be an “emerging growth company” for up to five years. An independent assessment of the effectiveness of our internal controls over
financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal
controls over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation.
General Risk Factors
We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our stock.
We currently anticipate that we will retain future earnings for the development, operation, and expansion of our business and do not
anticipate declaring or paying any cash dividends for the foreseeable future. In addition, we may enter into agreements that prohibit us from
paying cash dividends without prior written consent from our contracting parties, or which other terms prohibiting or limiting the amount of
dividends that may be declared or paid on our common stock. Any return to stockholders will therefore be limited to the appreciation of their
stock, which may never occur.
Unstable global market, economic and political conditions may have serious adverse consequences on our business, financial
condition and stock price.
As widely reported, global credit and financial markets have experienced extreme volatility and disruptions in the past several years,
including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in
unemployment rates and uncertainty about economic stability. There can be no assurance that further
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deterioration in credit and financial markets and in global economic and political conditions will not occur. Our general business strategy may
be adversely affected by any future economic downturn, political unrest, volatile business environment or continued unpredictable and
unstable market conditions. For instance, the current military conflict between Russia and Ukraine could disrupt or otherwise adversely
impact our operations and those of third parties upon which we rely. Related sanctions, export controls or other actions that may be initiated
by nations including the U.S., the European Union or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.), which could
adversely affect our business and/or our supply chain, our CROs, CMOs and other third parties with which we conduct business.
If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult,
more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material
adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development
plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these
difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.
In February 2019, we raised aggregate net cash proceeds of approximately $77.1 million in our IPO. On July 31, 2020, we completed the
sale of 9.2 million shares of stock in at a public offering price of $15.50 per share. We raised net cash proceeds of approximately $133.6
million from the offering. On January 22, 2021, we completed the sale of approximately 4.6 million shares of common stock in at a public
offering price of $30.50 per share. We raised net cash proceeds of approximately $131.3 million from the offering. As of December 31, 2021,
we had cash, cash equivalents and short-term investments of $265.6 million. While we are not aware of any downgrades, material losses, or
other significant deterioration in the fair value of our cash equivalents and short-term investments since December 31, 2021, no assurance
can be given that deterioration of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents
or our ability to meet our financing objectives. Furthermore, our stock price may decline due in part to the volatility of the stock market and
the general economic downturn.
Changes in tax law could adversely affect our business and financial condition.
The rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative
process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive
application) could adversely affect us or holders of our common stock. We urge investors to consult with their legal and tax advisers
regarding the implications of potential changes in tax laws on an investment in our common stock.
Our internal computer systems, or those used by our third-party CROs or other contractors or consultants, may fail or suffer
security breaches, which could result in a material disruption of the development programs of our product candidates.
Despite the implementation of security measures, our internal computer systems and those of our current and future CROs and other
contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, and
telecommunication and electrical failures. Cyber-attacks, denial-of-service attacks, ransomware attacks, business email compromises,
computer malware, viruses, and social engineering (including phishing) are prevalent in our industry, as well as many others. In addition, we
may experience attacks, unavailable systems, unauthorized access to systems or data or disclosure due to employee theft or misuse, denial-
of-service attacks, sophisticated nation-state and nation-state supported actors, and advanced persistent threat intrusions. Electronic security
attacks designed to gain access to personal, sensitive or confidential data are constantly evolving, and such attacks continue to grow in
sophistication. The techniques used to sabotage or to obtain unauthorized access to our platform, systems, networks, or physical facilities in
which data is stored or through which data is transmitted change frequently, and we may be unable to implement adequate preventative
measures or stop security breaches while they are occurring. Despite our efforts, we may in future become, the target of cyber-attacks by
third parties seeking unauthorized access to our data or to disrupt our operations or ability to conduct our business. While we have not
experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our
operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of data
from completed or future preclinical studies and clinical trials could result in delays in our regulatory approval efforts and significantly increase
our costs to recover or reproduce the data. Likewise, we rely on third parties for the manufacture of our product candidates and to conduct
clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent
that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of
confidential or proprietary information, we could incur liability and the further development and commercialization of our product candidates
could be delayed.
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Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations, and those of our CROs, CMOs and other contractors and consultants, could be subject to earthquakes, power shortages,
telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical pandemics or
epidemics and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence
of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We
rely on third-party manufacturers to produce and process our product candidates on a patient-by-patient basis. Our ability to obtain clinical
supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or
other business interruption.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit
commercialization of our product candidates.
We face an inherent risk of product liability as a result of the planned clinical testing of our product candidates and will face an even greater
risk if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are
found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include
allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a
breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves
against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even
successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability
claims may result in:
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decreased demand for our product candidates or products that we may develop;
injury to our reputation;
withdrawal of clinical trial participants;
initiation of investigations by regulators;
costs to defend the related litigation;
a diversion of management’s time and our resources;
substantial monetary awards to trial participants or patients;
product recalls, withdrawals or labeling, marketing or promotional restrictions;
loss of revenue;
exhaustion of any available insurance and our capital resources;
the inability to commercialize any product candidate; and
a decline in our share price.
Failure to obtain or retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could
prevent or inhibit the commercialization of products we develop, alone or with corporate collaborators. Although we have clinical trial
insurance, our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no
coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that
are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements
with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate
should any claim arise.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our
stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us
or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or
industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event
securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrades our stock or publishes inaccurate or
unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or
fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to
decline.
Item 1B. Unresolved Staff Comments
Not applicable.
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Item 2. Properties.
List of material office locations as of December 31, 2021.
Location
Cambridge, Massachusetts
Cambridge, Massachusetts
Cambridge, Massachusetts
Rockville, Maryland
Use of Space
Office and lab
Office
Office and lab
Manufacturing facility
Square Feet
Expiration
23,000 July 2025
5,000 September 2024
14,000 January 2024
84,300 June 2036
We believe that our office and laboratory space is sufficient to meet our needs for the foreseeable future.
Item 3. Legal Proceedings
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently aware of any
such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial
condition or results of operations.
Item 4. Mine Safety Disclosures
Not Applicable.
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Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
Certain Information Regarding the Trading of Our Common Stock
Our common stock trades under the symbol “TCRR” on the Nasdaq Global Select Market and has been publicly traded since February 14,
2019. Prior to this time, there was no public market for our common stock.
Holders of Our Common Stock
As of March 18, 2022, there were approximately 14 holders of record of shares of our common stock. This number does not include
stockholders for whom shares are held in “nominee” or “street” name.
Dividend Policy
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings to fund the
development and expansion of our business, and therefore we do not anticipate paying cash dividends on our common stock in the
foreseeable future. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend on our results
of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant by our Board of Directors.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part
III of this Annual Report.
Recent sales of unregistered securities
None.
Issuer Purchases of Equity Securities
None.
Item 6. Reserved
Not applicable.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated
financial statements and related notes appearing at the end of this Annual Report on Form 10-K. Some of the information contained in this
discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and
strategy for our business, includes forward looking statements that involve risks and uncertainties. As a result of many factors, including
those factors set forth in the ‘‘Risk Factors’’ section of this Annual Report on Form 10-K, our actual results could differ materially from the
results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage cell therapy company developing a pipeline of novel T cell therapies for cancer patients suffering from solid tumors by
powering the T cell receptor (TCR) with our proprietary, first-in-class TCR Fusion Construct T cells (TRuC-T cells). Designed to overcome the
limitations of current cell therapy modalities, our TRuC-T cells specifically recognize and kill cancer cells by harnessing the entire TCR
signaling complex, independent of human leukocyte antigens (HLA), which we believe is essential for T cell therapies to be effective in
patients with solid tumors.
Our lead TRuC-T cell targeting mesothelin-expressing solid tumors is gavocabtagene autoleucel (gavo-cel, formerly TC-210). We are
conducting our Phase 1/2 clinical trial for gavo-cel to treat patients with non-small cell lung cancer (NSCLC), ovarian cancer, malignant
pleural/peritoneal mesothelioma or cholangiocarcinoma. We estimate the patient population for gavo-cel in the four indications which we are
exploring in our clinical trial is up to 81,000 patients in the United States alone.
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Based on the latest interim data readout from patients in dose escalation in our Phase 1/2 clinical trial as of the June 30, 2021
data cutoff, gavo-cel has demonstrated consistent clinical benefit, with 15 of 16 patients evaluable for efficacy experiencing
tumor regression, clinical activity observed in all three mesothelin-expressing tumor types treated (i.e. mesothelioma, ovarian
cancer and cholangiocarcinoma), and an 81% disease control rate (DCR).
We have observed a 31% Overall Response Rate (ORR) in patients infused with gavo-cel following lymphodepletion with four
RECIST partial responses (PRs) (3 confirmed and 1 unconfirmed) by independent assessment, including the first ovarian cancer
patient to ever achieve a PR with a single agent, engineered cell therapy and one mesothelioma patient achieving a complete
metabolic response. Additionally, we observed our first PR by investigator assessment in a metastatic cholangiocarcinoma
patient.
Based on our mesothelin cutoff screening protocol (confirmed positive mesothelin expression on ≥50% of tumor cells that are 2+
and/or 3+ by immunohistochemistry), 46% of patients screened have been eligible to be enrolled in our clinical trial.
A maximum tolerated dose (MTD) was declared by the Safety Review Team (SRT) after all three patients treated at dose level 5
(DL5: 5x108 cells/m2 following lymphodepletion) experienced Grade ≥3 CRS. Below DL5, gavo-cel exhibited a manageable
safety profile with no patients experiencing on-target, off-tumor toxicities. In late December 2021, the SRT declared 1x108
cells/m2following lymphodepletion as the recommended Phase 2 dose (RP2D).
In October 2021, we announced a clinical trial collaboration agreement with Bristol Myers Squibb to evaluate gavo-cel in
combination with Opdivo® (nivolumab) and Yervoy®(ipilimumab) in our planned Phase 2 clinical trial in treatment refractory
mesothelin-expressing solid tumors.
We have received a Food and Drug Administration (FDA) Orphan Drug Designation for the treatment of mesothelioma and
cholangiocarcinoma with gavo-cel and we plan to apply for FDA Fast Track designation for gavo-cel. We anticipate presenting
the expanded and complete Phase 1 dataset in the first half of 2022, initiating the Phase 2 expansion cohort in the first half of
2022, and providing an initial update from the Phase 2 expansion portion of the gavo-cel Phase 1/2 clinical trial in the second
half of 2022.
Our next most advanced program is TC-510, our first enhanced TRuC-T cell targeting mesothelin-expressing solid tumors which incorporates
a PD-1:CD28 chimeric switch receptor. In our preclinical studies of TC-510, we have observed functional improvements over gavo-cel
including enhanced signaling, increased proliferation, reduced exhaustion and improved in vivo efficacy against tumors with high PD-L1
expression. Based on these preclinical studies, we believe we can improve on the efficacy of gavo-cel in specific hostile solid tumor
microenvironment settings and potentially expand into new solid tumor indications. We anticipate filing an IND for TC-510 in the first half of
2022 and initial safety, efficacy and translational data from the Phase 1 dose escalation in the second half of 2022.
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In addition to our lead clinical program, we are expanding our pipeline by utilizing our versatile platform to address some of the primary
challenges to cell therapies such as the hostile and immunosuppressive tumor microenvironment. These include enhancements, such as:
TC-510, our TRuC-T cell co-expressing a PD-1:CD28 chimeric switch receptor that converts inhibitory PD-1 signaling into positive
costimulation and TC-520, our TRuC-T cell co-expressing IL-15 pathway enhancements to improve T cell persistence; dual targeting TRuC-T
cells to combat tumor heterogeneity; and other accessories to combat the tumor microenvironment. We are also pursuing new targets such
as CD70, GPC3 and Nectin-4 for which we believe TRuC-T cells offer advantages over existing therapeutic modalities. We continue to
advance our allogeneic, or off-the-shelf, TRuC-T cell approaches to simplify manufacturing, reduce cost of therapy, and improve patient
access. In January 2022, we announced a strategic research collaboration and non-exclusive license agreement with Arbor Biotechnologies
focused on the further development of allogeneic TRuC-T cell therapies.
We expect that further updates from our emerging TRuC pipeline in 2022 will include the presentation of new preclinical data from
autologous TRuC-T cells targeting novel antigens and enhancements, preclinical data from our lead allogeneic TRuC-T cell candidate in
2022 and the selection of a lead allogeneic TRuC-T cell candidate in 2022.
We are devoting extensive resources in process development and manufacturing to optimize the reliability of our product candidates and
reduce manufacturing costs and vein-to-vein time. This investment will ensure that our manufacturing and delivery process will have utility
across all the product candidates in our pipeline.
In November 2020, we contracted with ElevateBio, LLC, to leverage the extensive technical capabilities at ElevateBio BaseCamp. The
BaseCamp partnership enables us to utilize our own equipment in close proximity to our U.S. headquarters in Cambridge, MA and establish
additional manufacturing capacity and technical capabilities in the U.S. and will support the Phase 2 expansion portion of the gavo-cel Phase
1/2 clinical trial once a RP2D is defined. In November 2021, we announced the expansion of our cGMP manufacturing at ElevateBio with the
addition of a second clean room.
In March 2021, we signed a long-term, full-building lease with ARE for an existing 85,000 square foot, state-of-the-art cell therapy
manufacturing facility in Rockville, Maryland which is ready for cGMP build-out. The facility is expected to support our commercial-scale
manufacturing timelines with production anticipated in 2023 and the flexible layout will allow production of gavo-cel and other emerging cell
therapies in the our pipeline.
Since our inception, we have incurred significant operating losses. Our ability to generate product revenue sufficient to achieve profitability
will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. As of
December 31, 2021, we had an accumulated deficit of $349.5 million. We expect to continue to incur significant expenses and increasing
operating losses for at least the next several years. We expect that our expenses and capital requirements will increase substantially in
connection with our ongoing activities, particularly if and as we:
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conduct additional preclinical studies for our product candidates;
initiate and conduct clinical trials for our product candidates;
continue to discover and develop additional product candidates;
acquire or in-license other product candidates and technologies;
maintain, expand, and protect our intellectual property portfolio;
hire additional clinical and scientific personnel;
expand our manufacturing capabilities with third parties and establish manufacturing capabilities in-house;
seek regulatory approvals for any product candidates that successfully complete clinical trials; and
add operational, financial, and management information systems and personnel, including personnel to support our product
development and planned future commercialization efforts, and our operations as a public reporting company.
We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory
approval for our product candidates. If we obtain regulatory approval for any of our product candidates and do not enter into a
commercialization partnership, we expect to incur significant expenses related to developing our internal commercialization capability to
support product sales, marketing and distribution. Additionally, we expect to incur significant expenses if we acquire and establish our own
commercial manufacturing facility, which will be a costly and time-consuming process, and in our operations as a public company.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time
as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity
offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements. We may be unable to
raise additional funds or enter into such other agreements or arrangements when needed on
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favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay,
scale back or discontinue the development and commercialization of one or more of our product candidates.
Impact of the COVID-19 Pandemic
Since the outbreak of a novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome 2), or coronavirus (COVID-19) in
December 2019, we have been carefully monitoring the COVID-19 pandemic and its actual and potential impact on our business and have
taken important steps to help ensure the safety of employees and their families and to reduce the spread of COVID-19 in our communities
while balancing our commitment to conduct our clinical trials. We have implemented stringent safety measures designed to comply with
applicable federal, state and local guidelines instituted in response to the ongoing COVID-19 pandemic. We have also maintained efficient
communication with our partners and clinical sites as the COVID-19 situation has progressed. We have taken these precautionary steps
while maintaining business continuity so that we can continue to progress our programs. COVID-19 has significantly impacted the global
healthcare system, including the conduct of clinical trials as medical institutions prioritize the treatment of those afflicted with COVID-19. We
continue to closely monitor the adverse impact of the ongoing COVID-19 pandemic on our operations and ongoing clinical and preclinical
development.
The effect of the ongoing COVID-19 pandemic on our development timelines for gavo-cel and TC-510, and its effect on our ability to
manufacture for our clinical trials is uncertain. We believe that we have been able, as of the date of this Annual Report, to mitigate some of
the impact from the COVID-19 pandemic on our ongoing clinical programs, however, we have been affected.
The future impact of the ongoing COVID-19 pandemic on our industry, the healthcare system, clinical trials and our current and future
operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence,
including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, as well as the
effect of any relaxation of current restrictions within the Cambridge community or regions in which our partners and clinical sites are located,
and the direct and indirect economic effects of the pandemic and containment measures, among others. See “Item 1A. Risk Factors” for a
discussion of the potential adverse impact of COVID-19 on our business, results of operations and financial condition.
Consolidation of Manufacturing in the U.S.
In the fourth quarter of 2021, we commenced efforts to consolidate our manufacturing operations in the United States. In connection with this
plan, we closed our manufacturing facility in Stevenage, United Kingdom, at the end of 2021. In addition, in February 2022 we executed an
agreement that expanded our partnership with ElevateBio by partnering for a second GMP manufacturing suite at ElevateBio BaseCamp in
Waltham, Massachusetts through December 2023.
Components of Our Results of Operations
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts and
the development of our product candidates, which include:
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employee-related expenses, including salaries, benefits and stock-based compensation;
expenses incurred in connection with the preclinical and clinical development of our product candidates, including under
agreements with third parties, such as consultants, contractors and contract research organizations (CROs);
the cost of acquiring and manufacturing preclinical and clinical trial materials, including under agreements with third parties, such as
consultants, contractors and contract manufacturing organizations (CMOs);
consultant fees and expenses associated with outsourced professional scientific development services;
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and
insurance; and
payments made under third-party licensing agreements.
We expense research and development costs as incurred. Any non-refundable advance payments that we make for goods or services to be
received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed
as the related goods are delivered or the services are performed.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical
development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and
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development expenses will increase substantially in connection with our planned preclinical and clinical development and manufacturing
activities in the near term and in the future. At this time, we cannot reasonably estimate or know the nature, timing, and costs of the efforts
that will be necessary to complete the preclinical and clinical development of any of our product candidates. The successful development and
commercialization of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product
development and commercialization, including the following:
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the timing and progress of our preclinical studies and clinical trials, which may be significantly slower or cost more than we currently
anticipate and will depend substantially upon the performance of third-party contractors;
the number and scope of preclinical and clinical programs we decide to pursue;
the progress of the development efforts of parties with whom we may enter into collaboration arrangements;
our ability to maintain our current research and development programs and to establish new ones;
our ability to establish licensing or collaboration arrangements;
our ability to complete investigational new drug application (IND)-enabling studies and successfully submit IND or comparable
applications;
whether we are required by the U.S. Food and Drug Administration (FDA) or similar foreign regulatory authorities to conduct
additional clinical trials or other studies beyond those planned to support the approval and commercialization of our product
candidates or any future product candidates;
the timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities;
our ability and the ability of third parties with whom we contract to manufacture adequate clinical and commercial supplies of our
product candidates or any future product candidates, remain in good standing with regulatory agencies and develop, validate and
maintain commercially viable manufacturing processes that are compliant with current good manufacturing practices (cGMP);
our ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities the safety, potency, purity and
acceptable risk to benefit profile of our product candidates or any future product candidates;
the prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates or
future product candidates, if any;
our ability to establish and enforce intellectual property rights in and to our product candidates or any future product candidates;
our ability to successfully develop a commercial strategy and thereafter commercialize our product candidates or any future product
candidates in the United States and internationally, if licensed for marketing, reimbursement, sale and distribution in such countries
and territories, whether alone or in collaboration with others;
the willingness of physicians, operators of clinics and patients to utilize or adopt any of our product candidates or future product
candidates to treat solid and hematologic cancers;
patient demand for our product candidates and any future product candidates, if licensed;
competition with other products; and
continued acceptable safety profile of our therapies following approval.
A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly
change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory
approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in
executive, finance, legal, and administrative functions. General and administrative expenses also include direct and allocated facility-related
costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services. We anticipate that
our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities
and development of our product candidates. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance,
and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.
Interest Income, net
Interest earned on our cash equivalents and investment balances, net of investment charges.
93
Income Tax Expense
Income tax expense is generated by investment income of our investment portfolio and the profit margin on our UK operations, which we
began winding down in the fourth quarter of 2021.
Consolidated Statements of Operations
(in thousands)
Operating expenses
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest income, net
Loss before income taxes
For the Years Ended December 31,
2020
2021
Change
$
$
77,239 $
22,503
99,742
(99,742 )
224
(99,518 ) $
51,980 $
16,720
68,700
(68,700 )
1,737
(66,963 ) $
25,259
5,783
31,042
(31,042 )
(1,513 )
(32,555 )
Comparison of the Years Ended December 31, 2021 and 2020
Research and Development Expenses
Research and development expenses were $77.2 million for the year ended December 31, 2021 compared to $52.0 million for the year
ended December 31, 2020. The following table summarizes our research and development expenses for the years ended December 31,
2021 and 2020.
(in thousands)
Clinical program expenses
Platform development expenses
Personnel expenses
Allocated facility expenses
Other expenses
2021
For the Years Ended December 31,
2020
Change
13,771
7,427
34,638
14,379
7,024
77,239
$
$
12,612 $
4,601
23,392
5,763
5,612
51,980 $
1,159
2,826
11,246
8,616
1,412
25,259
$
$
Spending increased in all areas as we have expanded our research and development efforts. The $25.3 million increase in research and
development expense for the year ended December 31, 2021 is primarily attributable to the increase in personnel expenses of $11.2 million
due to a significant increase in headcount. Allocated facilities costs increased $8.6 million for the year ended December 31, 2021 as
compared to the year ended December 31, 2020 as we expanded our lab and manufacturing space. Our clinical trial program expenses
increased $1.2 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 our gavo-cel trial has
progressed. Platform development expenses increased by $2.8 million and other research and development expenses increased by $1.4
million for the year ended December 31, 2021 as compared to the year ended December 31, 2020 as we increased research activities
related to our platform, new programs, and enhancements. Other expenses for the year ended December 31, 2021 include $3.7 million in
restructurings costs related to the closure of our United Kingdom manufacturing operations which was partially offset by a $2.0 million
settlement from a vendor due to a commercial dispute.
General and Administrative Expenses
General and administrative expenses were $22.5 million for the year ended December 31, 2021, compared to $16.7 million for the year
ended December 31, 2020. The increase in general and administrative expenses was primarily due to an increase in personnel costs of $2.6
million due to our increase in headcount, and increased stock-based compensation expense. Legal costs related to intellectual property and
other legal costs increased $0.8 million. Other costs under general and administration expenses increased by $2.3 million as we increased
the size and activities of the Company for the year ended December 31, 2021 compared to the year ended December 31, 2020.
94
Interest Income, net
Interest income, net was $0.2 million for the year ended December 31, 2021, compared to $1.7 million for the year ended December 31,
2020. The difference in interest income, net compared to the year ended December 31, 2020 was due to a significant decrease in the interest
rates paid on our investment balances during 2021 as a result of macroeconomic factors impacting the economy.
Liquidity and Capital Resources
Since our inception, we have incurred net losses and generated negative cash flows from operations and have funded our operations with
proceeds from the sale of our stock. During 2020 and 2021, we raised $133.6 million and $131.3 million, respectively, from the sale of stock.
Since our inception, we have received gross proceeds of $541.3 million from the sale of our stock. As of December 31, 2021, we had cash,
cash equivalents and investments of $265.6 million.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
(in thousands)
Operating activities
Investing activities
Financing activities
Operating Activities
For the Years Ended December 31,
2021
2020
$
(81,603 ) $
78,447
132,138
(56,739 )
(48,935 )
134,699
During the year ended December 31, 2021, we used $81.6 million of cash in operating activities, resulting primarily from our net loss of $99.8
million partially offset by non-cash charges of $16.6 million, which primarily related to depreciation and amortization, and stock-based
compensation. Non-cash charges have increased as we have increased our equipment base and therefore increased depreciation. In
addition, as we have increased personnel the number of shares and value of stock-based compensation has substantially increased for the
year ended December 31, 2021 compared to the year ended December 31, 2020.
During the year ended December 31, 2020, we used $56.7 million of cash in operating activities, resulting primarily from our net loss of $67.1
million partially offset by non-cash charges of $9.5 million, which primarily related to depreciation and amortization, and stock-based
compensation. Noncash charges have increased as we have increased our equipment base and therefore increased depreciation. In
addition, as we have increased personnel, the number of shares and the value of stock-based compensation have substantially increased for
the year ended December 31, 2021 compared to the year ended December 31, 2020.
Investing Activities
During the year ended December 31, 2021, cash provided by investing activities was $78.4 million, consisting primarily of proceeds from the
sale or maturity of investments net of purchases of $89.9 million, partially offset by the purchases of property and equipment and capitalized
software costs of $11.5 million.
During the year ended December 31, 2020, cash used in investing activities was $48.9 million, consisting primarily of purchases of
investments net of maturities of $41.8 million and purchases of property and equipment of $7.1 million.
Financing Activities
During the year ended December 31, 2021, net cash provided by financing activities was $132.1 million from the sale of our stock.
During the year ended December 31, 2020, net cash provided by financing activities was $134.7 million from the sale of our stock.
Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance the preclinical studies
and clinical trials of our product candidates in development and we will incur additional costs associated with
95
operating as a public reporting company. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur
significant commercialization expenses related to establishing sales, marketing, distribution and other commercial infrastructure to
commercialize such products.
In addition, our expenses will increase as we:
•
•
•
•
•
continue enrollment of existing clinical trials and commence enrollment for additional clinical trials for our product candidates;
seek regulatory approval for any product candidates that successfully complete preclinical and clinical trials;
establish manufacturing capabilities in-house for the production of preclinical and clinical supply;
hire additional clinical, medical, research and operational personnel; and
maintain, expand, and protect our intellectual property portfolio.
As of December 31, 2021, we had cash, cash equivalents and investments of $265.6 million. We believe that our existing cash, cash
equivalents and investments, will enable us to fund our operating expenses and capital expenditure requirements at least into 2024. We have
based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.
Additionally, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to
spend more money than currently expected because of circumstances beyond our control.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity
offerings, debt financings, collaborations, strategic alliances, and marketing, distribution, or licensing arrangements. To the extent that we
raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these
securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and
preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific
actions, such as incurring additional debt, making acquisitions or capital expenditures, or declaring dividends. If we raise additional funds
through collaborations, strategic alliances, or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish
valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not
be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may
be required to delay, limit, reduce, or terminate our research, 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.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States
(GAAP). The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, and expenses, and the disclosure of contingent assets and liabilities in our consolidated
financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual
results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 3 to our consolidated financial statements appearing elsewhere
in this Annual Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the
preparation of our consolidated financial statements.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We
expense research and development costs as incurred.
96
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development
expenses. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify
services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the
service when we have not yet been invoiced or otherwise notified of actual costs. The majority of our service providers invoice us in arrears
for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments.
We make estimates of our accrued expenses as of each balance sheet date in the consolidated financial statements based on facts and
circumstances known to us at that time. We periodically confirm the accuracy of the estimates with the service providers and make
adjustments, if necessary. Examples of estimated accrued research and development expenses include fees paid to:
•
•
•
vendors in connection with preclinical development activities;
CMOs in connection with the production of preclinical and clinical trial materials; and
CROs in connection with preclinical studies and clinical trials.
We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended
pursuant to quotes and contracts with multiple CMOs and CROs that supply, conduct, and manage preclinical studies on our behalf. The
financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. There
may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the
expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in
each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we adjust the accrual or prepaid
expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of
the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in
reporting amounts that are too high or too low in any particular period.
Stock-Based Compensation
We measure stock options and other stock-based awards granted to employees based on their fair value on the date of the grant and
recognize compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective
award. We apply the straight-line method of expense recognition to all awards with service-based vesting conditions. For stock-based awards
granted to non-employees, compensation expense is recognized over the period during which services are rendered by such non-employees
until completed.
We estimate the fair value of restricted stock at the then-current fair value of our common stock and for other stock-based awards we use the
Black-Scholes option-pricing model, which requires subjective assumptions, including the fair value of our common stock, volatility, the
expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock
options, and our expected dividend yield. The assumptions used in our Black-Scholes option-pricing model represent management’s best
estimates and involve a number of variables, uncertainties and assumptions and the application of management’s judgment, as they are
inherently subjective. If any assumptions change, our stock-based compensation expense could be materially different in the future.
We do not estimate and apply a forfeiture rate as we have elected to account for forfeitures as they occur.
These assumptions are estimated as follows:
•
•
•
•
•
Fair Market Value of Common Stock. The Company's stock is traded on The Nasdaq Global Select Market. Fair market value of our
stock is considered the quoted market price on NASDAQ.
Volatility. The expected volatility is based on the historical stock volatility of ours and several comparable publicly traded companies
over a sufficient period of time equal to the expected term of the options, as we do not have sufficient trading history to use the
volatility of our own common stock.
Expected Term. The expected term represents the period that our stock options are expected to be outstanding. We calculated the
expected term using the simplified method based on the average of each option’s vesting term and the contractual period during
which the option can be exercised, which is typically 10 years following the date of grant.
Risk-Free Interest Rate. The risk-free interest rate was based on the yields of U.S. Treasury securities with maturities
commensurate with the expected term of the award.
Expected Dividend Yield. We have not paid dividends on our common stock nor do we expect to pay dividends in the foreseeable
future.
97
Royalty Transfer Agreement
In connection with the sale of Series A redeemable convertible preferred stock prior to our IPO, certain investors are entitled to receive, in the
aggregate, a royalty from us equal to one percent of: (i) all global net sales of any of our products; and (ii) any license income on intellectual
property that was in existence at the time of the Series A preferred stock financing. We have elected to account for this liability at fair value
with changes recognized in the Statement of Operations. Given the nature of the underlying technology and inherent risks associated with
obtaining regulatory approval and achieving commercialization, we ascribed no value to the royalty agreement at inception and at December
31, 2021 and 2020. We continue to evaluate our scientific progress to assess our obligations under this agreement. There is substantial
judgment involved in our assessment.
Recently Issued and Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is
disclosed in Note 3 to our consolidated financial statements appearing elsewhere in this Annual Report.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act), and are eligible to take
advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging
growth companies. Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards issued subsequent
to the enactment of the JOBS Act until such time as those standards apply to private companies. Section 107 of the JOBS Act provides that
we can elect to opt out of the extended transition period at any time, which election is irrevocable. We have elected to avail ourselves of this
exemption from complying with new or revised accounting standards and, therefore, will not be subject to the same new or revised
accounting standards as other public companies that are not emerging growth companies.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act.
Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation (i)
providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the
Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the
consolidated financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the
earlier of (a) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (b) the last day of the fiscal
year following the fifth anniversary of the date of the completion of our initial public offering; (c) the date on which we have issued more than
$1.0 billion in nonconvertible debt during the previous three years; or (d) the date on which we are deemed to be a large accelerated filer
under the rules of the SEC.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information required by this Item is not applicable as we are electing scaled disclosure requirements available to Smaller Reporting
Companies with respect to this Item.
98
Item 8. Financial Statements
TCR2 THERAPEUTICS INC.
Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020
Notes to the Consolidated Financial Statements
1. Organization and Description of Business
2. Liquidity
3. Summary of Significant Accounting Policies
4. Investments and Fair Value Measurements
5. Property and Equipment
6. Accrued Expenses and Other Current Liabilities
7. Commitments and Contingencies
8. Leases
9. 401(k) Savings Plan
10. Stock-Based Compensation
11. Income tax expense
12. Related party transactions
13. Restructuring
14. Subsequent Event
99
Page
100
101
102
103
104
105
106
106
106
107
112
113
113
113
114
116
116
118
120
120
121
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
TCR2 Therapeutics Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of TCR2 Therapeutics Inc. and subsidiaries (the Company) as of December
31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the years
then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its
operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Change in Accounting Principle
As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for leases as of
January 1, 2021 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842) and Accounting Standards Update
No. 2018-11, Leases (Topic 842): Targeted Improvements.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2017.
Boston, Massachusetts
March 22, 2022
100
TCR2 THERAPEUTICS INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
December 31,
2021
December 31,
2020
Assets
Current assets
Cash and cash equivalents
Investments
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Right-of-use assets, operating leases
Restricted cash
Other assets, non-current
Total assets
Liabilities and stockholders’ equity
Accounts payable
Accrued expenses and other current liabilities
Operating lease liabilities
Total current liabilities
Operating lease liabilities, non-current
Other liabilities
Total liabilities
Commitments and contingencies (Note 7)
Stockholders’ equity
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, no shares issued or outstanding as of December
31, 2021 and December 31, 2020, respectively.
Common stock, $0.0001 par value; 150,000,000 shares authorized; 38,496,484 and 33,516,795 shares issued and
outstanding as of December 31, 2021 and December 31, 2020, respectively.
Additional paid-in capital
Accumulated other comprehensive income (loss)
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
See notes to consolidated financial statements
101
$
$
$
$
222,564 $
43,029
10,534
276,127
17,075
28,283
1,156
730
323,371 $
2,144 $
13,094
3,367
18,605
22,996
293
41,894
-
4
631,008
(13 )
(349,522 )
281,477
323,371 $
94,155
133,831
7,552
235,538
10,013
-
583
61
246,195
2,448
6,392
-
8,840
-
807
9,647
-
3
486,197
63
(249,715 )
236,548
246,195
TCR2 THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share and per share data)
Operating expenses
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest income, net
Loss before income tax expense
Income tax expense
Net loss
Per share information
Net loss per share of common stock, basic and diluted
Weighted average shares outstanding, basic and diluted
$
$
$
Years Ended December 31,
2021
2020
77,239 $
22,503
99,742
(99,742 )
224
(99,518 )
289
(99,807 ) $
51,980
16,720
68,700
(68,700 )
1,737
(66,963 )
161
(67,124 )
(2.63 ) $
(2.40 )
37,935,554
27,990,564
See notes to consolidated financial statements
102
TCR2 THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(amounts in thousands)
Net loss
Unrealized loss on investments, net
Comprehensive loss
Years Ended December 31,
2021
2020
$
$
(99,807 ) $
(76 )
(99,883 ) $
(67,124 )
(79 )
(67,203 )
See notes to consolidated financial statements
103
TCR2 THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands, except share data)
Balance at December 31, 2019
Issuance of common stock, net of issuance costs
Reclassification of shares issued and previously subject to
repurchase
Exercise of stock options including ESPP shares issued
Stock-based compensation expense
Unrealized loss on investments
Net loss
Balance at December 31, 2020
Issuance of common stock, net of issuance costs
Exercise of stock options including ESPP shares issued
Stock-based compensation expense
Unrealized loss on investments
Net loss
Balance at December 31, 2021
Common Stock
Shares
Amount
23,981,109
9,200,000
$
69,826
265,860
-
-
-
33,516,795
4,590,164
389,525
-
-
-
38,496,484
$
$
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
342,896
133,570
$
(182,591 )
-
$
142
-
$
51
1,188
8,492
-
486,197
131,329
1,217
12,265
-
-
631,008
$
$
-
-
-
-
(67,124 )
(249,715 )
-
-
-
-
(99,807 )
(349,522 )
$
$
-
-
-
(79 )
-
63
-
-
-
(76 )
-
(13 )
$
$
160,449
133,571
51
1,188
8,492
(79 )
(67,124 )
236,548
131,330
1,217
12,265
(76 )
(99,807 )
281,477
2
1
-
-
-
-
-
3
1
-
-
-
-
4
$
$
$
See notes to consolidated financial statements
104
TCR2 THERAPEUTICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Operating activities
Net loss
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization
Asset impairment due to restructuring
Stock-based compensation expense
Amortization (accretion) on investments
Deferred tax liabilities
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
Operating leases, net
Accounts payable
Accrued expenses and other liabilities
Cash used in operating activities
Investing activities
Purchases of equipment
Software development costs
Purchases of investments
Proceeds from sale or maturity of investments
Cash provided by (used in) investing activities
Financing activities
Proceeds from public offering of common stock, net of issuance costs
Proceeds from the exercise of stock options
Payment of deferred offering costs
Cash provided by financing activities
Net change in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of period
Supplemental disclosure of noncash activities
Property and equipment additions in accounts payable and accrued expenses
Right-of-use assets obtained in exchange for operating lease liabilities
Operating cash flows used in operating leases
See notes to consolidated financial statements
105
Twelve Months Ended December 31,
2021
2020
$
(99,807 ) $
(67,124 )
2,827
559
12,265
837
99
(2,496 )
(2,416 )
(771 )
7,300
(81,603 )
(11,098 )
(351 )
(50,726 )
140,622
78,447
131,330
1,217
(409 )
132,138
128,982
94,738
223,720 $
517 $
21,315 $
11,291 $
1,592
-
8,492
(702 )
131
(1,101 )
-
451
1,522
(56,739 )
(7,164 )
-
(152,812 )
111,041
(48,935 )
133,571
1,189
(61 )
134,699
29,025
65,713
94,738
611
-
-
$
$
$
$
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
1. Organization and Description of Business
TCR2 Therapeutics Inc. (the Company) is a clinical-stage immunotherapy company developing the next generation of novel T cell therapies
for patients suffering from cancer. The Company was incorporated under the laws of the State of Delaware on May 29, 2015 under the name
TCR2, Inc. In November 2016, the Company changed its name to TCR2 Therapeutics Inc. The Company’s principal operations are located in
Cambridge, Massachusetts.
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances
and transactions have been eliminated.
Shelf registration statement
On March 16, 2021, the Company filed an automatic shelf registration statement on Form S-3 (the Shelf), with the Securities and Exchange
Commission (SEC), which covers the offering, issuance and sale of an indeterminate amount of the Company’s common stock, preferred
stock, debt securities, warrants and/or units of any combination thereof. The Shelf was automatically effective when filed. As of December
31, 2021, no sales have been made under the Shelf.
Equity offerings
On July 31, 2020, the Company closed a public offering of its common stock pursuant to which it issued and sold 9,200,000 shares of its
common stock at a price to the public of $15.50 per share. The aggregate net proceeds received by the Company from the offering were
approximately $133.6 million after deducting $9.0 million relating to underwriting discounts and commissions and offering expenses.
On January 22, 2021, the Company closed a public offering of its common stock pursuant to which it issued and sold 4,590,164 shares of its
common stock at a price to the public of $30.50 per share. The aggregate net proceeds received by the Company from the offering were
approximately $131.3 million after deducting $8.7 million relating to underwriting discounts and commissions and offering expenses.
2. Liquidity
The Company’s operations to date have focused on organization and staffing, business planning, raising capital, acquiring technology and
assets, manufacturing and conducting clinical and preclinical studies. The Company does not have any product candidates approved for sale
and has not generated any revenue from product sales. The Company’s product candidates are subject to long development cycles and the
Company may be unsuccessful in its efforts to develop, obtain regulatory approval for or market its product candidates.
The Company is subject to a number of risks including, but not limited to, the need to obtain adequate additional funding for the ongoing and
planned clinical development of its product candidates. Because of the numerous risks and uncertainties associated with pharmaceutical
products and development, the Company is unable to accurately predict the timing or amount of funds required to complete development of
its product candidates, and costs could exceed the Company’s expectations for a number of reasons, including reasons beyond the
Company’s control. The Company is also subject to a number of other risks including possible failure of preclinical studies or clinical trials,
the need to obtain marketing approval for its product candidates, the development of new technological innovations by competitors, the need
to successfully commercialize and gain market acceptance of any of the Company’s products that are approved and uncertainty around
intellectual property matters. If the Company does not successfully commercialize any of its products, it will be unable to generate product
revenue or achieve profitability.
The Company has incurred net losses from operations since inception. The Company expects to continue to generate losses for the
foreseeable future. The Company expects that its cash, cash equivalents and investments as of December 31, 2021 of $265.6 million will be
sufficient to fund its operating expenses and capital expenditure requirements through at least twelve months from the date of issuance of
these consolidated financial statements.
106
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
3. Summary of Significant Accounting Policies
Principles of consolidation and basis of presentation
The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles
(GAAP). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification
(ASC) and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB).
Use of estimates
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Significant estimates and
assumptions reflected in these consolidated financial statements include, but are not limited to, the fair value of the royalty transfer
agreement obligations, and the fair value of stock-based compensation awards granted under the Company’s equity-based compensation
plans. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the consolidated financial
statements, actual results may materially vary from these estimates. Estimates and assumptions are periodically reviewed, and the effects of
revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.
Concentrations of credit risk and of manufacturing risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and
investments. The Company’s cash, cash equivalents and investments are held by financial institutions in the United States. Amounts on
deposit may at times exceed federally insured limits. Management believes that the financial institutions are financially sound, and
accordingly, minimal credit risk exists with respect to the financial institutions.
As of December 31, 2021, the Company had manufacturing arrangements with vendors for the supply of materials for use in preclinical and
clinical studies. If the Company were to experience any disruptions in the vendors' ability or willingness to continue to provide manufacturing
services, the Company may experience significant delays in its product development timelines and may incur substantial costs to secure
alternative sources of manufacturing.
Cash equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As
of December 31, 2021 and 2020, cash equivalents consisted of U.S treasuries, corporate bonds and government-backed money market
funds.
Investments
As of December 31, 2021, all investments were classified as available-for-sale and were carried at their estimated fair value. Unrealized
gains and losses are recorded as a component of accumulated other comprehensive income (loss) until realized. The Company determines
the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates such determination at each
balance sheet date. The Company periodically reviews its investments in debt securities for impairment and adjusts these investments to
their fair value when a decline in market value is deemed to be other than temporary. If losses on these securities are considered to be other
than temporary, the loss is recognized in the statement of operations. The Company classifies its available-for-sale marketable securities as
current or non-current based on each instrument’s underlying effective maturity date and for which the Company has the intent and ability to
hold the investment for a period of greater than 12 months. Marketable securities with maturities of less than 12 months are classified as
current and are included in investments in the consolidated balance sheets. Marketable securities with maturities greater than 12 months for
which the Company has the intent and ability to hold the investment for greater than 12 months are classified as non-current and are
included in investments, non-current in the consolidated balance sheets.
107
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
Fair value of financial instruments
As of December 31, 2021 and 2020, the Company’s financial instruments consist of money market funds, commercial paper, agency and
corporate bonds, and asset-backed securities are included in investments. The carrying value of investments is the estimated fair value. Fair
value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date.
Property and equipment
Property and equipment are recorded at cost. Depreciation and amortization are determined using the straight-line method over the
estimated useful lives. Expenditures for maintenance and repairs are expensed as incurred while renewals and betterments are capitalized.
When property and equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the
accounts and any resulting gain or loss is reflected in the consolidated statements of operations.
Laboratory equipment
Computer hardware and equipment
Furniture and fixtures
Leasehold improvements
Assets not placed in service
Estimated Useful Lives
5 years
3 years
5 - 7 years
Lesser of lease term or estimated
useful life.
Assets not placed in service includes direct costs related to the acquisition of property including leasehold improvements, primarily from the
Rockville manufacturing facility. Such costs are not depreciated until the asset is completed and placed into service.
Impairment of long-lived assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated. Impairment charges are recognized at the amount by which the carrying
amount of an asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or the fair
value less costs to sell. During the year ended December 31, 2021, the Company recognized impairment of long-lived assets in association
with the wind down of the UK manufacturing operations. See Note 13, Restructuring. No impairments of long-lived assets for the year ended
December 31, 2020 were recognized.
Restricted cash
Cash accounts that are restricted as to withdrawal or usage are presented as restricted cash in the Company's balance sheets. Restricted
cash includes amounts held as a security deposit in the form of a letter of credit for the Company’s leased facilities.
Deferred offering costs
The Company capitalizes costs that are directly associated with in-process equity financings until such financings are consummated at which
time such costs are recorded against the gross proceeds of the offering. Should the in-process equity financing be abandoned, the deferred
offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations.
Stock-based compensation
The Company measures employee stock-based awards at grant-date fair value and records compensation expense on a straight-line basis
over the requisite service period, which is generally the vesting period of the respective award. Generally, the Company issues awards with
only service-based vesting conditions. The Company accounts for forfeitures as they occur. The Company
108
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
measures the fair value of stock-based awards granted to non-employees on the date at which the related service is complete.
Compensation expense is recognized over the period during which services are rendered by such non-employee consultants until completed.
Estimating the fair value of stock options and warrants requires the input of subjective assumptions, including the expected life of the
instrument and stock price volatility. The Company uses the value of its stock price as quoted on the Nasdaq Global Select Market to
determine fair value of the Company’s common stock. The Company uses the Black-Scholes option pricing model to value its stock option
awards and warrants. The assumptions used in calculating the fair value of stock-based awards represent management’s estimates and
involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different
assumptions, stock-based compensation expense could be materially different for future awards.
The Company classifies stock-based compensation expense in its statements of operations in the same manner in which the award
recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
Leases
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and
circumstances present in the arrangement. Leases are classified at their commencement date, which is defined as the date on which the
lessor makes the underlying asset available for use by the lessee, as either operating or finance leases based on the economic substance of
the agreement. The Company recognizes lease right-of-use assets and related liabilities in its consolidated balance sheets for both operating
and finance leases. Lease liabilities are measured at the lease commencement date as the present value of the future lease payments using
the interest rate implicit in the lease, or the incremental borrowing rate if the rate implicit in the lease is not readily determinable. Lease right-
of-use assets are measured as the lease liability plus initial direct costs and prepaid lease payments less lease incentives. The lease term is
the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will
be exercised. The Company recognizes operating lease costs in operating expenses in its consolidated statements of operations, inclusive of
rent escalation provisions and rent holidays, on a straight-line basis over the respective lease term.
Research and development expenses
Research and development costs are expensed as incurred and consist primarily of funds for employee wages and funds paid to third parties
for the provision of services for product candidate development, clinical and preclinical development and related supply and manufacturing
costs, and regulatory compliance costs. At the end of the reporting period, the Company compares payments made to third party service
providers to the estimated progress toward completion of the research or development objectives. Such estimates are subject to change as
additional information becomes available. Depending on the timing of payments to the service providers and the progress that the Company
estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expense relating to these
costs.
Upfront milestone payments made to third parties who perform research and development services on the Company’s behalf are expensed
as services are rendered.
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A
reduction in the carrying value of the deferred tax assets is required when it is not more likely than not that such deferred tax assets are not
realizable.
109
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
Net loss per share
Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted-
average shares of common stock outstanding during the period. Dilutive shares of common stock are not assumed to have been issued if
their effect is anti-dilutive. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders, diluted net
loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since
dilutive shares of common stock are not assumed to have been issued if their effect is anti-dilutive. Therefore, the weighted-average shares
used to calculate both basic and diluted loss per share are the same.
The following potentially dilutive securities, on an as converted basis have been excluded from the computation of diluted weighted-average
shares outstanding as of December 31, 2021 and 2020, as they would be antidilutive:
Stock options outstanding
Common stock warrants
Restricted stock units
Employee stock purchase plan
Total
Comprehensive loss
As of December 31,
2021
2020
6,181,335
203,676
66,000
24,513
6,475,524
5,011,349
203,676
-
5,141
5,220,166
Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources (which excludes investments from owners). The Company’s only element of other comprehensive
loss is unrealized gains and losses on investments.
Common stock
Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders.
Preferred stock
The Board of Directors or any authorized committee thereof is expressly authorized, to the fullest extent permitted by law, to provide by
resolution or resolutions for, out of the unissued shares of Undesignated Preferred Stock, the issuance of the shares of Undesignated
Preferred Stock in one or more series of such stock, and by filing a certificate of designations pursuant to applicable law of the State of
Delaware, to establish or change from time to time the number of shares of each such series, and to fix the designations, powers, including
voting powers, full or limited, or no voting powers, preferences and the relative, participating, optional or other special rights of the shares of
each series and any qualifications, limitations and restrictions thereof. As of December 31, 2021, there are no preferred shares issued.
Reconciliation of cash, cash equivalents and restricted cash as presented in the statements of cash flows
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets to
the total of the same such amounts shown in the consolidated statements of cash flows for the years ended December 31, 2021 and 2020.
Cash and cash equivalents
Restricted cash
Cash, cash equivalents and restricted cash shown in the statements of cash flows
110
As of December 31,
2021
2020
$
$
222,564 $
1,156
223,720 $
94,155
583
94,738
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
Segment information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the
chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The
Company views its operations and manages its business in one consolidated operating segment.
JOBS Act accounting election
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Under the
JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the
JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for
complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the
date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period
provided in the JOBS Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the
new or revised accounting pronouncements as of public company effective dates.
Recently adopted accounting pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASC 842”), which amended a number of aspects of lease
accounting and required entities to recognize right-of-use assets and liabilities on the balance sheet. In July 2018, the FASB issued ASU No.
2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”), which provided a transition option to entities adopting ASC 842.
The Company adopted ASC 842, Leases, including ASU 2018-11, effective January 1, 2021 on a modified-retrospective basis under which
required the recognition of lease liabilities and right-of use assets at the adoption date but did not require retrospective adjustments of prior
periods. The amended guidance resulted in the recognition of additional assets and corresponding liabilities on the Company's balance
sheets. The Company elected the optional transition approach of not adjusting its comparative period financial statements for the impacts of
adoption. The Company elected the package of transition practical expedients for leases that commenced prior to January 1, 2021, allowing
it not to reassess (i) whether any expired or existing contracts contain leases, (ii) the lease classification for any expired or existing leases
and (iii) the initial indirect costs for any existing leases. The Company recorded, upon adoption of ASC 842 effective January 1, 2021,
operating lease assets and liabilities of $11.3 million and $11.8 million, respectively, related to its real estate leases under ASC 842.
The cumulative effect of applying ASC 842 on the Company’s consolidated balance sheet as of January 1, 2021 was as follows:
Assets
Prepaid expenses and other current assets
Right-of-use assets, operating leases
Total assets
Liabilities and Shareholders' Equity
Accrued expenses and other current liabilities
Operating lease liabilities
Other liabilities
Operating lease liabilities, non-current
Total liabilities and shareholders' equity
$
$
Balance as of
December 31, 2020
Adjustments
Balance as of
January 1, 2021
7,552 $
-
$
6,392 $
-
807
-
$
(154 ) $
11,300
11,146
(168 ) $
2,630
(482 )
9,166
11,146
7,398
11,300
6,224
2,630
325
9,166
Adopting ASC 842 did not result in a material impact to the Company's statements of operations or cash flows.
Please refer to Note 8, “Leases,” for further information regarding the Company’s leases as well as certain disclosures required by ASC 842.
111
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
4. Investments and Fair Value Measurements
As of December 31, 2021, investments were comprised of the following:
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Corporate bonds
U.S. Treasury securities
Total
$
$
33,048
9,994
43,042
As of December 31, 2020, investments were comprised of the following:
Corporate bonds
U.S. Treasury securities
Total
Amortized
Cost
$
$
34,801
98,967
133,768
$
$
$
$
-
-
-
60
3
63
$
$
$
$
(11 )
(2 )
(13 )
-
-
-
$
$
$
$
33,037
9,992
43,029
Fair
Value
34,861
98,970
133,831
Unrealized
Losses
Unrealized
Gains
The Company follows FASB’s accounting guidance on fair value measurements for financial assets and liabilities measured on a recurring
basis. Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing
parties. Where available, fair value is based on observable market prices, or parameters derived from such prices. Where observable prices
or inputs are not available, valuation models are applied. This hierarchy requires the use of observable market data when available and to
minimize the use of unobservable inputs when determining fair value. These valuation techniques involve some level of management
estimation and judgment. The degree of management estimation and judgment is dependent on the price transparency for the instruments,
or market, and the instruments’ complexity.
The guidance requires fair value measurements to be classified and disclosed in one of the following three categories:
Level 1 — Quoted prices (unadjusted in active markets for identical assets or liabilities)
Level 2 — Inputs other than quoted prices in active markets that are observable either directly or indirectly
Level 3 — Unobservable inputs in which there is little or no market data, which require the Company to develop its own
assumptions
The Company has classified assets measured at fair value on a recurring basis as follows as of December 31, 2021:
Amortized
Cost
Fair Value
Fair Value Measurement Based on
Significant
Other
Observable
Inputs
(Level 2)
Quoted
Prices in
Active
Market
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
(1)
Cash equivalents
Corporate bonds
U.S. Treasury securities
Total
$
$
219,162
33,048
9,994
262,204
$
$
219,162
33,037
9,992
262,191
$
$
219,162
-
-
219,162
$
$
-
33,037
9,992
43,029
$
$
-
-
-
-
(1)
Includes cash sweep accounts, U.S. Treasury money market mutual fund, bank certificates of deposit, U.S. Treasury bills and corporate
bonds that have a maturity of three months or less from the original acquisition date.
112
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
The Company has classified assets measured at fair value on a recurring basis as follows as of December 31, 2020:
Amortized
Cost
Fair Value
Fair Value Measurement Based on
Significant
Other
Observable
Inputs
(Level 2)
Quoted
Prices in
Active
Market
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
$
$
89,319
34,801
98,967
223,087
$
$
89,319
34,861
98,970
223,150
$
$
89,319
-
-
89,319
$
$
-
34,861
98,970
133,831
$
$
-
-
-
-
(1)
Cash equivalents
Corporate bonds
U.S. Treasury securities
Total
(1)
Includes cash sweep accounts, U.S. Treasury money market mutual fund, bank certificates of deposit, U.S. Treasury bills and corporate
bonds that have a maturity of three months or less from the original acquisition date.
During the years ended December 31, 2021 and 2020, there were no transfers among the Level 1, Level 2 and Level 3 categories.
5. Property and Equipment
Property and equipment, net, consisted of:
Laboratory equipment
Computer hardware and equipment
Furniture and fixtures
Leasehold improvements
Assets not placed in service
Less: accumulated depreciation
December 31, 2021
December 31, 2020
As of
13,115 $
54
376
551
7,592
21,688
(4,613 )
17,075 $
8,566
109
432
320
3,320
12,747
(2,734 )
10,013
$
$
Depreciation expense was $2,827 and $1,592 for the years ended December 31, 2021 and 2020, respectively.
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of:
Employee compensation and related benefits
Professional fees
Contract manufacturing organization fees
Contract research organization fees
Property received not yet invoiced
Accrued restructuring charges
Other
7. Commitments and Contingencies
Litigation
December 31, 2021
December 31, 2020
As of
$
$
4,631 $
413
1,261
2,810
748
2,401
830
13,094 $
3,808
224
582
487
385
-
906
6,392
The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a
potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the
113
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal
proceedings.
Royalty transfer agreement
In connection with the sale of Series A redeemable convertible preferred stock prior to the Company's IPO, certain investors are entitled to
receive, in the aggregate, a royalty from the Company equal to one percent of (i) all global net sales of any Company products and (ii) any
license income on intellectual property that was in existence at the time of the Series A preferred stock financing. The Company has elected
to account for this liability at fair value with changes recognized in the statement of operations. Given the early-stage nature of the underlying
technology and inherent risks associated with obtaining regulatory approval and achieving commercialization, the Company ascribed no
value to the royalty agreement at inception and for the years ended December 31, 2021 and 2020. The Company currently does not have
any net sales or license income and as a result has paid no royalties under this obligation as of December 31, 2021 and 2020 nor has the
Company accrued any liability as of December 31, 2021 and 2020.
8. Leases
The Company leases all of its offices and facilities, including its corporate headquarters, under operating leases. The Company has entered
into various non-cancellable lease arrangements for facilities expiring at various times through 2036. Certain of these arrangements have
free rent periods or escalating rent payment provisions. None of the Company's leases include residual value guarantees.
Fixed fees for use of property or equipment and other services are included in the right-of-use assets and lease liabilities. Rent expense is
recognized on a straight-line basis for total rent over the lease period. Variable service costs are included in the lease expense as incurred.
The Company is generally obligated for the cost of property taxes, insurance, common area maintenance, and other administrative fees
relating to its leases, which are considered variable lease costs and are expensed as incurred. In addition, the Company enters into contracts
that have different service obligations. These contracts are considered multiple-element service contracts. When leases are embedded in
multiple-element service contracts, all contract services are accounted for as a single lease component since the Company elected the
practical expedient to not separate lease components and non-lease components.
Operating Leases
Office space and lab facility, Cambridge, Massachusetts
In March 2018, the Company entered into a lease for office and laboratory facilities that expires in July 2025. Under the terms of the lease,
the Company placed a $290 letter of credit into a restricted cash account as security for the facility.
Manufacturing facility, Stevenage, United Kingdom
In December 2018, the Company signed a collaboration agreement (the Collaboration Agreement) with Cell Therapy Catapult Limited
(Catapult) to establish the Company's manufacturing process in Catapult’s good manufacturing practice (GMP) manufacturing facility in the
United Kingdom. The Collaboration Agreement provides for Catapult to provide identified space, called a module. The Company has
concluded that the Collaboration Agreement contained an embedded lease as the Company has the right to operate the module in a manner
it determines. The initial term of the Collaboration Agreement is three years which began March 1, 2019. The Company can terminate the
Collaboration Agreement earlier with 12 months’ notice and continued payment for contributions during the 12-month termination period.
In December 2021, the Company elected to cease manufacturing operations at its Catapult facility by the end of 2021. As a result, the
Company recognized a $1.5 million variable lease cost as of December 31, 2021 reflecting its estimated obligation for the 12-month
termination period.
114
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
Office space, Cambridge, Massachusetts
In September 2019, the Company entered into a lease for office facilities that expires in September 2024.Under the terms of the lease, the
Company placed a $127 letter of credit into a restricted cash account as security for the facility.
Lab facility, Cambridge Massachusetts
In November 2020, the Company entered into a lease for office and laboratory facilities that expires in January 2024. Under the terms of the
lease, the Company placed $166 letter of credit into a restricted cash account as security for the facility.
Manufacturing facility, Waltham, Massachusetts
In November 2020, the Company entered into a manufacturing agreement with ElevateBio LLC (ElevateBio) which includes identified space
dedicated to the Company. The Company has determined the agreement contains an embedded lease. The lease began in February 2021
when the Company obtained control of the dedicated manufacturing space and ends July 2022. In addition, in February 2022 we executed
an agreement that expanded our partnership with ElevateBio by partnering for a second GMP manufacturing suite at ElevateBio BaseCamp
in Waltham, Massachusetts through December 2023.
Manufacturing facility, Rockville, Maryland
In March 2021, the Company entered into a lease for a new manufacturing facility for an initial term of 15 years through June 2036. The
Company also has an option to extend the term of the lease for two consecutive terms of five years each. The Company placed a $557 letter
of credit into a restricted cash account as security for the facility.
Right-of-use assets and lease liabilities as of December 31, 2021 and January 1, 2021, the date of adoption of ASC 842, were as follows:
Assets:
Right-of-use assets, operating leases
Liabilities
Operating lease liabilities
Operating lease liabilities, non-current
Total lease liabilities
The components of the lease costs for the year ended December 31, 2021 were as follows:
Operating lease costs
Short-term lease costs
Variable lease costs
Total lease costs
$
$
$
December 31,
2021
January 1,
2021
28,283 $
11,300
3,367 $
22,996
26,363 $
December 31,
2021
$
$
2,630
9,166
11,796
8,031
548
5,937
14,516
Total lease costs above are recognized in the consolidated statements of operation for the year ended December 31, 2021. Variable lease
costs include the $1,501 cost associated with the Company’s decision to cease manufacturing operations at the Catapult facility during 2021.
Weighted average remaining lease term and discount rate as of December 31, 2021 were as follows:
Weighted-average remaining lease term (in years)
Operating leases
Weighted-average discount rate:
Operating leases
115
December 31,
2021
11.5
12.7 %
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
The following table presents future minimum lease payments under for operating leases as of December 31, 2021:
2022
2023
2024
2025
2026
Thereafter
Total minimum payments required
Less amounts representing imputed interest
Present value of lease liabilities
$
$
December 31, 2021
7,710
7,144
6,351
5,255
4,327
36,347
67,134
(40,771 )
26,363
Prior to adoption of ASC 842, future minimum lease payments under non-cancelable operating lease agreements as of December 31, 2020,
were as follows:
2021
2022
2023
2024
2025
Thereafter
Total
December 31, 2020
Minimum Lease Payments
4,966
3,985
3,690
2,537
1,054
-
16,232
$
$
Rent expense for the year ended December 31, 2020 was $3.6 million.
9. 401(k) Savings Plan
The Company maintains a defined contribution 401(k) plan in which employees may contribute a portion of their compensation, subject to
statutory maximum contribution amounts. For the years ended December 31, 2021 and 2020, the matching contribution expense was $376
and $369, respectively.
10. Stock-Based Compensation
In February 2019, the Company’s Board of Directors and stockholders approved the 2018 Stock Option and Incentive Plan (the 2018 Plan),
which replaced the 2015 Plan. The shares under the 2015 Plan which were not issued, were rolled into the 2018 Plan. The number of shares
of our common stock reserved for issuance under the 2018 Plan shall be cumulatively increased on January 1, 2020 and each January 1
thereafter by 4% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year or a lesser
number of shares determined by our Board of Directors.
The 2018 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units,
stock appreciation rights and other stock-based awards. The Company’s officers, employees, directors and other key persons (including
consultants) are eligible to receive awards under the 2018 Plan. The amount, terms of grants, and exercisability provisions are determined
and set by the Company’s Board of Directors. The maximum number of authorized shares to be issued under the Plan was 7,394,606. As of
December 31, 2021, there were 433,343 shares of common stock available for future issuance. The term of the options may be up to 10
years, and options are exercisable in cash or as otherwise determined by the Board of Directors. Generally, options and restricted stock
awards vest over a four-year period.
The Company recorded stock-based compensation expense in the following expense categories of its accompanying consolidated
statements of operations:
116
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
For the Years Ended December 31,
2021
2020
$
$
5,592 $
6,673
12,265 $
3,351
5,141
8,492
Research and development
General and administrative
Stock options
The following table summarizes the activity related to stock option grants to employees and non-employees for the years ended December
31, 2021 and 2020:
Balance as of January 1, 2020
Granted
Exercised
Forfeited
Balance as of December 31, 2020
Granted
Exercised
Forfeited
Balance as of December 31, 2021
Exercisable as of December 31, 2021
Vested and expected to vest as of December 31, 2021
Weighted
Average
Exercise
Price
Per Share
Weighted
Average
Remaining
Contractual
Life
(in Years)
10.31
28.12
3.91
12.31
14.99
9.32
2.55
21.63
13.32
10.52
-
8.9
8.4
6.1
2.6
Shares
4,189,292 $
1,252,365
(241,995 )
(188,313 )
5,011,349 $
2,094,554
(371,636 )
(552,932 )
6,181,335 $
2,482,070 $
6,181,335
As of December 31, 2021, there was $30,797 in unrecognized compensation cost that is expected to be recognized over an estimated
weighted-average amortization period of 2.6 years. The aggregate intrinsic value of options outstanding and options exercisable as of
December 31, 2021 was $1,368. The aggregate intrinsic values of options exercised during the year ended December 31, 2021 was $2,608.
The fair value of options is estimated using the Black-Scholes option pricing model, which takes into account inputs such as the exercise
price, the value of the underlying common stock at the grant date, expected term, expected volatility, risk-free interest rate and dividend yield.
The fair value of each grant of options during the years ended December 31, 2021 and 2020 was determined using the methods and
assumptions discussed below:
▪
▪
▪
▪
The expected term of employee options is determined using the “simplified” method, as prescribed in the SEC Staff Accounting
Bulletin (SAB) No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual
term of the option due to the Company’s lack of sufficient historical data. The expected term of non-employee options is equal to the
contractual term.
The expected volatility is based on historical volatilities of similar entities within the Company’s industry which were commensurate
with the expected term assumption as described in SAB No. 107.
The estimated annual dividend yield is 0% because the Company has not historically paid, and does not expect for the foreseeable
future to pay, a dividend on its common stock.
The Company is traded on the Nasdaq Select Market. Fair value is determined by the stock price quoted on the Nasdaq.
117
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
For the years ended December 31, 2021 and 2020, the grant date fair value of all option grants was estimated at the time of grant using the
Black-Scholes option-pricing model using the following weighted average assumptions:
Risk-free interest rate
Expected term (in years)
Expected volatility
Annual dividend yield
Fair value of common stock
Restricted stock units
For the Years Ended December 31,
2021
2020
1.2 %
6.1
70.2 %
0 %
9.42
$
0.5 %
6.1
75.0 %
0 %
18.51
$
During the year ended 2021, the Company granted 66,000 restricted stock units to employees. The restricted stock units (RSUs) vest over
two years.
The weighted-average grant date fair value of RSUs granted during the year ended December 31, 2021 was $4.80.
As of December 31, 2021, there was $317 of unrecognized compensation cost related to unvested employee RSUs. This amount is expected
to be recognized over a weighted-average period of 1.7 years.
Warrants
Warrants issued to non-employees in connection with providing consulting services are issued outside of the Plan and are accounted for as
stock-based compensation.
The warrants have an exercise price of $0.74 per share and will expire at the earlier of ten years from the date of issuance or a change in
control event as defined in the warrant agreements.
As of December 31, 2021 and 2020, there were 203,676 warrants outstanding. During the years ending December 31, 2021 and 2020, the
Company granted no warrants and there were no forfeitures.
Employee stock purchase plan (ESPP)
In February 2019, the Company’s Board of Directors adopted and the Company’s stockholders approved the 2018 Employee Stock
Purchase Plan (2018 ESPP). The 2018 ESPP enables eligible employees to purchase shares of the Company's common stock at the end of
each six-month offering period at a price equal to 85% of the fair market value of the shares on the first business day or the last business day
of the offering period, whichever is lower. Eligible employees generally included all employees. Offering periods began on the first trading day
September 1 and March 1 of each year and ended on the last trading day in February and August of each year. Share purchases are funded
through payroll deductions of up to 15% of an employee’s eligible compensation for each payroll period, or $25 each calendar year.
During the years ended December 31, 2021 and 2020, there were 17,889 and 23,864 shares issued under the 2018 ESPP, respectively.
11. Income Tax Expense
Loss before income tax expense for the years ended December 31, 2021 and 2020 consisted of the following:
United States
Foreign
Loss before income taxes
For the Years Ended December 31,
2021
2020
$
$
(100,607 ) $
1,089
(99,518 ) $
(67,625 )
662
(66,963 )
118
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
The income tax expense for the years ended December 31, 2021 and 2020 consisted of the following components:
Current tax
State
Foreign
Total current tax
Deferred tax
Foreign
Total deferred tax
Income tax expense
For the Years Ended December 31,
2021
2020
$
$
17 $
181
198
91
91
289 $
30
-
30
131
131
161
Subject to the limitations described below, at December 31, 2021, we have cumulative federal and state net operating loss carryforwards of
approximately $4.1 million and $217.6 million available to reduce federal and state taxable income, respectively, which begin to expire in
2035. Additionally, we have $214.8 million of federal net operating loss carryforwards which carryforward indefinitely. We have cumulative
federal and state tax credit carry forwards of $8.1 million and $3.1 million, respectively, available to reduce federal and state income taxes
which begin to expire in 2035 and 2031, respectively.
Section 382 of the Internal Revenue Code of 1986, as amended (the Code) provides for limitation on the use of net operating loss and
research and development tax credit carryforwards following certain ownership changes (as defined in Code) that could limit the Company’s
ability to utilize these carryforwards. Pursuant to Section 382 of the Code, an ownership change occurs when the stock ownership of a 5%
stockholder increases by more than 50% over a three-year testing period. The Company may have experienced various ownership changes,
as defined by the Code, as a result of past financings and may in the future experience an ownership change. Accordingly, the Company’s
ability to utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards
may be applied against future taxes. The Company has not performed an Internal Revenue Code Section 382 study in connection with
changes in control.
The components of net deferred income tax assets (liabilities) as of December 31, 2021 and 2020 are as follows:
Deferred tax assets:
Net operating loss carryforwards
Research and development credits
Equity-based compensation
Capitalized costs
Operating lease liabilities
Accrued expenses and other temporary differences
Total deferred tax assets
Deferred tax liabilities:
Depreciation
Right-of-use assets, operating leases
Total deferred tax liabilities
Less: valuation allowance
Total net deferred tax assets (liabilities)
As of December 31,
2021
2020
59,771 $
10,574
1,810
5,029
7,124
921
85,229
(489 )
(7,643 )
(8,132 )
(77,391 )
(294 ) $
34,749
7,584
2,874
5,646
-
1,020
51,873
(392 )
-
(392 )
(51,683 )
(202 )
$
$
In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence in determining
whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross
deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net
operating loss carryforwards. Management believes that it is more likely than not that the Company’s U.S. deferred income tax assets will not
be realized. As such, there is a full valuation allowance against the net U.S. deferred tax assets as of December 31, 2021 and 2020. The
Company is in a net deferred tax liability position in the United Kingdom and believes it is more likely than not that the foreign deferred
income tax assets will be realized. As such, there is no valuation allowance against the U.K. deferred tax assets. The valuation allowance in
the U.S. increased by approximately $25.7 million during the year ended December 31, 2021 primarily as a result of the increase in net
operating loss carryforwards. The valuation allowance increased by approximately $21.4 million during the year ended December 31, 2020
primarily as a result of the increase in net operating loss carryforwards.
119
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
The Company did not have unrecognized tax benefits as of December 31, 2021 or 2020. The Company recognizes interest and penalties
accrued on any unrecognized tax benefits as a component of income tax expense.
A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the financial statements is as
follows:
Statutory Federal income tax rate
State income tax, net of federal benefit
Stock compensation
Permanent differences
Research and development credit benefit
Change in valuation allowance
Effective income tax rate
As of December 31,
2021
2020
21.0 %
5.1 %
-3.1 %
-0.2 %
2.7 %
-25.8 %
-0.3 %
21.0 %
6.4 %
0.0 %
0.1 %
4.1 %
-32.0 %
-0.4 %
The Company’s remains subject to examination by U.S. Federal, state, local, and foreign tax authorities for tax years 2018 through 2021.
With a few exceptions, we are no longer subject to U.S. Federal, state, local, and foreign examinations by tax authorities for the tax year
2017 and prior. However, net operating losses from the tax year 2017 and prior would be subject to examination if and when used in a future
tax return to offset taxable income.
Management believes that the Company does not have any uncertain tax positions that would result in a material impact on the Company’s
financial statements. The Company files income tax returns in the above jurisdictions as well as the applicable state jurisdictions in the United
States. There are currently no income tax examinations ongoing. If and when applicable, the Company will recognize interest and penalties
on uncertain tax positions as income tax expense.
12. Related Party Transactions
Manufacturing agreement
During November 2020, we entered into a manufacturing partnership with ElevateBio, LLC. Dr. Ansbert Gadicke is a member of the board of
directors at the Company and ElevateBio, LLC. The agreement is to establish a manufacturing partnership with ElevateBio, LLC for
production of the Company’s clinical trial products. During the year ended December 31, 2021, we incurred $1,786 in expenses and have
incurred additional costs of $252 for equipment owned by us for use by ElevateBio, LLC.
Consulting arrangements
On October 1, 2015, the Company entered into a consulting agreement with Dr. Patrick Baeuerle. Pursuant to the consulting agreement, Dr.
Baeuerle agreed to perform such consulting, advisory and related services to and for the Company as may be reasonably requested. In
exchange, the Company agreed to pay Dr. Baeuerle a consulting fee of €15 per month. On November 1, 2016, the Company amended the
consulting agreement to revise Dr. Baeuerle’s consulting fee to be €3 per month. Dr. Baeuerle is also eligible for an annual bonus equal to
33% of the annual fees paid under the consulting agreement, subject to the discretion of the Company's Board of Directors based on Dr.
Baeuerle’s performance and the Company's performance. The term of the agreement is one year, and automatically extends for additional
one-year periods unless terminated. Dr. Baeuerle was a member of the Company's Board of Directors and is a managing director at MPM
Capital, the beneficial owner of more than 5% of the Company's voting securities. As of August 24, 2021, Dr. Baeuerle resigned from the
Board of Directors and is no longer considered a related party. During the year ended December 31, 2020, we incurred fees and travel
related expenses to Dr. Baeuerle in the amount of $74 under the consulting agreement. During 2021, and prior to his departure from the
board, we incurred fees and travel related expenses of $39 under the consulting agreement.
13. Restructuring
During December 2021, the Company decided to wind down its operations in the United Kingdom and consolidated manufacturing
operations in the United States. The Company expects the restructuring to be completed during the first quarter of 2022.
During 2021, the Company incurred the following expenses which are included in research and development expenses on the statements of
operations. Amounts included in lease costs below relate to our estimated obligation for the 12-month termination
120
TCR2 Therapeutics Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2021 and 2020
(Amounts in thousands, excluding share and per share items or as otherwise noted)
period for the Catapult facility, which was set to expire in April 2022, and also a payment for additional space at a separate facility which was
committed to during 2021 but never executed.
Expense
Severance and Related Costs
$
885 $
Lease and Other costs
Asset Impairment Costs
Total
2,217 $
559 $
3,661
For the Year Ended December 31, 2021
Accrued Restructuring Expenses
Balances related to this restructuring included in accrued expenses on the balance sheet are as follows:
Expense
Cash payments
Accrued expense
$
$
14. Subsequent Event
Severance and Related Costs
As of December 31, 2021
Lease and Other costs
Total
885 $
(701 )
184 $
2,217 $
-
2,217 $
3,102
(701 )
2,401
As previously described in our Form 8-K filing dated November 1, 2021 and as part of consolidating manufacturing in the United States, we
have executed a new agreement with ElevateBio LLC for a second clean room to manufacture gavo-cel and future products.
On February 11, 2022, our Board of Directors approved the TCR2 Therapeutics Inc. 2022 Inducement Plan (Inducement Plan) pursuant to
Listing Rule 5635(c)(4) of the corporate governance rules of the NASDAQ Stock Market, and reserved 1,400,000 shares of our Common
Stock for issuance employees of the Company under the Inducement Plan.
121
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There has been no change of accountants nor any disagreements with accountants on any matter of accounting principles or practices or
financial disclosure required to be reported under this Item.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
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 (the Exchange Act), refers to controls and procedures that are designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that such information is accumulated and communicated to a company’s management, including its principal executive
and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no
matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls
and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also
is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in
conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system,
misstatements due to error or fraud may occur and not be detected.
Our management, with the participation of our Chief Executive Officer (who serves as our principal executive officer, principal financial officer
and principal accounting officer), has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based
on that evaluation, our Chief Executive Officer concluded that our disclosure controls and procedures were effective as of the end of the
period covered by this report at the reasonable assurance level.
Changes in Internal Control over Financial Reporting:
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over
financial reporting 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 and effected by the company’s Board of Directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and
procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the
assets of the company;
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
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. 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
122
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control—Integrated Framework (2013 framework) (COSO). Based on its assessment, management concludes that, as of December 31,
2021, our internal control over financial reporting is effective based on those criteria.
Item 9B. Other Information
As previously disclosed, Mayur (Ian) Somaiya resigned from his position as our Chief Financial Officer and principal financial and accounting
officer in December 2021. On March 19, 2022, our Board of Directors appointed Garry E. Menzel, our current Chief Executive Officer and
principal executive officer, as our principal financial officer and principal accounting officer.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Not Applicable
123
Item 10. Directors, Executive Officers and Corporate Governance
Part III
The following table sets forth information about our directors, executive officers and other key employees as of March 18, 2022.
Name
Executive Officers
Garry E. Menzel
Rosemary Harrison
Angela Justice
Peter Olagunju
Alfonso Quintas Cardama
(3)(4)
(1)(2)(4)
Non-Employee Directors
Andrew Allen
Ansbert Gadicke
Neil W. Gibson
Priti Hegde
Axel Hoos
Shawn Tomasello
Stephen Webster
(1)(4)
(1)(2)
(2)(3)
(3)
(3)
Age
Position
57
39
49
44
51
55
64
65
50
52
63
61
President, Chief Executive Officer and Director
Chief Business and Strategy Officer
Chief People Officer
Chief Technical Officer
Chief Medical Officer
Director
Director
Director
Director
Director
Director
Chairman of the Board of Directors
(1)
(2)
(3)
(4)
Member of audit committee
Member of compensation committee
Member of corporate governance and nominating committee
Member of finance and strategy committee
Executive Officers
Garry Menzel, Ph.D. Dr. Menzel joined our company in 2016 as a director and Chief Executive Officer. Dr. Menzel has also served on the
Board of Directors and chairman of the audit committee of the oncology company Black Diamond Therapeutics Inc. since 2014 and has
served on the Board of Directors of Stoke Therapeutics Inc. since 2020. Previously, Dr. Menzel was the Chief Strategy Officer at Axcella
Health Inc. from 2015 to 2016, the Chief Financial Officer at DaVita Healthcare Partners Inc. from 2013 to 2015, and the Chief Operating
Officer at Regulus Therapeutics Inc. from 2008 to 2013. Dr. Menzel also had global leadership roles in running the biotechnology practices at
Goldman Sachs & Co. LLC from 1994 to 2004 and Credit Suisse Group AG from 2004 to 2008. In addition, he was a consultant with Bain &
Company and was a research assistant at SmithKline Beecham PLC (now GlaxoSmithKline PLC). Dr. Menzel received his Ph.D. from the
University of Cambridge, where he studied the regulation of oncogenes in immune cells, and his M.B.A. from the Stanford University
Graduate School of Business. We believe Dr. Menzel is qualified to serve as a member of our Board of Directors because of his scientific
background and corporate leadership experience.
Rosemary Harrison, Ph.D. Dr. Harrison joined TCR2 in January 2022 as Chief Business and Strategy Officer. She brings nearly 20 years of
global experience working on strategic planning, portfolio management and business development at both pharmaceutical and biotechnology
companies. Prior to joining the Company, she was Senior Vice President of Corporate Development and Strategy at Trillium Therapeutics
from October 2020 to November 2021 where she led its acquisition by Pfizer for $2.22 billion in November 2021. Before that, Dr. Harrison
served in strategic and research roles within RA Capital Management from June 2018 to June 2019, as Head of Rare Diseases at Imbria
Pharmaceuticals from June 2019 to March 2020, and as Head of Portfolio Management and Strategic Planning at the Novartis Institutes for
Biomedical Research from March 2015 to May 2018. Earlier in her career, Dr Harrison served as a consultant at Bain & Company where she
advised on corporate strategic and operational programs. Dr. Harrison holds a Bachelor of Biotechnology in Drug Design and Development
and a Ph.D. from The University of Queensland.
Angela Justice, Ph.D. Dr. Justice joined our company in October 2019 as Chief People Officer. From March 2018 to July 2019, Dr. Justice
was the Chief Human Resources Officer at Surgery Partners, Inc. From 2012 to February 2018, Dr. Justice held several positions at Biogen,
Inc., including serving as Chief Learning Officer from April 2015 to February 2018 and Senior Director of Global Medical Affairs for Biogen
from 2012 to 2015. Dr. Justice received her B.S. from Minnesota State University at Mankato and her Ph.D. from the University of Chicago.
Peter Olagunju. Mr. Olagunju joined TCR² in July 2021 as Chief Technical Officer. He brings over 20 years of experience in cell and gene
therapy, clinical development, program management, manufacturing and technical operations. Prior to joining the
124
Company, from March 2020 to July 2021, he was Senior Vice President of Technical Operations at FerGene Inc., where he led the technical
operations function for the commercialization of a gene therapy for bladder cancer. Before that, from February 2015 to March 2020, Mr.
Olagunju held several roles of increasing responsibility at bluebird bio, Inc., including as Vice President of Global Patient Operations where
he was the program lead and functional head of manufacturing supporting the European approval for ZYNTEGLO®, a transformational gene
therapy for Transfusion dependent Thalassemia. Earlier in his career, he held senior positions in Commercial Technical Operations and
served as the Head of Quality at Dendreon Corp. and ZymoGenetics, Inc. Mr. Olagunju holds an M.B.A. from the University of Washington
and a B.S. in Biology from the University of Illinois at Urbana-Champaign.
Alfonso Quintás Cardama, M.D. Dr. Quintás joined our company in 2017 as Chief Medical Officer. Dr. Quintás was the Clinical
Development Head of the Cell & Gene Therapies Unit at GlaxoSmithKline PLC in 2017. Between 2014 and 2016, he served as Global
Clinical Leader, Cell & Gene Therapy, at Novartis AG and was an Assistant Professor in the Department of Leukemia at The University of
Texas, MD Anderson Cancer Center from 2009 to 2014. Dr. Quintás received his M.D. from the Universidad de Santiago de Compostela
School of Medicine in Spain. He completed an internship and residency in the Department of Medicine of the Albert Einstein College of
Medicine—Yeshiva University and a hematology and oncology fellowship and a leukemia fellowship at The University of Texas, MD
Anderson Cancer Center.
Non-Employee Directors
Andrew Allen, M.D., Ph.D. Dr. Allen joined our Board of Directors in December 2018. Dr. Allen is a co-founder of Gritstone Oncology, Inc.,
and has served as its President and Chief Executive Officer since August 2015. Dr. Allen previously co-founded Clovis Oncology, Inc., a
public pharmaceutical development company, and served as its executive vice president of clinical and preclinical development and chief
medical officer from April 2009 to July 2015. Prior to that, he was chief medical officer at Pharmion Corporation from 2006 to 2008.
Previously, Dr. Allen served in clinical development leadership roles at Chiron Corporation and Abbott Laboratories, and worked at McKinsey
& Company, where he advised life science companies on strategic issues. He currently serves on the Board of Directors of Gritstone
Oncology, Inc., Sierra Oncology, Inc., Revitope Oncology, Inc. and Verge Genomics, Inc. Dr. Allen previously served on the Boards of
Directors for Epizyme, Inc. from 2014 until 2021 and Cell Design Labs, a private biotechnology company, from November 2015 until its
acquisition by Gilead Sciences, Inc. in December 2017. Dr. Allen qualified in medicine at Oxford University and received a Ph.D. in
immunology from Imperial College of Science, Technology and Medicine in London. We believe Dr. Allen is qualified to serve on our Board of
Directors due to his educational experience and his experience as a founder and senior executive of biotechnology and pharmaceutical
companies.
Ansbert Gadicke, M.D. Dr. Gadicke joined our Board of Directors in May 2015. Dr. Gadicke co-founded MPM Capital’s venture investing
activities in 1997 and has since served as a Managing Director. Prior to that, Dr. Gadicke led MPM Capital’s Advisory and Investment
Banking business from 1992 to 1996 and was in Boston Consulting Group’s Health Care Group from 1989 to 1992. He is a member of the
Board of Directors of Cullinan Oncology, LLC and ElevateBio, LLC and formerly served as a member of the Board of Directors of Radius
Health, Inc. and Chiasma, Inc. Dr. Gadicke received his M.D. from J.W. Goethe University and has held research positions at the Whitehead
Institute and Harvard University. We believe Dr. Gadicke is qualified to serve as a member of our Board of Directors because of his extensive
experience in the life sciences industry and in investment management.
Neil Gibson, Ph.D. Dr. Gibson joined our Board of Directors in February 2018. Dr. Gibson served as Senior Vice President to COI
Pharmaceuticals, Inc., an accelerator company focused on the creation and development of unique drug discover companies, from 2016 to
2021. As SVP for COI, Dr. Gibson served as President and CEO of Adanate from 2017 to 2021, and President and CEO of PDI Therapeutics
from 2017 to 2020. From 2015 to 2016, Dr. Gibson served as Senior Vice President and Chief Development Officer to BioAtla LLC. From
2011 to 2015, he served as Chief Scientific Officer of Regulus Therapeutics Inc., and from 2007 to 2011 he was Chief Scientific Officer of
Pfizer Oncology based in La Jolla, CA. Dr. Gibson is a member of the Board of Directors of Shattuck Labs, Inc. and Instill Bio, Inc. Dr. Gibson
received his Ph.D. from the University of Aston and his B.Sc. from the University of Strathclyde. We believe Dr. Gibson is qualified to serve
on our Board of Directors because of his extensive experience in the life sciences industry.
Priti Hegde, Ph.D. Dr. Hegde joined our Board of Directors in August 2021. Dr. Hegde has served as is Chief Scientific Officer of
Foundation Medicine Inc. since 2019, where she oversees clinical product development, cancer genomics, regulatory and early stage
research to advance their leading comprehensive genomic profiling portfolio. Previously, Dr. Hegde held roles of increasing responsibility at
Genentech for 12 years, including as Senior Director in Oncology Biomarker Development from 2016 to 2019, during which she established
and led the biomarker group accountable for translational science strategies in cancer immunotherapy and was responsible for clinical
translation strategies for more than 18 therapeutic programs in over 100 Phase I-III global clinical trials. Dr. Hegde was also instrumental in
the approvals for Tecentriq® (atezolizumab), a PD-L1 immunotherapy, in both the United States and European Union, as well as its
forthcoming diagnostic filings. Prior to joining Genentech, Dr. Hegde
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was the manager of disease and biomarker transcriptomics at GlaxoSmithKline. She completed her post-doctoral fellowship at The Institute
for Genomic Research and holds a Ph.D. in Biochemical Pharmacology from SUNY Buffalo, as well as a B. Pharmacy degree from Mumbai
University, India. We believe Dr. Hegde is qualified to serve as a member of our Board of Directors because of her extensive scientific
background and experience serving as an executive in the life sciences industry.
Axel Hoos, MD, Ph.D. Dr. Axel Hoos joined our Board of Directors in April 2020. Dr. Hoos has served as Chief Executive Officer and a
member of the Board of Directors of Scorpion Therapeutics, Inc. since 2021. Dr. Hoos also serves as Chairman of the Board of Trustees of
the Sabin Vaccine Institute, is Co-founder and Director on the Board of Imugene, a biotech company, Co-Director of the Cancer
Immunotherapy Consortium and Scientific Advisory Board Member of the Cancer Research Institute. Prior to Scorpion Therapeutics, Dr.
Hoos was Senior Vice President, R&D Governance Chair, and Therapeutic Area Head for Oncology at GlaxoSmithKline Pharmaceuticals
(GSK). He served as Therapeutic Area Head at GSK from 2012 to 2021 and was responsible for the Oncology business including discovery
and development with the four focus areas of immuno-oncology, epigenetics, cell & gene therapy and synthetic lethality. He served as R&D
Governance Chair at GSK from 2018 to 2021 where he oversaw technical and funding review committees. Prior to GSK, Dr. Hoos was the
Global Medical Lead in Immunology/Oncology at Bristol-Myers Squibb where he developed Yervoy (Ipilimumab) which was the first
checkpoint inhibitor drug in immuno-oncology. Dr. Hoos was also Senior Director of Clinical Development at Agenus Bio. Dr. Hoos holds an
MD from Ruprecht-Karls-University and a PhD in molecular oncology from the German Cancer Research Center (DKFZ). He trained in
surgery at the Technical University in Munich and at Memorial Sloan-Kettering Cancer Center in New York City (where he also studied
molecular pathology and tumor immunology). He is an alumnus of the Program for Leadership Development at Harvard Business School. We
believe Dr. Hoos is qualified to serve as a member of our Board of Directors because of his extensive background in oncology and
experience in the life sciences industry.
Shawn Tomasello. Ms. Tomasello joined our Board of Directors in February 2021. Ms. Tomasello served as the Chief Commercial Officer of
Kite Pharma, where she oversaw the global commercialization of Yescarta, from 2015 to 2018 including through its acquisition by Gilead for
$11.9 billion in October 2017. She was previously Chief Commercial Officer at Pharmacyclics, where she led commercial and medical affairs
activities for Imbruvica®, a first-in-class treatment for hematologic malignancies, from August 2014 until its acquisition by AbbVie for $21.0
billion in August 2015. Prior to Pharmacyclics, Ms. Tomasello served in leading commercial roles with multiple major pharmaceutical
companies, including Celgene as President of the Americas Hematology and Oncology, where she led the company through five successful
product launches encompassing 11 indications and played a critical role in acquisitions. Ms. Tomasello also serves as a director for UroGen
Pharma Ltd., Gamida Cell Ltd., Mesoblast Ltd., and 4D Molecular Therapeutics, Inc. Ms. Tomasello received her B.S. in Marketing from the
University of Cincinnati and her M.B.A. from Murray State University in Kentucky. We believe Ms. Tomasello is qualified to serve as a
member of our Board of Directors because of her experience serving in various commercial roles in the life sciences industry.
Stephen Webster. Mr. Webster joined our Board of Directors in May 2020 and became our Chairman in January of 2022. Mr. Webster
served as the Chief Financial Officer of Spark Therapeutics, a publicly traded gene therapy biotechnology company, from July 2014 until its
acquisition by Roche for $4.8 billion in December 2019. He was previously Senior Vice President (SVP) and Chief Financial Officer of
Optimer Pharmaceuticals, a publicly traded biotechnology company, from July 2012 until its acquisition by Cubist Pharmaceuticals in October
2013. Prior to joining Optimer, Mr. Webster served as SVP and Chief Financial Officer of Adolor Corporation, a biopharmaceutical company,
from 2008 until its acquisition by Cubist Pharmaceuticals in 2011. Mr. Webster also served in leadership positions in the investment banking
healthcare groups of Broadpoint Capital and PaineWebber Incorporated. Mr. Webster has served as a director of NextCure since April 2019,
Nabriva Therapeutics AG (formerly Nabriva Therapeutics plc) since August 2016 and Cullinan Oncology, Inc. since 2020. Mr. Webster
received an A.B. in Economics from Dartmouth College and an M.B.A. in Finance from The Wharton School of the University of
Pennsylvania. We believe Mr. Webster is qualified to serve as a member of our Board of Directors because of his extensive background in
finance and experience serving as an executive in the life sciences industry.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our equity securities
to file reports of holdings and transactions in securities of the Company with the SEC.
Based solely on a review of on Forms 3, 4 and 5 and any amendments thereto filed electronically with the Securities and Exchange
Commission with respect to the most recent fiscal year and written representations from the reporting persons, we believe all Section 16(a)
filing requirements were satisfied in 2021.
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Code of Business Conduct and Ethics
Our Board of Directors has adopted a Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics applies to all of our
employees, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller or persons
performing similar functions), agents and representatives, including directors and consultants.
The full text of our Code of Business Conduct and Ethics is posted on our website at www.tcr2.com. We intend to disclose future
amendments to certain provisions of our Code of Business Conduct and Ethics on our website. The inclusion of our website address in this
Annual Report does not include or incorporate by reference the information on our website into this Annual Report, and you should not
consider that information a part of this Annual Report.
Audit Committee
The members of our audit committee are Andrew Allen, Neil Gibson and Stephen Webster. Stephen Webster is the chair of the audit
committee. Our Board of Directors has determined that all members of our audit committee will meet the requirements for financial literacy
under the applicable rules and regulations of the SEC and the Nasdaq listing rules and that Stephen Webster is an “audit committee financial
expert” (within the meaning of applicable SEC regulations). Each of the members of the audit committee are independent pursuant to
applicable Nasdaq listing standards.
Recommendation of Director Nominees by Stockholders
There have been no material changes to the procedures by which our stockholders may recommend nominees to the Board of Directors.
Item 11. Executive Compensation
Executive Compensation Overview
As an emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting
companies,” as such term is defined in the rules promulgated under the Securities Act. This section provides an overview of the
compensation awarded to and earned by each individual who served as our principal executive officer at any time during our years ended
December 31, 2021 and to our next two most highly compensated executive officers in respect of their service to our company for our years
ended December 31, 2021. We refer to these individuals as our named executive officers. Our named executive officers are:
▪
▪
▪
Garry Menzel, our President and Chief Executive Officer;
Alfonso Quintás Cardama, our Chief Medical Officer; and
Peter Olangunju, our Chief Technical Officer.
Our executive compensation program is based on a pay-for-performance philosophy. Compensation for our executive officers is composed
primarily of the following main components: base salary, bonus and equity incentives in the form of stock options. Our executive officers, like
all full-time employees, are eligible to participate in our health and welfare benefit plans. As a publicly traded company, we periodically re-
evaluate our compensation values and philosophy and compensation plans and arrangements as circumstances require.
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Summary Compensation Table
The following table sets forth information regarding compensation awarded to and earned by our named executive officers for services
rendered to us in all capacities during our years ended December 31, 2021 and 2020.
Name and principal position
Garry Menzel, President and Chief
Executive Officer
Alfonso Quintás Cardama, Chief
Medical Officer
Peter Olagunju, Chief Technical
Officer (4)
Year
Salary
Bonus
2021 $
2020
579,600 $
560,000
2021
2020
2021
467,303
451,500
Option
Awards
(1)
Non-equity
plan
compensation
(2)
All other
compensation
Total
-
-
-
-
$
987,734 $
5,196,450
370,481
2,142,210
328,500 $
372,680
192,600
218,526
8,700 $
8,550
1,904,534
6,137,680
8,700
8,550
1,039,084
2,820,786
178,598
50,000 (5)
2,428,751
73,700
5,125
2,736,174
1.
2.
3.
4.
5.
The amounts reported in the “Option Awards” column reflects the aggregate grant date fair value of stock options awarded during the indicated year computed in
accordance with the provisions of Financial Accounting Standards Board ASC Topic 718. See Note 10 to our consolidated financial statements appearing
elsewhere in this Annual Report regarding assumptions underlying the valuation of equity awards.
The amounts reported reflect annual bonuses earned based upon achievement of company and individual performance metrics. Amounts reflected are paid in
the year subsequent to the performance year.
The amounts reported reflect 401(k) matching contributions.
Mr. Olagunju commenced employment with us in June 2021. The amount reported as salary reflects the amount actually earned following his commencement
of employment. In addition, his annual bonus was prorated to reflect his partial year of service.
Represents a signing bonus paid to Mr. Olagunju upon his commencement of employment with us.
Narrative to the Summary Compensation Table
Base Salary
We use base salaries to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our named
executive officers. Base salaries are reviewed annually, typically in connection with our annual performance review process, and adjusted
from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience.
Non-Equity Incentive Plan Compensation
We have a formal performance-based bonus plan under our senior executive cash bonus plan. Our employment arrangements with our
named executive officers provide that the executive may be eligible to earn an annual performance bonus of up to a target percentage of the
executive’s base salary, as described further below under the section entitled “––Employment Arrangements and Severance Agreements
with our Named Executive Officers”. Payment of 2021 annual bonuses was based in part on us achieving certain research and product
development, capital raising and other target goals. Our compensation committee evaluated our performance 2021 and determined to pay
bonuses to each of our named executive officers in the amounts as set forth in the Summary Compensation Table above under the heading
“Non-Equity Incentive Plan Compensation”. From time to time, our Board of Directors or compensation committee may approve additional
annual bonuses for our named executive officers based on individual performance, company performance or as otherwise determined to be
appropriate.
Equity Compensation
Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity
ownership guidelines applicable to them, we believe that equity grants provide our executive officers with a strong link to our long-term
performance, create an ownership culture and help to align the interests of our executive officers and our stockholders. In addition, we
believe that equity grants with a time-based vesting feature promote executive retention because this feature incentives our executive officers
to remain in our employment during the vesting period. Accordingly, our Board of Directors periodically reviews the equity incentive
compensation of our executives, including our named executive officers, and from time to time may grant equity incentive awards to them in
the form of stock options.
We typically grant stock option awards at the start of employment to each executive officer and our other employees as well as on an annual
basis for retention purposes. We award our stock options on the date our Board of Directors approves the grant. We set
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the option exercise price equal to the fair market value of our common stock on the date of grant. See “— Outstanding Equity Awards at
Fiscal Year-End” below for additional information.
401(k) Plan
We maintain a tax-qualified retirement plan (the 401(k) Plan) that provides eligible U.S. employees with an opportunity to save for retirement
on a tax advantaged basis. Eligible employees are able to defer eligible compensation subject to applicable annual Code limits. Employees’
pre-tax or Roth contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives
according to the participants’ directions. Employees are immediately and fully vested in their contributions. Our 401(k) Plan is intended to be
qualified under Section 401(a) of the Code with our 401(k) Plan’s related trust intended to be tax exempt under Section 501(a) of the Code.
As a tax-qualified retirement plan, contributions to our 401(k) Plan and earnings on those contributions are not taxable to the employees until
distributed from our 401(k) Plan.
Limitations on Liability and Indemnification
As permitted by Delaware law, provisions in our amended and restated certificate of incorporation and amended and restated bylaws limit or
eliminate the personal liability of directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that,
when acting on behalf of the corporation, a director exercise an informed business judgment based on all material information reasonably
available to him or her. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of
fiduciary duty as a director, except for liability for:
▪
▪
▪
▪
any breach of the director’s duty of loyalty to us or our stockholders;
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
any act related to unlawful stock repurchases, redemptions or other distributions or payments of dividends; or
any transaction from which the director derived an improper personal benefit.
These limitations of liability do not limit or eliminate our rights or any stockholder’s rights to seek non-monetary relief, such as injunctive relief
or rescission. These provisions will not alter a director’s liability under other laws, such as the federal securities laws or other state or federal
laws. Our amended and restated certificate of incorporation also authorizes us to indemnify our officers, directors and other agents to the
fullest extent permitted under Delaware law.
As permitted by Delaware law, our amended and restated bylaws provide that:
▪
▪
▪
we will indemnify our directors, officers, employees and other agents to the fullest extent permitted by law;
we must advance expenses to our directors and officers, and may advance expenses to our employees and other agents, in
connection with a legal proceeding to the fullest extent permitted by law; and
the rights provided in our amended and restated bylaws are not exclusive.
If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director or officer, then the
liability of our directors or officers will be so eliminated or limited to the fullest extent permitted by Delaware law, as so amended. Our
amended and restated bylaws will also permit us to secure insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in connection with their services to us, regardless of whether our bylaws permit such indemnification.
We have obtained such insurance.
In addition to the indemnification that is provided for in our amended and restated certificate of incorporation and amended and restated
bylaws, we have entered into indemnification agreements with each of our directors and executive officers, which may be broader than the
specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements may require us,
among other things, to indemnify our directors and executive officers for some expenses, including attorneys’ fees, expenses, judgments,
fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of his service as one of our
directors or executive officers or any other company or enterprise to which the person provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.
This description of the indemnification provisions of our amended and restated certificate of incorporation, our amended and restated bylaws
and our indemnification agreements is qualified in its entirety by reference to these documents, each of which is attached as an exhibit to this
Annual Report.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the Securities Act), may be permitted to our
directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been
129
advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore,
unenforceable.
There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we
aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
Health and Welfare Benefits
All of our named executive officers are eligible to participate in our employee benefit plans, including our medical, dental and vision insurance
plans, in each case on the same basis as all of our other full-time employees.
We believe the perquisites described above are necessary and appropriate to provide a competitive compensation package to our named
executive officers.
Rule 10b5-1 Sales Plans
Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or
sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters
established by the director or officer when entering into the plan, without further direction from the director or officer. The director or officer
may amend or terminate the plan in some circumstances. Our directors and executive officers may also buy or sell additional shares outside
of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.
Employment Arrangements and Severance Agreements with our Named Executive Officers
We have entered into employment agreements with each of our named executive officers.
Garry Menzel
In December 2018, we entered into an employment agreement with Dr. Menzel, effective upon the closing of the IPO. Dr. Menzel is currently
entitled to receive an annual base salary of $602,800 and an annual target bonus equal to 55% of his annual base salary based upon our
Board of Directors’ or the compensation committee of the Board of Directors’ assessment of Dr. Menzel’s performance and our performance.
This employment agreement also includes a reaffirmation of Dr. Menzel’s Employee Confidentiality and Assignment Agreement, which
contains continuing obligations to us, including provisions on proprietary information, assignment of inventions, non-competition and non-
solicitation of customers and employees. Dr. Menzel’s employment agreement provides that, in the event that his employment is terminated
by us without “cause” or by him for “good reason,” then subject to the execution and effectiveness of a separation agreement and release, he
will be entitled to receive (i) an amount equal to (x) 12 months of base salary payable on our normal payroll cycle if such termination is not in
connection with a “change in control” or (y) 18 months of base salary if such termination is in connection with a “change in control,” payable
on our normal payroll cycle, provided that in either case, if Dr. Menzel commences new employment, all payments shall cease; and (ii)
payment of the monthly employer COBRA premium for the same level of group health coverage as in effect for Dr. Menzel on the date of
termination up to (x) 12 months if such termination is not in connection with a “change in control,” and (y) 18 months if such termination is in
connection with a “change in control.” In addition, if within 12 months following a “change in control,” Dr. Menzel’s employment is terminated
by us without “cause” or he resigns for “good reason,” then subject to the execution of the separation agreement and release, all time-based
stock options and other time-based stock-based awards held by Dr. Menzel will accelerate and vest immediately.
Alfonso Quintás Cardama
In December 2018, we entered into an employment agreement with Dr. Quintás Cardama, effective upon the closing of the IPO. Dr. Quintás
Cardama is currently entitled to receive an annual base salary of $486,000 and an annual target bonus equal to 40% of his annual base
salary based upon our Board of Directors’ or the compensation committee of the Board of Directors’ assessment of Dr. Quintás Cardama’s
performance and our performance. This employment agreement also includes a reaffirmation of Dr. Quintás Cardama’s Employee
Confidentiality and Assignment Agreement, which contains continuing obligations to us including provisions on proprietary information,
assignment of inventions, non-competition and non-solicitation of customers and employees. Dr. Quintás Cardama’s employment agreement
provides that, in the event that his employment is terminated by us without “cause” or by him for “good reason,” then subject to the execution
and effectiveness of a separation agreement and release, he will be entitled to receive (i) an amount equal to (x) nine months of base salary
payable on our normal payroll cycle if such termination is not in connection with a “change in control” or (y) 12 months of base salary if such
termination is in connection with a “change in control,” payable on our normal payroll cycle, provided that in either case, if Dr. Quintás
130
Cardama commences new employment, all payments shall cease; and (ii) payment of the monthly employer COBRA premium for the same
level of group health coverage as in effect for Dr. Quintás Cardama on the date of termination for up to (x) nine months if such termination is
not in connection with a “change in control,” and (y) 12 months if such termination is in connection with a “change in control.” In addition, if
within 12 months following a “change in control,” Dr. Quintás Cardama’s employment is terminated by us without “cause” or he resigns for
“good reason,” then subject to the execution of the separation agreement and release, all time-based stock options and other time-based
stock-based awards held by Dr. Quintás Cardama will accelerate and vest immediately.
Peter Olagunju
In July of 2021, we entered into an employment agreement with Mr. Olagunju when he joined the us as our Chief Technical Officer. Mr.
Olagunju is currently entitled to receive an annual base salary of $417,200 and an annual target bonus equal to 40% of his annual base
salary based upon our Board of Directors’ or the compensation committee of the Board of Directors’ assessment of Mr. Olagunju’s
performance and our performance. This employment agreement also incorporates Mr. Olagunju’s Employee Confidentiality and Assignment
Agreement, which contains continuing obligations to us including provisions on proprietary information, assignment of inventions, non-
competition and non-solicitation of customers and employees. Mr. Olagunju's employment agreement provides that, in the event that his
employment is terminated by us without “cause” or by him for “good reason,” then subject to the execution and effectiveness of a separation
agreement and release, he will be entitled to receive (i) an amount equal to (x) nine months of base salary payable on our normal payroll
cycle if such termination is not in connection with a “change in control” or (y) 12 months of base salary if such termination is in connection
with a “change in control,” payable on our normal payroll cycle, provided that in either case, if Mr. Olagunju commences new employment, all
payments shall cease; and (ii) payment of the monthly employer COBRA premium for the same level of group health coverage as in effect for
Mr. Olagunju on the date of termination for up to (x) nine months if such termination is not in connection with a “change in control,” and (y) 12
months if such termination is in connection with a “change in control.” In addition, if within 12 months following a “change in control,” Mr.
Olagunju’s employment is terminated by us without “cause” or he resigns for “good reason,” then subject to the execution of the separation
agreement and release, all time-based stock options and other time-based stock-based awards held by Mr. Olagunju will accelerate and vest
immediately.
Outstanding Equity Awards
The following table sets forth information concerning outstanding equity awards held by our named executive officers as of December 31,
2021.
Option Awards (1)
Number of
securities
Underlying
unexercised
options (#)
exercisable
Number of
securities
underlying
unexercised
options (#)
unexercisable
138,031
369,890
354,452
80,500
-
-
31,582
42,346
77,489
154,074
34,547
-
-
-
-
-
63,147
131,654
87,500
245,000
305,800
-
-
13,230
57,228
37,553
101,000
114,700
286,367
47,100
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(2)
(3)
(4)
(5)
(6)
(7)
(9)
(7)
Option
exercise
price ($)
$
Option
expiration
date
12/7/2027
7/25/2028
4/10/29
12/18/2029
12/9/30
12/8/2031
10/9/2027
12/7/2027
7/25/2028
4/10/2029
12/18/2029
12/9/30
12/8/2031
7/25/2031
12/8/2031
0.74
5.88
16.11
16.10
31.83
5.21
0.74
0.74
5.88
16.11
16.10
31.83
5.21
12.69
5.21
Option awards vest over four years, with 25% vesting on the first anniversary of the vesting commencement date, and the remainder vesting in 36 equal monthly
installments thereafter, subject to continued employment with us.
Represents stock options granted on December 7, 2017, with a vesting start date of December 6, 2017.
Represents stock options granted on July 26, 2018, with a vesting start date of July 26, 2018.
Represents stock options granted on April 11, 2019, with a vesting start date of January 1, 2019.
Represents stock options granted on December 19, 2019, with a vesting start date of January 1, 2020.
131
NAME
Garry Menzel
Alfonso Quintás Cardama
Peter Olagunju
1.
2.
3.
4.
5.
6.
7.
8.
9.
Represents stock options granted on December 10, 2020, with a vesting start date of January 1, 2021.
Represents stock options granted on December 9, 2021, with a vesting start date of January 1, 2022.
Represents stock options granted on October 10, 2017, with a vesting start date of October 10, 2017.
Represents stock options granted on July 26, 2021, with a vesting start date of July 26, 2021.
Compensation Risk Assessment
We believe that although a portion of the compensation provided to our executive officers and other employees is performance-based, our
executive compensation program does not encourage excessive or unnecessary risk taking.
This is primarily due to the fact that our compensation programs are designed to encourage our executive officers and other employees to
remain focused on both short-term and long-term strategic goals. As a result, we do not believe that our compensation programs are
reasonably likely to have a material adverse effect on us.
Director Compensation
The following table presents the total compensation for each person who served as a non-employee member of our Board of Directors and
received compensation for such service during the year ended December 31, 2021. Other than as set forth in the table and described more
fully below, we did not pay any compensation, make any equity awards to, or pay any other compensation to any of the non-employee
members of our Board of Directors in 2021. Dr. Menzel, our President and Chief Executive Officer, did not receive any compensation for his
service as a member of our Board of Directors. Dr. Menzel’s compensation for service as an employee for year ended December 31, 2021 is
presented in “Executive Compensation—Summary Compensation Table.” We reimburse members of our Board of Directors for reasonable
travel and out-of-pocket expenses incurred in connection with attending Board of Directors and committee meetings.
Director Compensation Table — 2021
NAME
Andrew Allen
Ansbert Gadicke
Patrick Baeuerle
Neil W. Gibson
Priti Hegde
Axel Hoos
Shawn Tomasello
Stephen Webster
Fees earned
or paid
in cash
($)
$
47,500 $
-
-
53,438
10,391
39,000
33,000
50,000
Option
awards
($)
(1)
All other
compensation
($)
Total
($)
$
39,083
-
-
39,083
287,015
39,083
372,406 (4 )
39,083
- $
-
47,019
-
-
-
-
-
86,583
-
47,019
92,521
297,406
78,083
405,402
89,083
(1)
(2)
(3)
(4)
Represents stock options granted to our non-employee directors in 2021. In accordance with SEC rules, these columns reflect the aggregate grant date fair
value of the option awards granted during 2021 computed in accordance with Financial Accounting Standard Board ASC Topic 718 for stock-based
compensation transactions.
The following table provides information regarding the number of shares of common stock underlying stock options granted to our non-employee directors that
were outstanding as of December 31, 2021:
NAME
Andrew Allen
Ansbert Gadicke
Patrick Baeuerle
Neil W. Gibson
Priti Hegde
Axel Hoos
Shawn Tomasello
Stephen Webster
Option Awards
Outstanding as of
December 31, 2021
43,542
-
71,950
43,542
37,068
33,796
31,468
34,682
Dr. Baeuerle provided services to us pursuant to the terms of the consulting agreements with Dr. Baeuerle . The amounts reported in the "All Other
Compensation" column presented above are related to these consulting services for the year ended December 31, 2021. The amount for Dr. Baeuerle includes
fees paid prior to his resignation from the Board of Directors.
Ms. Tomasello provides consulting services to the Company for which she was awarded 4,177 non-qualified stock options on February 3, 2021 with an exercise
price of $17.21. This grant vests 25% on February 3, 2022, with the remainder vesting in 24 equal monthly installments thereafter.
132
Non-Employee Director Compensation Policy
Our Board of Directors has adopted a non-employee director compensation policy that is designed to enable us to attract and retain, on a
long-term basis, highly qualified non-employee directors. Under the policy, each independent director who is not an employee or affiliated
with one of our 5% holders is paid cash compensation for service on our Board of Directors and for service on each committee on which the
director is a member. The chair of each committee receives a higher retainer for such service. These fees are payable in arrears in four equal
quarterly instalments pro-rated based on the number of actual days served by the director during such calendar quarter. The fees paid to
independent non-employee directors for service on our Board of Directors and for service on each committee of our Board of Directors on
which the director is a member are set forth below:
Board of Directors
Audit Committee
Compensation Committee
Nominating and Corporate Governance Committee
Finance and Strategy Committee
$
Member
annual fee
($)
Chairman
additional
annual fee
($)
$
35,000
7,500
5,000
4,000
—
30,000
15,000
10,000
8,000
—
In addition, each non-employee director elected or appointed to our Board of Directors that is not affiliated with a 5% holder of our stock will
be granted an initial one-time equity award of a stock option with a grant date fair value of approximately $400,000, based on the current fair
market value of the Company’s common stock, which will vest 25% on the one-year anniversary of the date of grant, with the remainder
vesting in 24 equal monthly instalments, subject to continued service through such vesting date(s). In addition, at the end of each year, each
non-employee director that is not affiliated with a 5% holder will be granted an equity award of a stock option with a grant date fair value of
approximately $200,000, based on the current fair market value of the Company’s common stock, which will vest 25% on the one-year
anniversary of the January 1, that immediately follows the grant date, with the remainder vesting in 24 equal monthly installments subject to
continued service as a director through such vesting date(s). At the end of 2021 we granted an option to purchase 12,100 shares, the same
number of shares granted at the end of 2020, to each non-employee director that is not affiliated with a 5% holder rather than an option for a
number of shares with a market value of approximately $200,000.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Securities authorized for issuance under equity compensation plans
The following table provides information relating to our equity compensation plans as of December 31, 2021. As of December 31, 2021, we
had two equity compensation plans, our 2018 Plan and our Employee Stock Purchase Plan, which were approved by our Board of Directors
and our stockholders.
Equity Compensation Plans
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
Weighted-average exercise
price of outstanding options,
warrants, and rights
(b)
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
(c)
Equity compensation plans approved by stockholders
Equity compensation plans not approved by stockholders
Total
6,247,335
—
6,247,335
Security Ownership of Certain Beneficial Owners
690,976
—
690,976
The following table sets forth certain information known to us regarding beneficial ownership of our capital stock outstanding as of March 7,
2022 for:
•
•
•
•
each person, or group of affiliated persons, who is known by us to be the beneficial owner of five percent or more of our outstanding
common stock;
each of our directors;
each of our named executive officers; and
all of our current directors and executive officers as a group.
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We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. These rules generally attribute beneficial ownership of securities to persons who possess sole or
shared voting power or investment power with respect to those securities as well as any shares of common stock that the person has the
right to acquire within 60 days of March 7, 2022 through the exercise of stock options or other rights. These shares are deemed to be
outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that
person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless
otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as
beneficially owned by them. Each individual or entity shown on the table has furnished information with respect to beneficial ownership.
Except as otherwise indicated below, the address of each officer, director and five percent stockholder listed below is c/o TCR2 Therapeutics
Inc., 100 Binney Street, Suite 710, Cambridge, MA 02142.
The percentage of beneficial ownership in the table below is based on 38,546,345 shares of common stock deemed to be outstanding as of
March 7, 2022.
5% or Greater Stockholders
Entities affiliated with MPM Capital
(2)
UBS Oncology Impact Fund, L.P.
Entities affiliated with Tang Capital Partners L.P.
BlackRock, Inc.
(4)
(3)
(1)
Directors, Named Executive Officers and Other Executive Officers
(5)
(6)
(7)
(9)
(8)
Garry Menzel
Alfonso Quintás Cardama
Peter Olagunju
Ansbert Gadicke
Andrew Allen
(10)
Neil Gibson
Priti Hegde
Axel Hoos
Shawn Tomasello
Stephen Webster
All executive officers and directors as a group (12 persons)
(11)
(13)
(12)
(14)
Common stock
beneficially owned
Shares
Percentage
4,229,134
3,370,982
2,800,000
2,401,745
1,653,745
500,701
2,192
7,600,116
18,902
18,902
—
8,831
6,656
9,274
9,983,152
10.92 %
8.75 %
7.26 %
6.23 %
4.19 %
1.28 %
*
19.63 %
*
*
*
*
*
*
24.48 %
* Less than one percent.
1.
2.
3.
4.
Based solely on a Schedule 13D filed by MPM Asset Management on March 4, 2019, consists of (i) 110,859 shares of common stock held by MPM Asset
Management Investors BV2014 LLC, (ii) 62,916 shares of common stock held by MPM Asset Management Investors SunStates Fund LLC, (iii) 195,902 shares
of common stock and warrants to purchase 178,269 shares of common stock exercisable within 60 days of March 1, 2021, in each case held by MPM Asset
Management LLC, (iv) 203,846 shares of common stock held by MPM BioVentures 2014 (B), L.P., (v) 3,056,272 shares of common stock held by MPM
BioVentures 2014, L.P., and (vi) 421,070 shares of common stock held by MPM SunStates Fund, L.P. MPM BioVentures 2014 GP LLC is the general partner of
MPM BioVentures 2014, L.P. and MPM BioVentures 2014 (B), L.P. MPM BioVentures 2014 LLC is the managing member of MPM BioVentures 2014 GP LLC
and the manager of MPM Asset Management Investors BV2014 LLC. MPM SunStates Fund GP LLC is the general partner of MPM SunStates Fund, L.P. MPM
SunStates GP Managing Member LLC is the managing member of MPM SunStates Fund GP LLC and the manager of MPM Asset Management Investors
SunStates Fund LLC. MPM Asset Management LLC was retained as a manager to manage the operations of MPM BioVentures 2014, L.P., MPM BioVentures
2014 (B), L.P., MPM Asset Management Investors BV2014 LLC, MPM SunStates Fund, L.P., and MPM Asset Management SunStates Fund LLC. Dr. Ansbert
Gadicke is a member of MPM BioVentures 2014 LLC, MPM SunStates GP Managing Member LLC, and MPM Capital, formerly known as MPM Asset
Management LLC, and collectively with the other members of such entities makes investment decisions with respect to shares held by such entities. Each of the
entities and individuals listed above expressly disclaims beneficial ownership of the securities listed above except to the extent of any pecuniary interest therein.
The address of these entities and individuals is 450 Kendall Street, Cambridge, MA 02142.
Based solely on a Schedule 13D filed by MPM Asset Management on March 4, 2019, consists of 3,370,982 shares of common stock held by UBS Oncology
Impact Fund, L.P. The general partner of UBS Oncology Impact Fund, L.P. is Oncology Impact Fund (Cayman) Management L.P. The general partner of
Oncology Impact Fund (Cayman) Management L.P. is MPM Oncology Impact Management LP. The general partner of MPM Oncology Impact Management LP
is MPM Oncology Impact Management GP LLC. Dr. Ansbert Gadicke is a managing member and the managing director of MPM Oncology Impact Management
GP LLC. Each of the entities and individuals listed above expressly disclaims beneficial ownership of the securities listed above except to the extent of any
pecuniary interest therein. The address of these entities and individuals is Durell House, 28 New Street, St Helier, Jersey, JE1 4FS.
Based solely on a Schedule 13G/A filed by Tang Capital Partners, LP; Tang Capital Management, LLC, the general partner of Tang Capital Partners; and Kevin
Tang, the manager of Tang Capital Management on March 4, 2022, consists of 2,800,000 shares of common stock held by Tang Capital Partners, LP, Tang
Capital Management, LLC, and Kevin Tang. The address of Mr. Tang and these entities is 4747 Executive Drive, Suite 210, San Diego, CA 92121.
Based solely on a Schedule 13G/A filed by BlackRock, Inc. on February 3, 2022, consists of 2,401,745 shares of common stock held by BlackRock, Inc. The
address of this entity is 55 East 52nd Street, New York, NY 10055.
134
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Consists of (i) 180,932 shares of common stock, (ii) options to purchase 1,388,286 shares of common stock exercisable within 60 days of March 7, 2022 and (ii)
84,527 shares of common stock held by Dr. Garry Menzel, as Trustee of the Garry E. Menzel and Mary E. Henshall Family Trust, under instrument of trust dated
July 29, 2010. Dr. Menzel is the trustee of the Garry E. Menzel and Mary E. Henshall Family Trust and may be deemed to beneficially own these securities.
Consists of (i) 46,915 shares of common stock and (ii) options to purchase 453,786 shares of common stock exercisable within 60 days of March 7, 2022.
Consists of 2,192 shares of common stock.
Consists of all shares of common stock held by entities affiliated with MPM Capital and all shares of common stock held by UBS Oncology Impact Fund, L.P.
See notes (1) and (2) above.
Consists of options to purchase 18,902 shares of common stock exercisable within 60 days of March 7, 2022.
Consists of options to purchase 18,902 shares of common stock exercisable within 60 days of March 7, 2022.
Consists of options to purchase 8,831 shares of common stock exercisable within 60 days of March 7, 2022.
Consists of options to purchase 6,656 shares of common stock exercisable within 60 days of March 7, 2022.
Consists of options to purchase 9,274 shares of common stock exercisable within 60 days of March 7, 2022.
Consists of (i) 7,746,106 shares common stock, (ii) options to purchase 2,058,777 shares of common stock exercisable within 60 days of March 7, 2022 and (iii)
warrants to purchase 178,269 shares of common stock exercisable within 60 days of March 7, 2022, held by twelve executive officers and directors, and entities
affiliated with such executive officers and directors, as described in notes (5) through (13) above.
Communications with the Board of Directors
Stockholders who want to communicate with members of the Board, including the independent directors, individually or as a group, should
address their communications to the Board, the Board members or the Board committee, as the case may be, and send them by mail to c/o
TCR2 Therapeutics Inc., 100 Binney Street, Suite 710, Cambridge, Massachusetts 02142. The Chair of the Audit Committee will forward all
such communications directly to such Board members. Any such communications may be made on an anonymous and confidential basis.
A copy of any such written communication may also be forwarded to the Company’s legal counsel and a copy of such communication may
be retained for a reasonable period of time. The director may discuss the matter with the Company’s legal counsel, with independent
advisors, with non-management directors, or with the Company’s management, or may take other action or no action as the director
determines in good faith, using reasonable judgment, and applying his or her own discretion.
The Audit Committee oversees the procedures for the receipt, retention, and treatment of complaints received by the Company regarding
accounting, internal accounting controls, or audit matters, and the confidential, anonymous submission by employees of concerns regarding
questionable accounting, internal accounting controls or auditing matters. The Company has also established a toll-free telephone number
for the reporting of such activity, which is 877-865-0978.
Board Committees
Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance
committee, each of which operates pursuant to a charter adopted by our Board of Directors. Our Board of Directors has also established a
Finance and Strategy committee. We believe that the composition and functioning of all of our committees will comply with the applicable
requirements of Nasdaq, the Sarbanes-Oxley Act of 2002 and SEC rules and regulations that will be applicable to us. We intend to comply
with future requirements to the extent they become applicable to us.
The full text of our Audit Committee charter, Compensation Committee charter, and Nominating and Corporate Governance charter are
posted on the investor relations portion of our website at www.tcr2.com. We do not incorporate the information contained on, or accessible
through, our corporate website into this Annual Report, and you should not consider it a part of this Annual Report.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The following is a description of transactions or series of transactions since January 1, 2021 to which we were or will be a party, in which:
•
•
the amount involved in the transaction exceeds, or will exceed, $120,000 (or, if less, 1% of the average of our total assets amounts
at December 31, 2020 and 2021); and
in which any of our executive officers, directors or holder of five percent or more of any class of our capital stock, including their
immediate family members or affiliated entities, had or will have a direct or indirect material interest.
135
Compensation arrangements for our named executive officers and our directors are described elsewhere in this Annual Report under
“Director Compensation” and “Executive Compensation.”
All amounts in thousands unless otherwise noted
Manufacturing agreement
During November 2020, we entered into a manufacturing partnership with ElevateBio, LLC. Dr. Ansbert Gadicke is a member of the Board of
Directors at the Company and ElevateBio, LLC. The agreement is to establish a manufacturing partnership with ElevateBio, LLC for
production of the Company’s clinical trial products. During the year ended December 31, 2021, we incurred $1.8 million in expenses and
have incurred additional costs of $252 for equipment owned by us for use by ElevateBio, LLC.
Harpoon Therapeutics, Inc. License Agreement
In June 2017, we entered into a license agreement with Harpoon Therapeutics, Inc. (Harpoon), under which Harpoon provides us with rights
to use certain Harpoon intellectual property relating to antibody-based protein binders and related know-how developed by Harpoon. In
return, we provide Harpoon with the right to use antibody-based protein binders developed by us. Each license granted under this Harpoon
license agreement is non-exclusive. Affiliates of MPM Capital that own shares of our common stock are stockholders in Harpoon.
Amended and Restated Investors’ Rights Agreement
We are a party to an amended and restated investors’ rights agreement, or the Investors’ Rights Agreement, dated as of February 28, 2018,
with holders of our previously outstanding Series A preferred stock and Series B preferred stock, including certain of our 5% stockholders
and their affiliates and entities affiliated with certain of our officers and directors. The Investors’ Rights Agreement provides these holders the
right to demand that we file a registration statement or request that their shares be covered by a registration statement that we are otherwise
filing.
Employment Agreements
We have entered into employment agreements with certain of our executive officers. See “Item 11-Executive Compensation—Employment
Arrangements and Severance Agreements with our Named Executive Officers”
Equity Grants
We have granted stock options and warrants to certain of our executive officers and members of our Board of Directors. See “Item 11-
Executive Compensation”
Indemnification Agreements
As permitted by Delaware law, provisions in our amended and restated certificate of incorporation and amended and restated bylaws limit or
eliminate the personal liability of directors for a breach of their fiduciary duty of care as a director. In addition, we have entered into
indemnification agreements with each of our executive officers and the members of our Board of Directors which may require us to indemnify
them. See “Item 11-Executive Compensation—Limitations on Liability and Indemnification”
Policies for Approval of Related Party Transactions
Our Board of Directors reviews and approves transactions with directors, officers and holders of 5% or more of our voting securities and their
affiliates, each a related party. Prior to our initial public offering, the material facts as to the related party’s relationship or interest in the
transaction were disclosed to our Board of Directors prior to their consideration of such transaction, and the transaction was not considered
approved by our Board of Directors unless a majority of the directors who are not interested in the transaction approved the transaction.
Further, when stockholders were entitled to vote on a transaction with a related party, the material facts of the related party’s relationship or
interest in the transaction were disclosed to the stockholders, who must have approved the transaction in good faith.
In connection with our initial public offering, our Board of Directors adopted a written related party transactions policy. Pursuant to this policy,
the audit committee has the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are
transactions between us and related persons in which the aggregate amount involved exceeds or may be
136
expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy,
a related person will be defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common
stock, in each case since the beginning of the most recently completed year, and their immediate family members.
Director Independence
Under the Nasdaq listing rules, independent directors must comprise a majority of a listed company’s Board of Directors within twelve months
from the date of listing. In addition, the Nasdaq listing rules require that, subject to specified exceptions, each member of a listed company’s
audit, compensation and nominating and governance committees be independent within twelve months from the date of listing. Audit
committee members must also satisfy additional independence criteria, including those set forth in Rule 10A-3 under the Securities
Exchange Act of 1934, as amended (the Exchange Act), and compensation committee members must also satisfy the independence criteria
set forth in Rule 10C-1 under the Exchange Act. Under Nasdaq listing rules, a director will only qualify as an “independent director” if, in the
opinion of that company’s Board of Directors, that person does not have a relationship that would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 under the
Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit
committee, the Board of Directors or any other board committee: (1) accept, directly or indirectly, any consulting, advisory or other
compensatory fee from the listed company or any of its subsidiaries, other than compensation for board service; or (2) be an affiliated person
of the listed company or any of its subsidiaries. In order to be considered independent for purposes of Rule 10C-1, the Board of Directors
must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a
director has a relationship to such company which is material to that director’s ability to be independent from management in connection with
the duties of a compensation committee member, including, but not limited to: the source of compensation of the director, including any
consulting advisory or other compensatory fee paid by such company to the director, and whether the director is affiliated with the company
or any of its subsidiaries or affiliates.
In March 2022, our Board of Directors undertook a review of the composition of our Board of Directors and its committees and the
independence of each director. Based upon information requested from and provided by each director concerning his background,
employment and affiliations, including family relationships, our Board of Directors has determined that all members of our Board of Directors,
except Garry Menzel, are independent directors, including for purposes of Nasdaq and SEC rules. In making that determination, our Board of
Directors considered the relationships that each director has with us and all other facts and circumstances the Board of Directors deemed
relevant in determining independence, including the potential deemed beneficial ownership of our capital stock by each director, including
non-employee directors that are affiliated with certain of our major stockholders. There are no family relationships among any of our directors
or executive officers.
Audit Committee
As of March 1, 2022, our audit committee consists of Andrew Allen, Neil Gibson and Stephen Webster and is chaired by Stephen Webster.
The functions of the audit committee include:
•
•
•
•
•
•
•
•
•
•
•
appointing, approving the compensation of and assessing the independence of our independent registered public accounting firm;
pre-approving auditing and permissible non-audit services, and the terms of such services, to be provided by our independent
registered public accounting firm;
reviewing the overall audit plan with our independent registered public accounting firm and members of management responsible
for preparing our consolidated financial statements;
reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly
consolidated financial statements and related disclosures as well as critical accounting policies and practices used by us;
coordinating the oversight and reviewing the adequacy of our internal control over financial reporting;
establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;
recommending based upon the audit committee’s review and discussions with management and our independent registered public
accounting firm whether our audited consolidated financial statements shall be included in our Annual Report on Form 10-K;
monitoring the integrity of our consolidated financial statements and our compliance with legal and regulatory requirements as they
relate to our consolidated financial statements and accounting matters;
preparing the audit committee report required by SEC rules to be included in our annual proxy statement;
reviewing all related party transactions for potential conflict of interest situations and approving all such transactions; and
reviewing quarterly earnings releases.
137
All members of our audit committee will meet the requirements for financial literacy under the applicable rules and regulations of the SEC and
the Nasdaq listing rules. Our Board of Directors has determined that Andrew Allen, Neil Gibson and Stephen Webster are “independent” for
audit committee purposes as that term is defined in the rules of the SEC and the current listing standards of Nasdaq. Our Board of Directors
has determined that Stephen Webster is an audit committee financial expert.
The audit committee held four meetings during 2021. The audit committee operates under a written charter that satisfies the applicable
standards of the SEC and Nasdaq. A copy of the audit committee charter is available on our website at investors.tcr2.com/corporate-
governance/governance-overview. We do not incorporate the information contained on, or accessible through, our corporate website into this
Annual Report, and you should not consider it a part of this Annual Report.
Compensation Committee
As of March 1, 2022, our compensation committee consists of Andrew Allen, Shawn Tomasello and Neil Gibson, and is chaired by Neil
Gibson. The functions of the compensation committee include:
•
•
•
•
•
•
•
•
•
•
•
•
annually reviewing and recommending to the Board of Directors the corporate goals and objectives relevant to the compensation of
our Chief Executive Officer;
evaluating the performance of our Chief Executive Officer in light of such corporate goals and objectives and based on such
evaluation (i) reviewing and determining the cash compensation of our Chief Executive Officer and (ii) reviewing and approving
grants and awards to our Chief Executive Officer under our equity-based plans;
reviewing and approving the compensation of our other executive officers;
reviewing and establishing our overall management compensation, philosophy and policy;
overseeing and administering our compensation and similar plans;
evaluating and assessing potential and current compensation advisors in accordance with the independence standards identified in
the applicable Nasdaq listing rules;
reviewing and approving our policies and procedures for the grant of equity-based awards;
reviewing and recommending to the Board of Directors the compensation of our directors;
preparing our compensation committee report if and when required by SEC rules;
reviewing and discussing annually with management our “Compensation Discussion and Analysis,” if and when required, to be
included in our annual proxy statement;
reviewing and approving the retention or termination of any consulting firm or outside adviser to assist in the evaluation of
compensation matters; and
reviewing matters relating to environmental, social and governance strategy and reporting, corporate citizenship, talent
management, culture and diversity and inclusion initiatives.
Each member of our compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act,
and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code).
The compensation committee held four meetings during 2021. The compensation committee operates under a written charter that satisfies
the applicable standards of the SEC and Nasdaq. A copy of the compensation committee charter is available on our website at
investors.tcr2.com/corporate-governance/governance-overview. We do not incorporate the information contained on, or accessible through,
our corporate website into this Annual Report, and you should not consider it a part of this Annual Report.
Nominating and Corporate Governance Committee
As of March 1, 2022, our nominating and corporate governance committee consists of Ansbert Gadicke, Priti Hegde, Axel Hoos, and Shawn
Tomasello and is chaired by Ansbert Gadicke. The functions of the nominating and corporate governance committee include:
•
•
•
•
developing and recommending to the Board of Directors’ criteria for board and committee membership;
establishing procedures for identifying and evaluating board of director candidates, including nominees recommended by
stockholders;
reviewing the composition of the Board of Directors to ensure that it is composed of members containing the appropriate skills and
expertise to advise us;
identifying individuals qualified to become members of the Board of Directors;
138
•
•
•
recommending to the Board of Directors the persons to be nominated for election as directors and to each of the board’s
committees;
developing and recommending to the Board of Directors a code of business conduct and ethics and a set of corporate governance
guidelines; and
overseeing the evaluation of our Board of Directors and management.
The nominating and corporate committee held three meetings during 2021. The nominating and corporate committee operates under a
written charter that satisfies the applicable standards of the SEC and Nasdaq. A copy of the nominating and corporate committee charter is
available on our website at investors.tcr2.com/corporate-governance/governance-overview. We do not incorporate the information contained
on, or accessible through, our corporate website into this Annual Report, and you should not consider it a part of this Annual Report.
Finance and Strategy Committee
Our finance and strategy committee consists of Ansbert Gadicke, Andrew Allen and Stephen Webster and is chaired by Ansbert Gadicke.
The purpose of the finance and strategy committee is to consider and make recommendations to our Board of Directors regarding issues
impacting our financial structure and strategic direction, including, but not limited to, our capital structure, business development activities
and financing strategy, as well as the overall scope and focus of our business and operations. The finance and strategy committee held one
meeting during 2021.
Our Board of Directors may from time to time establish other committees.
Director Affiliations
Some of our directors are affiliated with and serve on the Board of Directors as representatives of entities which beneficially own or owned
5% or more of our common stock, as indicated below:
Ansbert Gadicke
Name
MPM Capital and UBS Oncology Impact Fund, L.P.
Principal Stockholder
Item 14. Principal Accountant Fees and Services
Our independent registered public accounting firm is KPMG LLP, Boston, MA, Auditor Firm ID: 185.
The Audit Committee has selected KPMG LLP as our independent registered public accounting firm for the years ended December 31, 2021
and 2020. In addition to retaining KPMG LLP to audit our consolidated financial statements for the years ended December 31, 2021 and
2020, we may engage the firm from time to time during the year to perform other services.
The following table sets forth the aggregate fees billed by KPMG LLP in connection with services rendered during the last two fiscal years.
Audit fees
Audit-related fees
Tax fees
Other fees
For the Years Ended
2021
2020
$
$
634,000 $
—
—
1,780
635,780 $
598,000
—
—
1,780
599,780
Audit Fees consist of fees for professional services rendered in connection with the audit of our annual consolidated financial statements,
the review of the interim consolidated financial statements included in quarterly reports, services rendered in connection with SEC
registration statements, and services that are normally provided by KPMG LLP, such as comfort letters, in connection with statutory and
regulatory filings or engagements.
All Other Fees consist of accounting research software license fees.
In fiscal 2021 and 2020, no services other than those discussed above were provided by KPMG LLP.
The Audit Committee has adopted a policy requiring pre-approval of all audit and non-audit related services to be performed by the
Company’s independent auditor regardless of amount. These services may include audit services, audit-related services, tax
139
services and other related services. KPMG LLP and management are required to periodically report to the Audit Committee regarding the
extent of services provided by KPMG LLP in accordance with this pre-approval and the fees for the services performed to date. The Audit
Committee may also pre-approve particular services on a case-by-case basis.
The Audit Committee annually evaluates the qualifications, performance and independence of the Company’s independent registered public
accounting firm. It selected KPMG as the Company’s independent registered public accounting firm for 2021. This selection was
subsequently approved by the Board. The Audit Committee has reviewed and discussed with management and with KPMG the Company’s
audited consolidated financial statements for the year ended December 31, 2021. In addition, the Audit Committee has discussed with KPMG
the matters that independent registered public accounting firms must communicate to audit committees under applicable PCAOB standards.
The Audit Committee has also discussed and confirmed with KPMG its independence from the Company and received all written disclosures
and correspondence required by the PCAOB Ethics and Independence requirements. The Audit Committee has evaluated and concluded
the non-audit services provided by KPMG to the Company do not impair KPMG’s independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board that the audited consolidated
financial statements for the year ended December 31, 2021 and the related footnotes be included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2021.
140
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
3. Exhibits
PART IV
The exhibits required by Item 601 of Regulation S-K and Item 15(b) of this Annual Report on Form 10-K are listed in the Exhibit Index
immediately preceding the signature page of this Annual Report on Form 10-K. The exhibits listed in the Exhibit Index are incorporated by
reference herein.
ITEM 16. FORM 10-K SUMMARY
None.
141
FILE NO.
001-38811
001-38811
001-38811
333-229066
333-229066
333-229066
001-38811
333-229066
333-229066
333-229066
333-229066
333-229066
333-229066
333-229066
333-229066
333-229066
EXHIBIT
3.1
FILING DATE
2/25/2019
FILED
HEREWITH
3.2
3.3
4.1
4.2
4.3
4.4
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
2/25/2019
3/16/2021
12/28/2018
2/1/2019
12/28/2018
03/16/2021
12/28/2018
2/1/2019
12/28/2018
2/1/2019
12/28/2018
12/28/2018
12/28/2018
12/28/2018
12/28/2018
333-229066
10.13
12/28/2018
333-229066
10.14
12/28/2018
001-38811
001-38811
333-229066
10.1
10.1
21.1
5/13/2019
5/13/2021
2/1/2019
X
X
X
X
X
X
X
X
X
X
EXHIBIT INDEX
FORM
8-K
8-K
10-K
S-1
S-1
S-1
10-K
S-1
S-1
S-1
S-1
S-1
S-1
S-1
S-1
S-1
S-1
S-1
10-Q
10-Q
S-1
Number
EXHIBIT DESCRIPTION
3.1
3.2
3.3
4.1
4.2
4.3
4.4
10.1#
10.2#
10.3#
10.4#
10.5#
10.6#
10.7
10.8#
10.9†
10.10
10.11
10.12#
10.13#
10.14
21.1
23.1
31.1
32.1+
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
EX-104
#
†
+
Amended and Restated Certificate of Incorporation of the Registrant
Amended and Restated By-laws of the Registrant
Amendment No. 1 to Amended and Restated By-Laws of the Registrant
Amended and Restated Investors’ Rights Agreement among the Registrant
and certain of its stockholders, dated February 28, 2018
Form of Specimen Common Stock Certificate
Form of Common Stock Warrant
Description of Registrant’s Securities
2015 Stock Option and Grant Plan and forms of award agreements
thereunder
2018 Stock Option and Incentive Plan and forms of award agreements
thereunder
Senior Executive Cash Incentive Bonus Plan
2018 Employee Stock Purchase Plan
Form of Director Indemnification Agreement
Form of Officer Indemnification Agreement
Lease Agreement, dated as of June 30, 2017, by and between ARE-MA
Region No. 45, LLC and the Registrant
Form of Amended and Restated Employment Agreement
License Agreement, dated as of June 21, 2017, by and between Harpoon
Therapeutics, Inc. and the Registrant
Royalty Transfer Agreement, dated as of May 26, 2016, by and among the
Registrant, MPM Oncology Charitable Foundation, Inc. and the UBS
Optimus Foundation
Letter Agreement, dated as of May 26, 2016, by and among the Registrant,
MPM Oncology Charitable Foundation, the UBS Optimus Foundation and
UBS Oncology Impact Fund L.P.
Amendment #1 to 2018 Stock Option and Incentive Plan
2022 Inducement Plan and forms of award agreements thereunder
Lease Agreement, dated as of March 23, 2021, by and between ARE-
Maryland No. 31, LLC and the Registrant
Subsidiaries of the Registrant
Consent of KPMG LLP, Independent Registered Public Accounting Firm
Certification of Principal Executive Officer and Principal Financial Officer
pursuant to Rule 13a‑14(a) / Rule 15d‑14(a) of the Securities Exchange Act
of 1934, as amended
Certification of the Principal Executive Officer and Principal Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
Inline XBRL Instance Document - the instance document does not appear
in the Interactive Data File because its XBRL tags are embedded within the
Inline XBRL document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (embedded within the Inline XBRL
document)
Indicates a management contract or any compensatory plan, contract or
arrangement
Confidential treatment has been granted as to certain portions of this
exhibit, which portions have been omitted and submitted separately to the
Securities and Exchange Commission.
The certifications furnished in Exhibit 32.1 hereto are deemed to
accompany this Annual Report on Form 10-K and will not be deemed “filed”
for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended. Such certifications will not be deemed to be incorporated by
reference into any filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, except to the extent that
the Registrant specifically incorporates it by reference.
142
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SIGNATURES
March 22, 2022
2
TCR THERAPEUTICS INC.
By: /s/ Garry E. Menzel
Garry E. Menzel
President, Chief Executive Officer and Director
(Principal Executive Officer, Principal Financial Officer
and Principal Accounting Officer)
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and appoints Garry E. Menzel with full power of substitution and
resubstitution, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name
and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual report on
Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing, ratifying
and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Garry E. Menzel
Garry E. Menzel
/s/ Andrew Allen
Andrew Allen
/s/ Ansbert Gadicke
Ansbert Gadicke
/s/ Neil Gibson
Neil Gibson
/s/ Priti Hegde
Priti Hegde
/s/ Axel Hoos
Axel Hoos
/s/ Shawn Tomasello
Shawn Tomasello
/s/ Stephen Webster
Stephen Webster
Title
Date
President, Chief Executive Officer and Director (Principal Executive Officer,
Principal Financial Officer and Principal Accounting Officer)
March 22, 2022
Director
Director
Director
Director
Director
Director
Director
143
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
March 22, 2022
TCR2 THERAPEUTICS INC.
2022 INDUCEMENT PLAN
Exhibit 10.13
SECTION 1.
GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the TCR2 Therapeutics Inc. 2022 Inducement Plan (the “Plan”). The purpose of the Plan is to encourage and enable TCR2 Therapeutics
Inc. (the “Company”) to grant equity awards to induce highly-qualified prospective officers and employees to accept employment and provide them with a proprietary
interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with
those of the Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company. The
Company intends that the Plan be reserved for persons to whom the Company may issue securities without stockholder approval as an inducement pursuant to Rule 5635(c)
(4) of the Marketplace Rules of the NASDAQ Stock Market, Inc.
The following terms shall be defined as set forth below:
“Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
“Administrator” means either the Board or the compensation committee of the Board or a similar committee performing the functions of the compensation
committee and which is comprised of not less than two Non-Employee Directors who are independent.
“Affiliate “ means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Act. The Board will
have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
“Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock Units, Restricted Stock Awards, Unrestricted Stock Awards, and Dividend Equivalent Rights.
“Award Certificate” means a written or electronic document setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award
Certificate is subject to the terms and conditions of the Plan.
“Board” means the Board of Directors of the Company.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
“Consultant” means a consultant or adviser who provides bona fide services to the Company or an Affiliate as an independent contractor and who qualifies as a
consultant or advisor under Instruction A.1.(a)(1) of Form S-8 under the Act.
“Dividend Equivalent Right” means an Award entitling the grantee to receive credits based on cash dividends 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 had been issued to and held by the grantee.
“Effective Date” means the date on which the Plan is approved by the Board as set forth in Section 19.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“Fair Market Value” of the Stock on any given date means the fair market value of the Stock determined in good faith by the Administrator; provided, however,
that if the Stock is listed on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), NASDAQ Global Market, The New York Stock
Exchange or another national securities exchange or traded on any established market, the determination shall be made by reference to market quotations. If there are no
market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations.
“Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary.
1
“Non-Qualified Stock Option” means any Stock Option that is not an “incentive stock option” under Section 422 of the Code.
“Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5.
“Restricted Shares” means the shares of Stock underlying a Restricted Stock Award that remain subject to a risk of forfeiture or the Company’s right of
“Restricted Stock Award” means an Award of Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time of
repurchase.
grant.
“Restricted Stock Units” means an Award of stock units subject to such restrictions and conditions as the Administrator may determine at the time of grant.
“Sale Event” shall mean (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) a merger,
reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power and outstanding stock immediately prior to such transaction do not
own a majority of the outstanding voting power and outstanding stock or other equity interests of the resulting or successor entity (or its ultimate parent, if applicable)
immediately upon completion of such transaction, (iii) the sale of all of the Stock of the Company to an unrelated person, entity or group thereof acting in concert, or (iv)
any other transaction in which the owners of the Company’s outstanding voting power immediately prior to such transaction do not own at least a majority of the
outstanding voting power of the Company or any successor entity immediately upon completion of the transaction other than as a result of the acquisition of securities
directly from the Company.
“Sale Price” means the value as determined by the Administrator of the consideration payable, or otherwise to be received by stockholders, per share of Stock
pursuant to a Sale Event.
“Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder.
“Service Relationship” means any relationship as an employee, director or Consultant of the Company or any Affiliate (e.g., a Service Relationship shall be
deemed to continue without interruption in the event an individual’s status changes from full-time employee to part-time employee or Consultant).
“Stock” means the Common Stock, par value $0.0001 per share, of the Company, subject to adjustments pursuant to Section 3.
“Stock Appreciation Right” means an Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable
Award Certificate) having a value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise price of the Stock Appreciation Right
multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised.
“Subsidiary” means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either directly or
indirectly.
“Unrestricted Stock Award” means an Award of shares of Stock free of any restrictions.
SECTION 2.
ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS
(a)
(b)
power and authority:
Administration of Plan. The Plan shall be administered by the Administrator.
Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the
(i)
to select the individuals to whom Awards may from time to time be granted;
to determine the time or times of grant, and the extent, if any, of Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, Restricted Stock Units, Unrestricted Stock Awards, and Dividend Equivalent Rights, or any combination of the foregoing, granted to any one or
more grantees;
(ii)
(iii)
to determine the number of shares of Stock to be covered by any Award;
2
the Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the forms of Award Certificates;
(iv)
to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of
(v)
(vi)
to accelerate at any time the exercisability or vesting of all or any portion of any Award;
subject to the provisions of Section 5(c), to extend at any time the period in which Stock Options may be exercised; and
at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it
deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.
(vii)
All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.
(c)
Award Certificate. Awards under the Plan shall be evidenced by Award Certificates that set forth the terms, conditions and limitations for each Award
which may include, without limitation, the term of an Award and the provisions applicable in the event employment or service terminates.
(d)
Indemnification. Neither the Board nor the Administrator, nor any member of either or any delegate thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Administrator (and any delegate thereof)
shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation,
reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under the Company’s articles or bylaws or any directors’ and officers’
liability insurance coverage which may be in effect from time to time and/or any indemnification agreement between such individual and the Company.
(e)
Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which
the Company and its Subsidiaries operate or have employees or other individuals eligible for Awards, the Administrator, in its sole discretion, shall have the power and
authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which individuals outside the United States are eligible to participate in the Plan;
(iii) modify the terms and conditions of any Award granted to individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and
modify exercise procedures and other terms and procedures, to the extent the Administrator determines such actions to be necessary or advisable (and such subplans and/or
modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in
Section 3(a) hereof; and (v) take any action, before or after an Award is made, that the Administrator determines to be necessary or advisable to obtain approval or comply
with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards
shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute
or law.
SECTION 3.
STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a)
Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 1,400,000 shares, subject to
adjustment as provided in Section 3(b). For purposes of this limitation, the shares of Stock underlying any Awards that are forfeited, canceled, held back upon exercise of an
Option or settlement of an Award to cover exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of Stock or otherwise
terminated (other than by exercise) under the Plan shall be added back to the shares of Stock available for issuance under the Plan. In the event the Company repurchases
shares of Stock on the open market, such shares shall not be added to the shares of Stock available for issuance under the Plan. The shares available for issuance under the
Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company.
(b)
Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number
or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation, sale of all or substantially all of the assets of the
Company, the outstanding shares of Stock are converted into or exchanged for securities of the Company or any successor entity (or a parent or subsidiary thereof), the
Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, (ii) the number and kind
3
of shares or other securities subject to any then outstanding Awards under the Plan, (iii) the repurchase price, if any, per share subject to each outstanding Restricted Stock
Award, and (iv) the exercise price for each share subject to any then outstanding Stock Options and Stock Appreciation Rights under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by the number of shares subject to Stock Options and Stock Appreciation Rights) as to which such Stock Options
and Stock Appreciation Rights remain exercisable. The Administrator shall also make equitable or proportionate adjustments in the number of shares subject to outstanding
Awards and the exercise price and the terms of outstanding Awards to take into consideration cash dividends paid other than in the ordinary course or any other
extraordinary corporate event. The adjustment by the Administrator shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan
resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional shares.
(c)
Mergers and Other Transactions. In the case of and subject to the consummation of a Sale Event, the parties thereto may cause the assumption or
continuation of Awards theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent thereof, with
appropriate adjustment as to the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree. To the extent the parties to such Sale
Event do not provide for the assumption, continuation or substitution of Awards, upon the effective time of the Sale Event, the Plan and all outstanding Awards granted
hereunder shall terminate. In such case, except as may be otherwise provided in the relevant Award Certificate, all Options and Stock Appreciation Rights with time-based
vesting conditions or restrictions that are not vested and/or exercisable immediately prior to the effective time of the Sale Event may become fully vested and exercisable as
of the effective time of the Sale Event at the discretion of the Administrator, all other Awards with time-based vesting, conditions or restrictions may become fully vested
and nonforfeitable as of the effective time of the Sale Event at the discretion of the Administrator, and all Awards with conditions and restrictions relating to the attainment
of performance goals may become vested and nonforfeitable in connection with a Sale Event in the Administrator’s discretion or to the extent specified in the relevant
Award Certificate. In the event of such termination, (i) the Company shall have the option (in its sole discretion) to make or provide for a payment, in cash or in kind, to the
grantees holding Options and Stock Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale Price multiplied
by the number of shares of Stock subject to outstanding Options and Stock Appreciation Rights (to the extent then exercisable at prices not in excess of the Sale Price) and
(B) the aggregate exercise price of all such outstanding Options and Stock Appreciation Rights (provided that, in the case of an Option or Stock Appreciation Right with an
exercise price equal to or greater than the Sale Price, such Option or Stock Appreciation Right shall be cancelled for no consideration); or (ii) each grantee shall be
permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Administrator, to exercise all outstanding Options and Stock
Appreciation Rights (to the extent then exercisable) held by such grantee. The Company shall also have the option (in its sole discretion) to make or provide for a payment,
in cash or in kind, to the grantees holding other Awards in an amount equal to the Sale Price multiplied by the number of vested shares of Stock under such Awards.
SECTION 4.
ELIGIBILITY
Grantees under the Plan will be such individuals to whom the Company may issue securities without stockholder approval in accordance with Rule 5635(c)(4) of
the Marketplace Rues of the NASDAQ Stock Market, Inc. and related guidance thereunder, as are selected from time to time by the Administrator in its sole discretion.
SECTION 5.
STOCK OPTIONS
(a)
Award of Stock Options. The Administrator may grant Stock Options under the Plan. Any Stock Option granted under the Plan shall be a Non-
Qualified Stock Option and shall be in such form as the Administrator may from time to time approve.
Stock Options granted pursuant to this Section 5 shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem desirable.
(b)
Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5 shall be determined by the
Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant.
(c)
Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten years after
the date the Stock Option is granted.
(d)
Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be
determined by the Administrator at or after the grant date. The Administrator may at any time accelerate the exercisability of all or any portion of any Stock Option. An
optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.
4
(e)
Method of Exercise. Stock Options may be exercised in whole or in part, by giving written or electronic notice of exercise to the Company,
specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods except to the extent otherwise
provided in the Option Award Certificate:
(i)
(ii)
In cash, by certified or bank check or other instrument acceptable to the Administrator;
Through the delivery (or attestation to the ownership following such procedures as the Company may prescribe) of shares of
Stock that are not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date;
(iii)
By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to
pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as
the Company shall prescribe as a condition of such payment procedure; or
exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price.
(iv)
By a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon
Payment instruments will be received subject to collection. The transfer to the optionee on the records of the Company or of the transfer agent of the shares of Stock to be
purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions
of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Option Award Certificate or
applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is obligated to withhold with respect to the optionee). In the event an
optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee
upon the exercise of the Stock Option shall be net of the number of attested shares. In the event that the Company establishes, for itself or using the services of a third party,
an automated system for the exercise of Stock Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Stock Options
may be permitted through the use of such an automated system.
SECTION 6.
STOCK APPRECIATION RIGHTS
(a)
Award of Stock Appreciation Rights. The Administrator may grant Stock Appreciation Rights under the Plan. A Stock Appreciation Right is an
Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable Award Certificate) having a value equal to the excess
of the Fair Market Value of a share of Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with
respect to which the Stock Appreciation Right shall have been exercised.
(b)
Exercise Price of Stock Appreciation Rights. The exercise price of a Stock Appreciation Right shall not be less than 100 percent of the Fair Market
Value of the Stock on the date of grant.
(c)
Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator independently of any Stock
Option granted pursuant to Section 5 of the Plan.
(d)
Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined
on the date of grant by the Administrator. The term of a Stock Appreciation Right may not exceed ten years. The terms and conditions of each such Award shall be
determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees.
SECTION 7.
RESTRICTED STOCK AWARDS
(a)
Nature of Restricted Stock Awards. The Administrator may grant Restricted Stock Awards under the Plan. A Restricted Stock Award is any Award
of Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time of grant. Conditions may be based on continuing
employment (or other Service Relationship) and/or achievement of pre-established performance goals and objectives.
(b)
Rights as a Stockholder. Upon the grant of the Restricted Stock Award and payment of any applicable purchase price, a grantee shall have the rights
of a stockholder with respect to the voting of the Restricted Shares and receipt of dividends; provided that if the lapse of restrictions with respect to the Restricted Stock
Award is tied to the attainment of performance goals, any dividends paid by the Company during the performance period shall accrue and shall not be paid to the grantee
until and to
5
the extent the performance goals are met with respect to the Restricted Stock Award. Unless the Administrator shall otherwise determine, (i) uncertificated Restricted Shares
shall be accompanied by a notation on the records of the Company or the transfer agent to the effect that they are subject to forfeiture until such Restricted Shares are vested
as provided in Section 7(d) below, and (ii) certificated Restricted Shares shall remain in the possession of the Company until such Restricted Shares are vested as provided in
Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator may prescribe.
(c)
Restrictions. Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically
provided herein or in the Restricted Stock Award Certificate. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to
Section 16 below, in writing after the Award is issued, if a grantee’s employment (or other Service Relationship) with the Company and its Subsidiaries terminates for any
reason, any Restricted Shares that have not vested at the time of termination shall automatically and without any requirement of notice to such grantee from or other action
by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price (if any) from such grantee or such grantee’s legal
representative simultaneously with such termination of employment (or other Service Relationship), and thereafter shall cease to represent any ownership of the Company
by the grantee or rights of the grantee as a stockholder. Following such deemed reacquisition of Restricted Shares that are represented by physical certificates, a grantee
shall surrender such certificates to the Company upon request without consideration.
(d)
Vesting of Restricted Shares. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-transferability of the Restricted Shares and the Company’s right of repurchase or forfeiture shall lapse.
Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have
lapsed shall no longer be Restricted Shares and shall be deemed “vested.”
SECTION 8.
RESTRICTED STOCK UNITS
(a)
Nature of Restricted Stock Units. The Administrator may grant Restricted Stock Units under the Plan. A Restricted Stock Unit is an Award of stock
units that may be settled in shares of Stock (or cash, to the extent explicitly provided for in the Award Certificate) upon the satisfaction of such restrictions and conditions at
the time of grant. Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and
objectives. The terms and conditions of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and
grantees. Except in the case of Restricted Stock Units with a deferred settlement date that complies with Section 409A, at the end of the vesting period, the Restricted Stock
Units, to the extent vested, shall be settled in the form of shares of Stock. Restricted Stock Units with deferred settlement dates are subject to Section 409A and shall
contain such additional terms and conditions as the Administrator shall determine in its sole discretion in order to comply with the requirements of Section 409A.
(b)
Rights as a Stockholder. A grantee shall have the rights as a stockholder only as to shares of Stock acquired by the grantee upon settlement of
Restricted Stock Units; provided, however, that the grantee may be credited with Dividend Equivalent Rights with respect to the stock units underlying his Restricted Stock
Units, subject to the provisions of Section 11 and such terms and conditions as the Administrator may determine.
(c)
Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 16 below, in writing
after the Award is issued, a grantee’s right in all Restricted Stock Units that have not vested shall automatically terminate upon the grantee’s termination of employment (or
cessation of Service Relationship) with the Company and its Subsidiaries for any reason.
SECTION 9.
UNRESTRICTED STOCK AWARDS
Grant or Sale of Unrestricted Stock. The Administrator may grant (or sell at par value or such higher purchase price determined by the Administrator) an
Unrestricted Stock Award under the Plan. An Unrestricted Stock Award is an Award pursuant to which the grantee may receive shares of Stock free of any restrictions under
the Plan. Unrestricted Stock Awards may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee.
SECTION 10. RESERVED.
SECTION 11. DIVIDEND EQUIVALENT RIGHTS
(a)
Dividend Equivalent Rights. The Administrator may grant Dividend Equivalent Rights under the Plan. A Dividend Equivalent Right is an Award
entitling the grantee to receive credits based on cash dividends 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 had been issued to
6
the grantee. A Dividend Equivalent Right may be granted hereunder to any grantee as a component of an award of Restricted Stock Units or as a freestanding award. The
terms and conditions of Dividend Equivalent Rights shall be specified in the Award Certificate. Dividend equivalents credited to the holder of a Dividend Equivalent Right
may be paid currently or may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue additional equivalents. Any such reinvestment shall be
at Fair Market Value on the date of reinvestment or such other price as may then apply under a dividend reinvestment plan sponsored by the Company, if any. Dividend
Equivalent Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment or installments. A Dividend Equivalent Right granted as a
component of an Award of Restricted Stock Units shall provide that such Dividend Equivalent Right shall be settled only upon 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.
(b)
Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 16 below, in writing
after the Award is issued, a grantee’s rights in all Dividend Equivalent Rights shall automatically terminate upon the grantee’s termination of employment (or cessation of
Service Relationship) with the Company and its Subsidiaries for any reason.
SECTION 12. TRANSFERABILITY OF AWARDS
(a)
Transferability. Except as provided in Section 12(b) below, during a grantee’s lifetime, his or her Awards shall be exercisable only by the grantee, or
by the grantee’s legal representative or guardian in the event of the grantee’s incapacity. No Awards shall be sold, assigned, transferred or otherwise encumbered or disposed
of by a grantee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order. No Awards shall be subject, in whole or in part, to
attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void.
(b)
Administrator Action. Notwithstanding Section 12(a), the Administrator, in its discretion, may provide either in the Award Certificate regarding a
given Award or by subsequent written approval that the grantee (who is an employee or director) may transfer his or her Non-Qualified Stock Options to his or her
immediate family members, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, provided that the
transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Award. In no event may an Award be
transferred by a grantee for value.
(c)
Family Member. For purposes of Section 12(b), “family member” shall mean a grantee’s child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships,
any person sharing the grantee’s household (other than a tenant of the grantee), a trust in which these persons (or the grantee) have more than 50 percent of the beneficial
interest, a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which these persons (or the grantee) own more than
50 percent of the voting interests.
(d)
Designation of Beneficiary. To the extent permitted by the Company, each grantee to whom an Award has been made under the Plan may designate a
beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation shall be on a form
provided for that purpose by the Administrator and shall not be effective until received by the Administrator. If no beneficiary has been designated by a deceased grantee, or
if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.
SECTION 13. TAX WITHHOLDING
(a)
Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the grantee for income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator
regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income. The Company and its
Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Company’s
obligation to deliver evidence of book entry (or stock certificates) to any grantee is subject to and conditioned on tax withholding obligations being satisfied by the grantee.
(b)
Payment in Stock. The Administrator may require the Company’s tax withholding obligation to be satisfied, in whole or in part, by the Company
withholding from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser amount as is
necessary to avoid liability accounting treatment. For purposes of share withholding, the Fair Market Value of withheld shares shall be determined in the same manner as
the value of Stock includible in income of the Participants. The Administrator may also require the Company’s tax withholding obligation to be satisfied, in whole or in
part, by an arrangement whereby a certain
7
number of shares of Stock issued pursuant to any Award are immediately sold and proceeds from such sale are remitted to the Company in an amount that would satisfy the
withholding amount due.
SECTION 14.
SECTION 409A AWARDS
Awards are intended to be exempt from Section 409A to the greatest extent possible and to otherwise comply with Section 409A. The Plan and all Awards shall
be interpreted in accordance with such intent. To the extent that any Award is determined to constitute “nonqualified deferred compensation” within the meaning of Section
409A (a “409A Award”), the Award shall be subject to such additional rules and requirements as specified by the Administrator from time to time in order to comply with
Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service” (within the meaning of Section 409A) to a grantee who is then
considered a “specified employee” (within the meaning of Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one
day after the grantee’s separation from service, or (ii) the grantee’s death, but only to the extent such delay is necessary to prevent such payment from being subject to
interest, penalties and/or additional tax imposed pursuant to Section 409A. Further, the settlement of any 409A Award may not be accelerated except to the extent permitted
by Section 409A.
SECTION 15. TERMINATION OF SERVICE RELATIONSHIP, TRANSFER, LEAVE OF ABSENCE, ETC.
(a)
Termination of Service Relationship. If the grantee’s Service Relationship is with an Affiliate and such Affiliate ceases to be an Affiliate, the grantee
shall be deemed to have terminated his or her Service Relationship for purposes of the Plan.
(b)
For purposes of the Plan, the following events shall not be deemed a termination of a Service Relationship:
another; or
(i)
(ii)
a transfer to the employment of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to
an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the
employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.
SECTION 16. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying
changes in law or for any other lawful purpose, but no such action shall materially and adversely affect rights under any outstanding Award without the holder’s consent.
Except as provided in Section 3(b) or 3(c), without prior stockholder approval, in no event may the Administrator exercise its discretion to reduce the exercise price of
outstanding Stock Options or Stock Appreciation Rights or effect repricing through cancellation and re-grants or cancellation of Stock Options or Stock Appreciation Rights
in exchange for cash or other Awards. Nothing in this Section 16 shall limit the Administrator’s authority to take any action permitted pursuant to Section 3(b) or 3(c).
SECTION 17.
STATUS OF PLAN
With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall have
no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In
its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the Company’s obligations to deliver Stock or make payments with
respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.
SECTION 18. GENERAL PROVISIONS
(a)
No Distribution. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to distribution thereof.
(b)
Issuance of Stock. To the extent certificated, stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the
Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known address
on file with the Company. Uncertificated Stock shall be deemed delivered for all purposes when the Company or a Stock transfer agent of the Company shall have given to
the grantee by electronic mail (with proof of receipt) or by United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company, notice
of issuance and recorded the issuance in its records (which may include electronic “book entry” records). Notwithstanding anything herein to the contrary, the Company
shall not be required to issue or deliver
8
any evidence of book entry or certificates evidencing shares of Stock pursuant to the exercise or settlement of any Award, unless and until the Administrator has determined,
with advice of counsel (to the extent the Administrator deems such advice necessary or advisable), that the issuance and delivery is in compliance with all applicable laws,
regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed, quoted or traded. Any Stock issued
pursuant to the Plan shall be subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state or
foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is listed, quoted or traded. The Administrator may place legends on any Stock
certificate or notations on any book entry to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Administrator may
require that an individual make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems necessary or advisable in order to
comply with any such laws, regulations, or requirements. The Administrator shall have the right to require any individual to comply with any timing or other restrictions
with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Administrator.
(c)
Stockholder Rights. Until Stock is deemed delivered in accordance with Section 18(b), no right to vote or receive dividends or any other rights of a
stockholder will exist with respect to shares of Stock to be issued in connection with an Award, notwithstanding the exercise of a Stock Option or any other action by the
grantee with respect to an Award.
(d)
Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary.
(e)
Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to the Company’s insider trading policies and
procedures, as in effect from time to time.
(f)
Clawback Policy. Awards under the Plan shall be subject to the Company’s clawback policy, as in effect from time to time.
SECTION 19. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon approval by the Board.
SECTION 20. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with the General Corporation Law of the State of
Delaware, applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: ____________
9
RESTRICTED STOCK UNIT AWARD AGREEMENT
UNDER THE TCR2 THERAPEUTICS INC.
2022 INDUCEMENT PLAN
Name of Grantee:
No. of Restricted Stock Units:
Grant Date:
Pursuant to the TCR2 Therapeutics Inc. 2022 Inducement Plan as amended through the date hereof (the “Plan”), TCR2 Therapeutics Inc. (the “Company”) hereby
grants an award of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above. Each Restricted Stock Unit shall relate to one share of
Common Stock, par value $0.0001 per share (the “Stock”) of the Company.
SECTION 21. Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee, and
any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i) the
Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and (ii) shares of Stock have been issued to the Grantee in accordance
with the terms of the Plan and this Agreement.
SECTION 22. Vesting of Restricted Stock Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in
the following schedule so long as the Grantee continues to have a Service Relationship with the Company or a Subsidiary on such dates. If a series of
Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Stock Units
specified as vested on such date.
Incremental Number of
Restricted Stock Units Vested
_____________ (___%)
_____________ (___%)
_____________ (___%)
_____________ (___%)
Vesting Date
_______________
_______________
_______________
_______________
The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
SECTION 23. Termination of Service Relationship. If the Grantee’s Service Relationship with the Company and its Subsidiaries terminates for any reason (including
death or disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested as of
such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or
personal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units.
SECTION 24.
Issuance of Shares of Stock. As soon as practicable following each Vesting Date (but in no event later than two and one-half months after the end of the
year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate number of Restricted
Stock Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the rights of a stockholder of
the Company with respect to such shares.
SECTION 25.
Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of
the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning
specified in the Plan, unless a different meaning is specified herein.
SECTION 26. Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes,
pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be
withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be
10
satisfied, in whole or in part, by (i) withholding from shares of Stock to be issued to the Grantee a number of shares of Stock with an aggregate Fair Market
Value that would satisfy the withholding amount due or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Grantee,
the number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Grantee on account of such
transfer.
SECTION 27.
Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are exempt
from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A of the Code.
SECTION 28. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to
continue the Grantee in the Service Relationship and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any
Subsidiary to terminate the Service Relationship of the Grantee at any time.
SECTION 29.
Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and
discussions between the parties concerning such subject matter.
SECTION 30. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries
and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not
limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or
desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i)
authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the
Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic
form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee
shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
SECTION 31. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at
the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
11
TCR2 THERAPEUTICS INC.
By:
Name:
Title:
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to
the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
Dated:
Grantee’s Signature
Grantee’s name and address:
12
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR COMPANY EMPLOYEES
UNDER THE TCR2 THERAPEUTICS INC.
2022 INDUCEMENT PLAN
Name of Optionee:
No. of Option Shares:
Option Exercise Price per Share: $
[FMV on Grant Date]
Grant Date:
Expiration Date:
[No more than 10 years]
Pursuant to the TCR2 Therapeutics Inc. 2022 Inducement Plan as amended through the date hereof (the “Plan”), TCR2 Therapeutics Inc. (the “Company”) hereby
grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of
Common Stock, par value $0.0001 per share (the “Stock”) of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and
conditions set forth herein and in the Plan. This Stock Option has been granted as an inducement pursuant to Rule 5635(c)(4) of the Marketplace Rules of NASDAQ Stock
Market, Inc. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.
SECTION 32. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below,
and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option
shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as Optionee continues to have a Service
Relationship with the Company or a Subsidiary on such dates:
Incremental Number of
Option Shares Exercisable
___________ (___%)
___________ (___%)
___________ (___%)
___________ (___%)
___________ (___%)
Exercisability Date
__________
__________
__________
__________
__________
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the
provisions hereof and of the Plan.
SECTION 33. Manner of Exercise.
(a)
The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock
Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice.
This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other
instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the
open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding
periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions
to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the
Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of
indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the
Company will reduce the number of shares of Stock issuable upon exercise by the largest
13
whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment
instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from
the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other
agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the
issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with
applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the
number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.
(b)
The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the
transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with
the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not
be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option
shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall
have been entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with
respect to such shares of Stock.
(c)
The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of
shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time.
(d)
Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
SECTION 34. Termination of Service Relationship. If the Optionee’s Service Relationship by the Company or a Subsidiary (as defined in the Plan) is terminated, the
period within which to exercise the Stock Option may be subject to earlier termination as set forth below.
(a)
Termination Due to Death. If the Optionee’s Service Relationship terminates by reason of the Optionee’s death, any portion of this Stock Option
outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12
months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate
immediately and be of no further force or effect.
(b)
Termination Due to Disability. If the Optionee’s Service Relationship terminates by reason of the Optionee’s disability (as determined by the
Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination of Service Relationship, may thereafter
be exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Stock Option that is not
exercisable on the date of disability shall terminate immediately and be of no further force or effect.
(c)
Termination for Cause. If the Optionee’s Service Relationship terminates for Cause, any portion of this Stock Option outstanding on such date shall
terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean, unless otherwise provided in an employment agreement (or similar
services agreements) between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach
by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to a felony or a
crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the
Optionee’s duties to the Company.
(d)
Other Termination. If the Optionee’s Service Relationship terminates for any reason other than the Optionee’s death, the Optionee’s disability or
Cause, and unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the
date of termination, for a period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable
on the date of termination shall terminate immediately and be of no further force or effect.
The Administrator’s determination of the reason for termination of the Optionee’s Service Relationship shall be conclusive and binding on the Optionee and his
or her representatives or legatees.
14
SECTION 35.
Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions
of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning
specified in the Plan, unless a different meaning is specified herein.
SECTION 36. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and
thereafter, only by the Optionee’s legal representative or legatee.
SECTION 37. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income tax
purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to
be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in
whole or in part, by withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that
would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser
amount as is necessary to avoid adverse accounting treatment or as determined by the Administrator.
SECTION 38. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to
continue the Optionee’s Service Relationship and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any
Subsidiary to terminate the Service Relationship of the Optionee at any time.
SECTION 39.
Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and
discussions between the parties concerning such subject matter.
SECTION 40. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries
and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not
limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or
desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i)
authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the
Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic
form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee
shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
SECTION 41. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee
at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
15
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to
the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
Dated:
TCR2 THERAPEUTICS INC.
By:
Title:
Optionee’s Signature
Optionee’s name and address:
16
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (Nos. 333-236965, 333-252244 and 333-254355) on Form S-3
and (Nos. 333-229691, 333-237481 and 333-254354) on Form S-8 of our report dated March 22, 2022, with respect to the consolidated
financial statements of TCR2 Therapeutics Inc.
Exhibit 23.1
/s/ KPMG LLP
Boston, Massachusetts
March 22, 2022
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13A‑14 (A) /
RULE 15D‑14 (A)
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit 31.1
I, Garry E. Menzel, certify that:
1.
I have reviewed this Annual Report on Form 10‑K of TCR2 Therapeutics Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
I am 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 my
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 my 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 my 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.
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 22, 2022
/s/ Garry E. Menzel
Garry E. Menzel
President, Chief Executive Officer and Director
(Principal Executive Officer, Principal Financial Officer and
Principal Accounting Officer
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL
FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002
Exhibit 32.1
In connection with this Annual Report on Form 10‑K of TCR2 Therapeutics Inc. (the “Company”) for the fiscal year ended December 31, 2021
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that, to the best of his or her knowledge:
1.
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
2.
Company.
Dated: March 22, 2022
/s/ Garry E. Menzel
Garry E. Menzel
President, Chief Executive Officer and Director
(Principal Executive Officer, Principal Financial Officer and
Principal Accounting Officer)