Item 1. Business
Item 1. Business.
Overview
We are a clinical stage global biopharmaceutical company focused on developing innovative therapies to improve clinical outcomes for patients with high unmet medical needs. Our first-in-class lead asset, Plinabulin, which has been administered to over 700 cancer patients with generally good tolerability, is being developed as a potential “pipeline in a drug” in various cancer indications as a direct anti-cancer agent. We are also developing three small molecule immune agents, which are currently in pre-clinical stages. In addition, we founded and continue to own an equity stake in SEED Therapeutics Inc., or SEED. See “—SEED’s relationship with BeyondSpring” for additional information. SEED is utilizing a proprietary Targeted Protein Degradation (TPD) drug discovery platform, or “molecular glue” technology, to develop innovative therapeutic agents from internal research and development efforts and with our collaborators on currently undruggable protein targets. SEED is partnering with Eli Lilly and Co., or Eli Lilly, and Eisai Co., Ltd., or Eisai, to discover and develop new chemical entities through this proprietary TPD platform which could produce therapeutic benefits to patients suffering from oncology and central nervous system (CNS) disease, among others.
Through our 15-year research and development efforts to progress our lead asset Plinabulin, we discovered that Plinabulin has novel mechanisms of action. Plinabulin binds in a unique pocket in tubulin which is different from other tubulin binders such as taxane, vinca, and colchicine, and releases an immune defense protein GEF-H1, which produces the potent effect of maturing immune dendritic cells, leading to T-cell activation for a potential durable anti-cancer benefit. Therefore, we believe Plinabulin’s mechanism stimulates both innate and adaptive immunity. We are applying these insights to our current clinical studies to target mechanism-based patient populations. Plinabulin’s unique binding site has also led to clinical findings that have repeatedly shown significant reductions in CIN, which may provide added clinical and safety benefits to cancer patients.
Plinabulin is being studied as an anti-cancer agent in a number of company-sponsored studies and investigator-initiated studies. We completed a randomized global Phase 3 study of Plinabulin in combination with docetaxel compared with docetaxel alone for second- and third- line treatment of NSCLC, epidermal growth factor receptor, or EGFR, wild type (DUBLIN-3 Phase 3 registration study). The DUBLIN-3 study enrolled 559 patients at 58 clinical sites globally and the final results from the study showed that the Plinabulin and docetaxel combination had statistically significant and clinically meaningful overall survival benefit compared to standard of care docetaxel alone. Key secondary endpoints were also achieved with additional clinically significant benefits in progression free survival (PFS) and objective response rate (ORR), coupled with a significant reduction in grade 4 neutropenia, with over 80% reduction. The finding was published in LANCET Respiratory Medicine journal in September 2024, and at the same time we made an oral presentation at the International Association for the Study of Lung Cancer (IASLC) conference. We plan to use our best efforts to file an NDA with the NMPA as soon as possible.
The current standard of care for first-line NSCLC without driver mutations is chemotherapy plus PD-1/PD-L1 antibodies, with 60% patients progress on these therapies. Once patients progress on these regimens, docetaxel is the recommended in the second line, but it has modest clinical benefit and high severe neutropenia. To address the significant unmet need in this population, our collaborators at Peking Union Medical College Hospital in China are conducting an investigator-initiated Phase 2 study (Study 303): Plinabulin in combination with Keytruda® (pembrolizumab), a PD-1 antibody, and docetaxel for the treatment of NSCLC patients who progressed from PD-1/PD-L1 antibodies. We presented the early data of disease control rate and prolonged PFS from this study at European Society for Medical Oncology (ESMO) 2024 and Society for Immunotherapy of Cancer (SITC) 2024.
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Plinabulin is also being studied in a Phase 2 investigator-initiated study (Study 302) in combination with Keytruda®, etoposide and platinum for the first-line treatment of extensive-stage small cell lung cancer, or ES-SCLC, patients at Wuhan Union Hospital in China, where the current standard of care has limited median progression free survival.
Additional investigator initiated studies with Plinabulin include: 1) in combination with nivolumab, a PD-1 antibody, for the treatment of NSCLC at the University of California San Diego, or UCSD, and the University of Washington (Phase 1 completed); 2) in combination with nivolumab and ipilimumab, a CTLA-4 antibody, for the treatment of ES-SCLC at the Rutgers University and other U.S. clinical centers (both Phase 1 and Phase 2 completed); and 3) in combination with PD-1 or PD-L1 antibodies and radiation for the treatment of patients with various cancers who progressed from PD-1/PD-L1 antibodies at The University of Texas MD Anderson Cancer Center, or MD Anderson (Phase 1 completed and presented at SITC 2023).
We expect each of these studies to benefit from our previous investigation of Plinabulin as an agent that has been studied in two randomized, controlled Phase 3 clinical studies to have demonstrated a statistically significant reduction in CIN. In total, over 700 patients have been treated with Plinabulin, where improvements in CIN have been repeatedly observed.
Our principal executive offices are located in New Jersey, and we also have offices in Beijing, China and Dalian, China. In addition, SEED has offices in Pennsylvania. We are incorporated in the Cayman Islands. Our management team has deep experience and capabilities in biology, chemistry, drug discovery, manufacturing, clinical development, regulatory and capital markets.
Plinabulin, Our Lead Drug Candidate
Plinabulin is a first-in-class, novel small molecule derived from a natural compound found in marine microorganisms. It is a Selective Immunomodulating Microtubule-Binding Agent, which may provide multiple therapeutic opportunities. As a low molecular weight small molecule, Plinabulin is relatively simple to manufacture. An advantage of natural products and their derivatives, such as Plinabulin, is that it may be difficult for others to discover structurally distinct molecules possessing a similar array of activities.
By depolymerizing tubulin, Plinabulin triggers the release of the immune defense protein, GEF-H1, which activates RhoA/ROCK (Rho-associated protein kinases) pathway and leads to two distinct effects: 1) a durable anti-cancer benefit due to the maturation of dendritic cells resulting in activation of tumor antigen-specific T-cells to target cancer cells and 2) early-onset action in CIN prevention after chemotherapy by boosting the number of hematopoietic stem/progenitor cells, or HSPCs. Effects on HSPCs could explain the potential for Plinabulin not only to prevent CIN but also to increase circulating CD34+ cells in patients. As a potential “pipeline in a drug,” Plinabulin is being broadly studied in combination with various immuno-oncology agents that could boost the effects of the PD-1/PD-L1 antibodies and potentially allow patients who progressed on PD-1/PD-L1 antibodies to respond to PD-1/PD-L1 combination with Plinabulin. The elucidation of this mechanism was a multi-year collaborative effort among us, University of Basel, Massachusetts General Hospital, and MD Anderson.
In aggregate, as of the date of this Annual Report on Form 10-K, Plinabulin has been administered to over 700 patients with advanced cancer and thus far is generally well-tolerated. We believe the data from completed and ongoing clinical trials suggest there is a path forward for Plinabulin in the treatment of advanced and metastatic NSCLC with added safety benefit of CIN reduction.
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Plinabulin for the Treatment of Advanced and Metastatic NSCLC
NSCLC disease overview
According to the National Cancer Institute, approximately 230,000 patients are diagnosed with lung cancer in the U.S. per year. The prognosis for patients with lung cancer is poor with five-year survival rate of only 18.6%. Lung cancer is the leading cause of cancer death in the U.S. and a global health problem with approximately 1.8 million cases diagnosed per year. Approximately one-third of lung cancer patients worldwide are in China, with approximately 700,000 cases of lung cancer diagnosed in China in 2015. These lung cancers are typically divided into two groups based upon the histologic appearance of the tumor cells—NSCLC and small cell lung cancer (SCLC), which are treated with distinct chemotherapeutic approaches. NSCLC accounts for approximately 87% of lung cancer cases. The global NSCLC market is increasing at a rate of 10% per year, with estimated sales of $26.7 billion and $44.6 billion in 2021 and 2026, respectively. In China, between 2015 and 2019, the number of new cases of NSCLC increased from 669,000 to 761,000, and the number of new cases is expected to reach over 1 million by 2030. According to Frost & Sullivan, in China, NSCLC targeted drug sales reached RMB 12.7 billion (approximately $2.0 billion) in 2018, RMB 20.8 billion (approximately $3.3 billion) in 2019, and RMB 29.1 billion (approximately $4.6 billion) in 2020.
Lung cancer is typically diagnosed relatively late in its clinical course after it has metastasized to other tissues in the body. In these advanced cases, treatment is not curative, and patients are generally treated with systemic therapies. Initial first-line therapy is often based on broad chemotherapy drugs such as cisplatin with or without PD-1/PD-L1 inhibitors. Most patients, however, do not obtain a long-term overall survival benefit. For patients who failed first-line therapies and with no driver mutation, the current standard of care is still docetaxel-based therapies, with limited survival benefit of around 9 months and high severe neutropenia rate of over 40%. Seven recent Phase 3 studies in patients with EGFR wild-type NSCLC who were previously treated with immune checkpoint inhibitors failed to show overall survival (OS) benefit compared with docetaxel (SAPPHIRE, LEAP-008, CONTACT01, EVOKE-01, CARMEN-LC03, and CANOPY-2, and TROPION-Lung01). No new drug has been approved in this hard-to-treat indication in the last decade. Therefore, we believe new treatments for advanced and metastatic NSCLC with EGFR wild-type after platinum therapy progression are urgently needed.
Plinabulin in advanced and metastatic NSCLC
Plinabulin is a Selective Immunomodulating Microtubule-Binding Agent, which activates immune defense protein GEF-H1, and leads to dendritic cell maturation and T-cell activation (La Sala 2019; Kashyap 2019) for anti-cancer benefit. High GEF-H1 immune signature patients in anti-cancer studies live much longer than the ones who have lower GEF-H1 immune signature (Kashyap 2019).
Phase 1/2 in advanced and metastatic NSCLC (Study 101)
The primary purpose of the Phase 2 portion of the Phase 1/2 trial was to evaluate the potential anti-cancer effect of Plinabulin in combination with docetaxel compared to docetaxel monotherapy in advanced second- and third-line NSCLC patients. The trial enrolled 163 advanced NSCLC patients in the U.S., Australia, Argentina, Chile, Brazil and India. Patients enrolled in the trial had unresectable, locally advanced or metastatic cancers, meaning that in some patients the disease had spread to adjacent lymph nodes if not throughout the body. In such patients there may not be measurable lesions in the lungs.
For intent to treat, or ITT, population with no targeted patient selection, the trial did not meet the primary endpoint of a statistically significant improvement in overall survival for Plinabulin in combination with docetaxel compared to docetaxel monotherapy, with only modest 1.2 months survival benefit in the combination vs. docetaxel alone. However, we identified a subset of patients with measurable lung lesions (Plinabulin mechanism targeted patients) in which the addition of Plinabulin to docetaxel may increase anti-tumor activity compared to docetaxel monotherapy with survival benefit of 4.6 months. In this mechanism-based subset analysis, patients in the Plinabulin plus docetaxel arm had a median OS of 11.3 months, while those treated with docetaxel alone had a median OS of 6.7 months. Additionally, the Plinabulin plus docetaxel cohort had an objective response rate, or ORR, of 18.4% compared to 10.5% for the docetaxel monotherapy arm. This subset included only 38 patients from each arm and did not reach statistical significance on the OS (p=0.29). The patients who received Plinabulin plus docetaxel also had a duration of response, the initial response until documented tumor progression, of 12.7 months compared to only one month for the patients who received docetaxel monotherapy (p=0.049). This subset analysis was presented as an oral presentation at 2017 American Society of Clinical Oncology—Society for Immunotherapy of Cancer, or ASCO-SITC, conference and was selected as one of five highlights of the meeting.
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Phase 3 in advanced and metastatic NSCLC (Study 103 or DUBLIN-3)
In June 2016, we initiated a Phase 3 trial (DUBLIN-3), a randomized, active-controlled, single blind to patients, global trial that enrolled 559 patients in second- and third-line NSCLC, EGFR wild type, with a measurable lung lesion. Patients were treated on a 21-day cycle with infusion of docetaxel (D, 75 mg/m2 on Day 1) and Plinabulin (P, 30 mg/m2 on days 1 and 8) or with docetaxel alone (D, 75 mg/m2 on Day 1). The study was conducted in the U.S., China and Australia.
The primary endpoint is overall survival in patients given a combination of Plinabulin and docetaxel compared to patients given docetaxel alone. Secondary endpoints include the frequency of grade 4 neutropenia, ORR, PFS percentage of patients at or longer than two years of survival and at or longer than three years of survival, duration of response, cycles of chemo treatment, and quality of life.
The primary endpoint of OS was met in the ITT population (Combination (DP): n = 278 [male 199, female 79]; docetaxel (D): n = 281[male 207, female 74]). The following table summarizes the final results, which was published in Lancet Respiratory Medicine 12 (10): page 775-786 (2024).
Key findings of DUBLIN-3 study are summarized below:
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Favorable benefit/risk ratio: Significant improvement in OS (Hazard ratio or HR=0.82; same HR in the Western vs. Asian patients), PFS (HR=0.79) and ORR (nearly doubled). Durable anti-cancer benefits in doubling 24-months and 36-months OS rates. And 82% relative reduction in grade 4 neutropenia in Cycle 1 Day 8 (p<0.0001).
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Consistent OS benefit in 24-month follow-up after the database lock: OS HR=0.81 in the ITT population, with better OS benefit in the non-squamous subset (OS HR=0.72, p=0.0078). For the non-squamous subset patients, median OS (mOS) in Plinabulin/docetaxel arm was 11.4 months vs. 8.8 months in the docetaxel arm, with mOS benefit of 2.6 months.
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Improved OS benefit with more cycles of treatment (≥ 4, 6, 8, 10, or 12 cycles): for patients who used at least 4 cycles of treatment, OS HR=0.64, p=0.0027, with mOS benefit of 4.8 months (Plinabulin/docetaxel arm n=133; docetaxel arm n=127).
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Plinabulin/docetaxel combination is well-tolerated: Treatment-emergent adverse-events occurred in 273/274 (99·6%) of patients in the Plinabulin group and 276/278 (99·3%) in the control group. Higher incidences of grade 3/4 gastrointestinal disorders (46 patients [16·8%] vs. 8 [2·9%]) and transient grade 3 hypertension (50 patients [18·2%] vs. 8 [2·9%]) occurred in the Plinabulin vs. control group.
Plinabulin in Combination with Immuno-oncology Agents in Anti-Cancer Indications
Preclinical studies have identified some novel and intriguing activities of Plinabulin associated with stimulation of the immune system, consistent with Plinabulin’s ability to enhance the activity of immuno-oncology agents. We have observed in these studies that Plinabulin works at multiple early steps in the process of immune activation against cancer, in particular, to activate and mobilize tumor antigen-specific T-cells to the tumor. The potential role of Plinabulin in stimulating the activity of other immuno-oncology agents has been explored in several investigator-initiated Phase 1/2 trials described below.
Overview of immuno-oncology
The immune system is capable of recognizing and eliminating tumor cells; however, tumors are sometimes able to evade the immune response through alteration of regulatory checkpoint pathways. One of these pathways is driven by PD-1, a receptor that is expressed on immune T-cells. Between 35% and 100% of some tumors such as melanoma, hepatocellular carcinoma, colorectal cancer and NSCLC overexpress PD-L1, a compound naturally bound by PD-1. Binding of PD-L1 to PD-1 suppresses immune activation, allowing the tumor to evade destruction by the immune system. Immune checkpoint cancer therapies that target PD-1 such as nivolumab (Opdivo) have been approved for the treatment of around 20 types of cancers, including melanoma, NSCLC, renal cell carcinoma, classic Hodgkin’s lymphoma, head and neck squamous cell carcinoma, urothelial carcinoma, colorectal carcinoma and hepatocellular carcinoma. While PD-1/PD-L1 inhibitors are highly effective in a subset of tumors, there are multiple pathways that tumors rely upon to evade the immune system allowing many tumors to continue to proliferate.
The global market size of PD-1 and PD-L1 inhibitors/ immune checkpoint inhibitors was estimated at $52.3 billion in 2024. It is estimated at $63.7 billion in 2025 and $145.6 billion by 2030 at a compound annual growth rate (CAGR) of 18.0% (Modor Intelligence Research and Advisory 2024). Around 60% of the patients who receive such treatment progressed from PD-1/PD-L1 antibodies in NSCLC (Cancer Cell 2024).
As with the treatment of most cancers, combination treatments are often required to increase efficacy. In 2020, the combination of nivolumab, a PD-1 antibody, and ipilimumab, a CTLA-4 antibody, was approved in melanoma based on increased efficacy. However, this combination resulted in increases in grades 3 and 4 adverse events, which occurred in 55% of the combination patients compared to 16.3% in patients treated with nivolumab alone and 27.3% of patients treated with ipilimumab alone. We believe that the addition of Plinabulin to an immune checkpoint inhibitor such as PD-1 or PD-L1 antibodies has the potential to increase activity without increasing the rate of serious adverse events, or potentially decrease immune-related side effects. In addition, cancer patients who progressed from PD-1/PD-L1 antibodies could potentially benefit from Plinabulin and PD-1/PD-L1 combination and chemotherapy/radiation. Current investigator-initiated studies on these Plinabulin combinations aim to help design an optimum registrational study for these indications for patients who failed PD-1/PD-L1 inhibitors, especially in NSCLC.
Preclinical study data supporting Plinabulin in immuno-oncology
Checkpoint inhibitors (PD-1/PD-L1 inhibitors) alleviate immune system blocks at a relatively late stage in the overall immune process—at the point when T-cells recognize cancer cells. Recent “Tamon et al Cancer Cell 2024” paper studied the mechanism of “acquired resistance” of PD-1/PD-L1 inhibitors, including T-cell exhaustion and antigen presentation pathway mutation, which we believe Plinabulin has the potential to revert. Preclinical studies indicate that Plinabulin activates the immune system multiple steps earlier in the process of immune activation, and thus has the potential to complement the activity of checkpoint inhibitors. Both published and unpublished preclinical study data have suggested that Plinabulin can stimulate an immune response to cancer cells by increasing the “presentation of cancer antigens” by dendritic cells, stimulating dendritic cell proliferation, increasing levels of helper T-cells and by decreasing the levels of immunosuppressive regulatory T-cells.
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One example of this is in a colon cancer model (MC38) in immune competent mice. The combination of Plinabulin and a PD-1 antibody resulted in tumors that were approximately 25% smaller than those from control animals, similar to the levels seen with the combination of a PD-1 antibody and a CTLA-4 antibody. The triple combination of Plinabulin, a PD-1 antibody and a CTLA-4 antibody resulted in tumors that were smaller than those in animals treated with any of the other studied agents or the studied combinations thereof and approximately 40% smaller than the vehicle control.
Another example is in a PD-1 non-responsive tumor model which was conducted at Dr. Steven Lin’s lab at MD Anderson. The results of this preclinical study were highlighted in a poster presentation titled “Plinabulin, a microtubule destabilizing agent, improves tumor control by enhancing dendritic cell maturation and CD8 T-cell infiltration in combination immuno-radiotherapy,” at American Association for Cancer Research Virtual Annual Meeting in June 2020. Data highlights include:
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Preclinical effectiveness:
The triple immuno-oncology combination of Plinabulin, anti-PD-1 and radiation (triple combination) achieved a 100% complete response in a breast cancer model that is not responsive to PD-1 antibody alone.
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Sequential benefit:
Plinabulin’s effects on dendritic cell maturation are greater when administered after each dose of fractionated radiotherapy, compared to administration before radiation, or administration only once after the first dose of radiotherapy.
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Abscopal effect:
The Plinabulin triple combination anti-cancer effects in both irradiated and non-irradiated tumors in the same mice indicate the activation of a systemic anti-cancer immune response. Notably, CD8 cell levels in the non-irradiated tumors were almost double in the triple combination group compared to anti-PD-1 and radiation alone.
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Dendritic cell major histocompatibility complex class II, or MHC-II, up-regulation and T-cell tumor infiltration:
Plinabulin triple combination significantly increased dendritic cell MHC-II expression and T-cell infiltration in the tumor.
We believe that the activation of dendritic cells is a key to unlocking the next boost to the efficacy of immuno-oncology agents. Activated dendritic cells, which are the most potent antigen presenting cells, present foreign tumor antigens to T-cells to induce cancer-directed immune attacks. Thus, adding this critical step of dendritic cell activation in the immune cascade to the established effects of immune checkpoint inhibition therapies is expected to increase overall anti-cancer efficacy in the clinic and has the potential to re-sensitize patients who progress on prior immunotherapies. Even with the current PD-1 and PD-L1 antibody annual sales exceeding $50 billion, with most sales coming from lung cancer, around 60% of lung cancer patients could develop acquired resistance to PD-1 and PD-L1 antibody, and these patients currently have limited treatment options (Tamon et al Cancer Cell 2024). Our anti-cancer strategy is to combine Plinabulin with checkpoint inhibition and immune activation from radiotherapy. We believe the data strongly indicates that this triple combination has potential to help patients who failed or have progressed on anti-PD-1/PD-L1 targeted therapy, which represents a high unmet medical need.
Investigator-initiated studies in Plinabulin in immuno-oncology
We have explored and plan to continue to explore the role of Plinabulin in stimulating the activity of other immuno-oncology agents in clinical programs:
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Plinabulin + Pembrolizumab + Docetaxel in 2L NSCLC who progressed on PD-1/PD-L1 (Study 303)
Docetaxel remains the standard of care for second-line and third-line treatments of patients with NSCLC without targetable alterations who progress on immune checkpoint inhibitors with and without standard chemotherapy. In the recent TROPION Lung-01 Phase 3 studies, a similar patient population had an overall response rate (ORR) of 12.8% and median PFS (mPFS) of 3.7 months with docetaxel.
This investigator-initiated, single-arm, open-label, Phase 2 study (KeyPelms-004 or Study 303) evaluates the efficacy and safety of a triple combination regimen of pembrolizumab plus Plinabulin/docetaxel (NCT05599789). The study intends to enroll 47 patients and is funded by Merck’s Investigator Studies Program with provision of study drug and financial support. The study is ongoing at Peking Union Medical College Hospital, Beijing, China with the principal investigator Dr. Mengzhao Wang, Chief of the Department of Respiratory and Critical Care Medicine.
In March 2023, the first patient was enrolled. At the database lock on August 29, 2024, 36 patients were enrolled, 30 patients are evaluable. Prior to entry, all patients had experienced disease progression after initial clinical benefit with immune checkpoint inhibitors. Of the 30 treated patients (median age at 68.0 years; ranged 50-77 years), 73.3% were male and 26.7% were female; 60% were current or former smokers. Histology included 57% patients (n=17) with non-squamous cell carcinoma and 43% (n=13) with squamous cell carcinoma. The median follow-up was 11.5 months.
The combination was generally well tolerated. 46.7% of patients experienced grade 3 or higher treatment-related adverse effects, or AEs. Most common AE is myelosuppression (13.3%), gastrointestinal side effect (13.3%), and transient hypertension (6.7%). There were no treatment-related deaths.
Table below is the summary of the efficacy study of 30 patients presented at SITC conference in November 2024, which is consistent with the data reported on the first 19 patients in Study 303 at ESMO in September 2024.
Primary Endpoint
Plinabulin + Pembrolizumab + Docetaxel (n=30)
Confirmed ORR (RECIST 1.1)
21.1%
Secondary Endpoints
Median PFS (RECIST 1.1)
8.6 M
Median OS
(Overall Survival)
Not reached
Median DoR
(Duration of Response)
11.4 M
Disease Control Rate
(Partial Response + Stable Disease > 4 months)
89.3%
(25/28 – 2 patients withdrew after first dose)
Note: partial response: tumor(s) size reduction more than 30% since initial baseline measurement and there are no new tumors; stable disease: the tumor(s) have not increased in size by more than 20% or decreased in size by more than 30% since the initial baseline measurement and there are no new tumors.
Plinabulin + Pembrolizumab + Etoposide / Platinum in 1L ES-SCLC (Study 302)
Current treatment for first-line ES-SCLC includes Etoposide and Platinum (EP) and EP plus PD-L1 antibodies. Although the objective response rate (ORR) is high (around 60-70%), median progression free survival (PFS) remains low, even for PD-L1 and EP at around 5 months, with median overall survival at 10-13 months. Therefore, first-line treatment of ES-SCLC remains a serious unmet medical need.
In an open-label, single-arm Phase 2 investigator-initiated trial, Pembrolizumab, Plinabulin plus EP in first-line ES-SCLC will be evaluated for the efficacy and safety in Wuhan Union Hospital in China, with Dr. Xiaorong Dong, Deputy Director of the Oncology Research Department and Director of the Thoracic Oncology Department, as the principal investigator. The study intends to enroll 45 patients and is funded by Merck’s Investigator Studies Program with provision of study drug and financial support. The primary endpoint is the 12-month PFS rate. In March 2024, the first patient was enrolled. The study is ongoing.
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Plinabulin + PD-1/PD-L1 antibody + Radiation in multiple cancers of PD-1/PD-L1 failed patients in Multiple Cancer Types
In July 2018, we entered into a sponsored research agreement with MD Anderson to evaluate the benefits of adding Plinabulin to radiation therapy plus immune checkpoint antibodies. The pre-clinical study has demonstrated that the triple combination approach (Plinabulin+radiation+PD-1 antibody) has dramatic benefits in tumor reduction (100% tumor shrinkage), increasing tumor dendritic cell maturation and increasing tumor T-cell infiltration in animal models.
In June 2021, the first patient was dosed in this Phase 1/2 study at MD Anderson, for the treatment of patients after progression on PD-1 or PD-L1 antibody therapies in seven different cancer types with Plinabulin+PD-1/PD-L1 antibodies and radiation. The cancer types include bladder cancer, melanoma, Merkle cell cancer, microsatellite instability-high cancers (of any histology), NSCLC, renal cell cancer, and hogkins lymphoma. The protocol was updated in 2022 to include patients that have any tumor type with checkpoint inhibitor approval that may or may not have progressed on previous PD-1/PD-L1 antibodies or anti-CTLA-4. Enrollment of the Phase 1 study has been completed in March 2023. Topline clinical data with corresponding biomarker analysis was presented at the SITC 38th Annual Meeting in November 2023. Durable response was observed in heavily pre-treated patients, including two Hodgkin’s lymphoma patients who progressed after 12 or 16 prior lines of therapy respectively, including progression on PD-1 antibody and stem cell transplant therapies. In addition, DC maturation was observed in patients with the clinical benefit of partial response and stable disease.
Phase 1 portion of this study has been completed.
Plinabulin + PD-1 antibody in 2/3L NSCLC
In September 2016, UCSD enrolled the first patient in an investigator-initiated Phase 1/2 trial of Plinabulin in combination with nivolumab in patients with metastatic NSCLC. UCSD has completed the enrollment of 18 patients. The study had achieved its Phase 1 endpoint of safety evaluation and dose selection and the study has been completed. In addition, Fred Hutchison Cancer Center, together with the University of Washington, launched an investigator-initiated Phase 1/2 trial of Plinabulin in combination with nivolumab in patients with advanced NSCLC who have failed up to two previous therapies. The University of Washington study achieved the dose regimen endpoint and therefore the study site has been closed.
Preliminary safety data from these two trials were presented at the ASCO-SITC meeting in January 2018. In the 10 patients evaluated, the combination therapy was well-tolerated, with no immune related serious adverse events. Only two patients presented with immune related adverse events, one with a grade 1 event and the other with a grade 2 event. While these studies showed limited efficacy in Plinabulin and PD-1 antibody in patients who failed PD-1/PD-L1 inhibitors in prior lines, they provide important tolerability data for Plinabulin in combination with PD-1 antibody.
Plinabulin + PD-1 + CTLA-4 antibodies in 2/3L ES-SCLC
In October 2018, we announced the opening of an investigator-initiated Phase 1 clinical trial with a triple combination therapy, consisting of Plinabulin, nivolumab (one type of PD-1 antibody), and ipilimumab (one type of CTLA-4 antibody), for the treatment of second- and third-line ES-SCLC. The trial, conducted through the Big Ten Cancer Research Consortium, enrolled 16 patients at Rutgers Cancer Institute of New Jersey and other clinical centers in the U.S. in the Phase 1 portion of this Phase 1/2 combined study. This study investigated whether the addition of Plinabulin results in a reduction of immune-related side effects of PD-1 and CTLA-4 antibodies and if it provides efficacy synergy. In ASCO meeting in June 2021, we presented positive Phase 1 data from this study on 13 evaluable patients with immunotherapy naïve or resistant tumors in second-line and beyond in ES-SCLC, Plinabulin in combination with nivolumab and ipilimumab showed a 46% ORR. Additionally, the data demonstrated that the Plinabulin combination was able to re-sensitize tumors to immune-oncology therapy, that had previously progressed on prior immunotherapies, with a 43% ORR.
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In October 2021, the first patient was enrolled in the Phase 2 portion of this investigator-initiated study. Patients with histological or cytological confirmed ES-SCLC who progressed after at least one platinum-based chemotherapy regimen and checkpoint inhibitors received the triple combination of Plinabulin + nivolumab + ipilimumab. Patients in the Phase 2 study continued treatment until disease progression, development of unacceptable toxicity, or one of the protocol-defined reasons for treatment discontinuation occurs. Enrollment of the Phase 2 study has been completed in February 2023. Between September 2018 and February 2023, 39 patients were enrolled, and 36 patients received study treatment (16 in Phase 1; 20 in Phase 2). The data was published in 2024, with one patient using 90 cycles of treatment. Both Phase 1 and Phase 2 studies have been completed. We believe these studies were important to provide tolerability data for Plinabulin in combination with PD-1 and CTLA-4 inhibitors.
Plinabulin in Prevention of CIN
CIN overview
Neutropenia is an abnormally low blood concentration of neutrophils, a type of white blood cell, which may result from an abnormal rate of destruction or a low rate of synthesis of white blood cells in bone marrow. Neutropenia is graded according to its severity, which generally depends on neutrophil count. An absolute neutrophil count below 500 cells/mm3 (0.5 x 10^9 /L) is categorized as grade 4 neutropenia and a neutrophil count between 500 and 1,000 cells/mm3 (0.5-1.0 x 10^9 /L) is categorized as grade 3 neutropenia. Patients with low neutrophil counts are more susceptible to bacterial infections and sepsis, which are a significant cause of morbidity and mortality in cancer patients.
Chemotherapy is still the standard of care for cancer patients with or without combination with PD-1/PD-L1 antibodies in a number of cancer indications. Neutropenia represents a key limitation associated with most chemotherapies. Even with the current revolution of immunotherapies for anti-cancer treatment, PD-1/PD-L1 antibodies have been approved in combination with chemotherapy with improved anti-cancer efficacy, so chemotherapy is “here to stay”. The current standard of care for neutropenia is biologic drugs based on G-CSF, a human growth factor that stimulates the proliferation, differentiation and maturation of neutrophils. Treatment or prevention of CIN with G-CSF has been the standard of care since Neupogen (filgrastim) was approved in 1991. G-CSF includes filgrastim and pegfilgrastim, which is long-lasting filgrastim. While monotherapy G-CSF reduces duration of severe neutropenia, or DSN, over 80% of patients still experience grade 4 neutropenia, which is the most common reason for reducing the relative dose intensity of chemotherapy, downgrading the chemotherapy regimen, delaying chemotherapy schedule and discontinuing chemotherapy, all of which will negatively impact patients’ long-term survival outcome. Furthermore, G-CSF cannot be given on the same day as chemotherapy and the expansion of bone marrow generated by monotherapy G-CSF causes bone pain. According to post-marketing patient surveys, between 59% and 71% of patients report having experienced bone pain and, of those patients, about one-quarter describe the pain as severe.
The main benefit of G-CSF treatment, however, is in week 2 after chemotherapy and with side effect of bone pain. Week 1 after chemotherapy is considered the “Neutropenia Vulnerability Gap” where over 75% of CIN-related clinical complications occur, including febrile neutropenia, infection, hospitalization and death. Plinabulin has the potential to fill this “Neutropenia Vulnerability Gap” by working in week 1 to prevent the onset and progression of CIN. Therefore, we believe combining Plinabulin with G-CSF may maximize the protection of patients for the full cycle of chemotherapy, as demonstrated in the PROTECTIVE-2 Phase 3 registration study.
PROTECTIVE-2 Phase 3 study was the registration study to support the NDA submission for the use of Plinabulin in combination with G-CSF for the prevention of CIN. The NDA submission was based on positive data from this study, which shows that Plinabulin in combination with pegfilgrastim demonstrated superior CIN prevention benefit, compared to pegfilgrastim alone. The study met the primary endpoint, with a statistically significant improvement in the rate of prevention of grade 4 neutropenia (improved from 13.6% to 31.5%, p=0.0015) and met all key secondary endpoints, including DSN and absolute neutrophil count, or ANC nadir. In addition, the combination reduced clinical complications such as incidence and severity of febrile neutropenia, and incidence and duration of hospitalization for febrile neutropenia patients. The combination is well-tolerated, with over 20% reduction of grade 4 Treatment Emergent Adverse Events in the combination compared to that of pegfilgrastim. The NDA submissions included five supportive trials that show consistent CIN prevention in various chemotherapy regimens and cancers in over 1,200 patients.
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Based on the meta-analysis data over 7,000 patients in 36 clinical studies which was published in Cancer Investigation 2023, grade 4 neutropenia rate (primary endpoint of PROTECTIVE-2 Phase 3) is linked to adverse clinical consequences, such as febrile neutropenia and hospitalization.
Plinabulin’s effect in preventing CIN has been demonstrated in six clinical trials so far, namely Study 101, DUBLIN-3, PROTECTIVE-1 (Phase 2 and Phase 3), and PROTECTIVE-2 (Phase 2 and Phase 3), with consistent data for CIN prevention early onset benefit in week 1 after chemotherapy.
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In the Phase 2 portion of Study 101, the addition of Plinabulin to a standard regimen of docetaxel resulted in a statistically significant reduction (p=0.002) in the incidence of grade 3 and 4 neutropenia adverse events from 26% of patients in the docetaxel monotherapy arm to 7% in the Plinabulin plus docetaxel arm based upon a retrospective analysis of the data.
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In DUBLIN-3, a Phase 3 study for NSCLC, we evaluated 559 patients on a secondary endpoint of grade 4 neutropenia reduction in Cycle 1 Day 8 and demonstrated Plinabulin’s ability to reduce docetaxel induced grade 4 neutropenia in NSCLC patients by 80% (p<0.0001).
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In our registration program for CIN, Plinabulin has been studied in two Phase 2/3 clinical trials, the first in Plinabulin monotherapy compared to pegfilgrastim for the prevention of CIN caused by intermediate-risk chemotherapy with high risk factors, composed solely of Taxotere (docetaxel), in various cancer including NSCLC, breast cancer and prostate cancer patients (PROTECTIVE-1), and the second in the Plinabulin and pegfilgrastim combination compared to pegfilgrastim alone for the prevention of CIN caused by high-risk chemotherapy, a myelosuppressive chemotherapeutic regimen composed of three agents, Taxotere (docetaxel), Adriamycin (doxorubicin) and Cytoxan (cyclophosphamide), in breast cancer patients (PROTECTIVE-2). TAC is an example of high febrile neutropenia risk chemotherapy and is the regimen used in all G-CSF biosimilar registration studies.
PROTECTIVE-1 (Plinabulin monotherapy vs. Pegfilgrastim monotherapy)
Based on the clinical profile observed in Study 101 and the results of the discussions between us and the FDA, we refined our design of our two Phase 2/3 trials in CIN. The first trial, PROTECTIVE-1, was a Phase 2/3 trial of Plinabulin monotherapy compared to pegfilgrastim monotherapy in 160 patients in both Phase 2 and Phase 3 studies in various cancers, including advanced breast cancer, hormone refractory prostate cancer and advanced NSCLC patients, treated with docetaxel (intermediate febrile neutropenia risk chemotherapy with high risk factors) in the U.S., China, Russia and Ukraine.
The primary endpoint of this trial was non-inferiority in DSN in the first cycle of chemotherapy, compared to the standard of care, Neulasta (one type of pegfilgrastim, a long-lasting G-CSF). DSN represents the days the patient has grade 4 neutropenia. A clinically meaningful DSN is less than one day.
In the Phase 2 portion of PROTECTIVE-1, published at JAMA Oncology in September 2020, 55 NSCLC patients treated with one dose of Plinabulin at 20 mg/m2 on Day 1 (same day as chemotherapy) had the same incidence or rate of severe neutropenia (grade 4) as patients treated with one dose of Neulasta (6 mg) in the first 21-day cycle. Grade 4 neutropenia occurred in 14% of patients treated with either Plinabulin or Neulasta. This result established the recommended dose of 40 mg (equivalent to 20 mg/m2) for the Phase 3 portion of the trial based on a clear dose response in grade 4 neutropenia incidence and the DSN seen in the Phase 2 portion. Additionally, in the Phase 2 portion of PROTECTIVE-1, Plinabulin was shown to reduce thrombocytopenia and demonstrated a superior immune profile compared to Neulasta based on promyelocytes and immature neutrophil data.
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One of the secondary endpoints evaluated in PROTECTIVE-1 was the reduction of bone pain. Bone pain is a significant issue for this patient population and results in many patients discontinuing therapy. In the Phase 2 portion of PROTECTIVE-1, bone pain occurred in fewer patients treated with Plinabulin at 20 mg/m2 (11%, or 0% from Day 3) compared to patients treated with Neulasta (35%).
In the Phase 2 portion of PROTECTIVE-1, nearly half (45%) of patients who received Neulasta experienced thrombocytopenia (any grade) in Cycle 1, compared to 0% of patients who received 20 mg/m2 of Plinabulin. Plinabulin’s platelet-protective effect also carried through all four cycles in a statistically significant manner. Clinically significant thrombocytopenia, which is defined as a decrease in platelet counts of more than 30%, occurred less frequently in patients who received docetaxel with Plinabulin, compared to patients who received docetaxel and Neulasta over all four cycles (p=0.019).
In addition, our data further demonstrated that Plinabulin mobilizes CD34+ progenitor cells into the peripheral blood through a mechanism of action different from G-CSF or Plerixafor, potentially presenting a new option for hematopoietic cell transplantation. We evaluated CD34+ cell counts in the blood by measuring CD34+ levels pre-dose and at multiple time points through Day 8 of treatment with docetaxel, both with and without Plinabulin. CD34+ measurements were obtained in at least nine patients on both Day 0 and Day 8 for each Plinabulin dose. Patients treated with Plinabulin had statistically significant increases in CD34+ levels at Day 8 in a dose-dependent manner (p<0.0004).
In the Phase 3 portion of PROTECTIVE-1 (double-blind, active-controlled), 105 NSCLC, breast cancer and prostate cancer patients were enrolled to compare Plinabulin with Neulasta in CIN prevention benefit, with DSN in cycle 1 as the primary endpoint. The Phase 3 portion of PROTECTIVE-1 had met its primary endpoint of non-inferiority versus Neulasta for DSN in the first cycle, with statistical significance in a pre-specified interim analysis at 105-patient enrollment in December 2018. This conclusion was confirmed at the Data and Safety Monitoring Board meeting in January 2019, chaired by Dr. Crawford, founding member and former Chairman of the National Comprehensive Cancer Network guidelines for Neutropenia Management in the U.S. This finding was published in JAMA Network Open in January 2022.
PROTECTIVE-2 (Plinabulin + Pegfilgrastim combination vs. Pegfilgrastim monotherapy)
The second trial, PROTECTIVE-2, was a Phase 2/3 trial of Plinabulin in combination with a myelosuppressive chemotherapeutic regimen composed of three agents, Taxotere (docetaxel), Adriamycin (doxorubicin) and Cytoxan (cyclophosphamide) in 336 patients with solid tumors (breast cancer) in China and Ukraine. This trial compared Plinabulin in combination with Neulasta (6 mg) (the Plinabulin/Neulasta Combo) to measure superiority in efficacy as compared to Neulasta monotherapy, with rate of prevention of grade 4 neutropenia as the primary endpoint per protocol.
We enrolled 115 patients in the Phase 2 portion of PROTECTIVE-2. In October 2018, we announced Phase 2 data that demonstrated that the Plinabulin/Neulasta Combo led to a clinically meaningful reduction of the duration of grade 3 and 4 neutropenia, a statistically significant increase in the percentage of patients with no severe neutropenia (grade 3 and 4 neutropenia) in the first cycle of chemotherapy, a statistically significant reduction of bone pain, and less immune suppression compared with Neulasta monotherapy in the first cycle. Additionally, the Plinabulin/Neulasta Combo presented good tolerability and no cardio-safety issues. Our data suggested that combining Plinabulin with Neulasta reverses the immune-suppressive profile of Neulasta by lowering the percentage of patients with a neutrophil-to-lymphocyte ratio of less than 5 (p<0.007) or with a lymphocyte-to-monocyte ratio of greater than 3.2 (p<0.07) versus Neulasta alone. The data further suggested that Plinabulin can also activate the body’s innate immune response by increasing plasma levels of both neutrophil count and the immune-modulatory protein haptoglobin.
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In the Phase 3 portion of PROTECTIVE-2 (double-blind, active-controlled, registration superiority study), 221 patients were enrolled to evaluate the CIN prevention effect of the Plinabulin and pegfilgrastim combination compared with pegfilgrastim alone. It was designed as a superiority study to compare the safety and efficacy of Plinabulin (40 mg, Day 1 dose) in combination with pegfilgrastim (6 mg, Day 2 dose) versus a single dose of pegfilgrastim (6 mg, Day 2 dose) in patients with breast cancer, treated with TAC. The primary endpoint was the rate of prevention of grade 4 neutropenia, which correlates with high rates of infection, bacteremia, infection, fever and mortality. According to literature, patients treated with TAC and pegfilgrastim still have an incidence of grade 4 neutropenia of approximately 83-93%, or 7-17% of patients with rate of prevention of grade 4 neutropenia. Secondary endpoints include DSN cycle 1, which is the legacy primary endpoints for all biosimilar G-CSF approval studies. In addition, the incidence and duration of profound neutropenia were evaluated. According to literature, profound neutropenia leads to 80% patient death in first week of infection, 48% febrile neutropenia, and 50% infection.
PROTECTIVE-2 Phase 3 registration study demonstrated CIN prevention superiority in the Plinabulin and pegfilgrastim combination compared to pegfilgrastim alone, which met all primary and key secondary endpoints. Results of comparison of CIN prevention benefit between combo arm (Plinabulin+pegfilgrastim, n=111) and peg arm (pegfilgrastim alone, n=110) are detailed below.
Plinabulin + Pegfilgrastim
(n=111)
Pegfilgrastim
(n=110)
p value
Primary Endpoint:
Rate of prevention of grade 4 neutropenia
31.5%
13.6%
p=0.0015
Key Secondary Endpoints:
Mean ANC Nadir
0.538 x 10^9 cells/L
0.538 x 10^9 cells/L
p=0.0002
Rate of prevention of grade 3 neutropenia
20.7%
4.6%
p=0.003
We had previously submitted an NDA to each of the FDA and the NMPA based on positive results in our PROTECTIVE-2 Study, supported by five additional clinical studies as described above, for the use of Plinabulin in combination with G-CSF for the prevention of CIN. In November 2021, the FDA issued a Complete Response Letter for Plinabulin in combination with G-CSF for the prevention of CIN. In March 2023, we withdrew the NDA submission for the indication of Plinabulin in combination of pegfilgrastim agents to treat CIN in adult non-myeloid cancer from the NMPA.
All of these well-controlled clinical studies demonstrated Plinabulin’s benefit in the prevention of CIN with differentiated profile from G-CSF in week 1 benefit after chemotherapy, limited bone pain and limited thrombocytopenia. We are currently focusing on the anti-cancer benefit of Plinabulin, with CIN prevention as a safety benefit in anti-cancer studies of Plinabulin in combination with chemotherapy with or without PD-1/PD-L1 inhibitors.
Investigator-initiated study in multiple myeloma (Plinabulin + Pegfilgrastim combination)
Plinabulin in combination with pegfilgrastim was studied in a Phase 1, open label, investigator-initiated trial for the reduction of neutropenia burden in multiple myeloma patients who have undergone autologous hematopoietic cell transplantation, or AHCT, at Memorial Sloan Kettering Cancer Center. In this pilot study, patients with multiple myeloma were treated with a single high dose of melphalan and undergo AHCT. Patients received a Plinabulin 40 mg fixed dose intravenous infusion, and on day +1, pegfilgrastim 6 mg was administered per standard of care. The objectives of this study were to evaluate neutropenia burden, safety, tolerability, neutrophil and platelet engraftment rate, disease response, progression free survival, overall survival and patient reported outcome (PRO) assessment of symptom burden. In January 2022, the first patient was dosed in this study. Preliminary data was presented in August 2022 at the 19th International Myeloma Society Annual Meeting, showing that Plinabulin is well tolerated and only one out of the 10 patients enrolled (10%) had non-engraftment related neutropenic fevers or febrile neutropenia (FN) with Plinabulin and pegfilgrastim, compared to a historical number of 60% of FN with standard of care.
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Enrollment of this Phase 1 study was completed in March 2023. The study was completed and the topline data was presented at the ASCO in June 2023.
Other Programs
In addition to exploring Plinabulin’s therapeutic potential in combination with immuno-oncology agents, we have a pipeline of immuno-oncology product candidates and have utilized our research collaborators to advance these programs.
BPI-002 program
Our BPI-002 program is based on an oral small molecule agent that increases T-cell co-stimulation. Due to its short pharmacokinetics half-life, it has the potential of managing immune-related adverse events better than biological long half-life agents like CTLA-4 inhibitors in combination with PD-1/PD-L1 inhibitors. In preclinical cancer models, BPI-002 has significant anti-cancer effects as a monotherapy and in combination with checkpoint inhibitors. Investigational New Drug, or IND, enabling studies and efforts related to manufacturing and safety testing have been initiated.
BPI-003 program
Our IKK program, BPI-003, is based on a novel small molecule inhibitor of IKK, a protein kinase. IKK is involved in survival of some tumor cells as well as in the production of a number of cytokines and growth factors that serve as survival factors for various tumors. Our IKK inhibitor has shown promising activity in multiple animal models of pancreatic cancer.
BPI-004 program
Our BPI-004 program is focused on a small molecule that induces the production of neo-antigens by tumor cells, allowing tumors containing no immune cells to be infiltrated by the immune system. A large proportion of human cancers do not produce antigens that are recognized by the immune system. As a result, these tumors do not respond to treatments that work through interaction with the patient’s immune response. For example, these tumors will not respond to treatment with PD-1 inhibitors. A treatment that induces the tumor cells to produce antigens has the potential to make these cancers responsive to PD-1 inhibitors.
SEED ’ s Targeted Protein Degradation (TPD) Platform and Pipeline
SEED ’ s TPD platform
SEED is investigating an alternative approach to disease treatment in which disease-causing proteins are marked for early degradation. This approach uses a protein called a ubiquitin E3 ligase to target and promote the destruction of disease-causing proteins. To trigger degradation, the target protein is labeled with poly-ubiquitin by a specific ubiquitin ligase enzyme. Poly-ubiquitin acts as an indicating tag to cellular proteasome machinery that the target protein should be destroyed. SEED’s approach to tagging the target protein is using its proprietary “molecular glue” technology to bind the ubiquitin ligase to the target protein.
SEED uses its proprietary TPD technology platform on harnessing and engineering “molecular glue” to attack previously believed undruggable targets. Backed by a comprehensive intellectual property portfolio, SEED’s mission is to positively impact human health by creating novel protein degradation therapeutics to treat various severe diseases that currently have limited options for patients and their families. SEED was co-founded with Nobel Prize winner in TPD field, Dr. Avram Hershko. SEED is establishing a growing pipeline of novel drug candidates for internal development and in R&D collaboration with Eli Lilly and Eisai on a path to potential clinical and commercial success.
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We believe SEED is an established leader in overcoming the significant scientific challenges to discovering “molecular glue”, which enables the development of a new class of drugs with the potential to treat many previously untreatable medical conditions through the targeting of disease-causing proteins that are resistant to inhibition with traditional drug discovery methods. SEED stands out from its competitors through the discovery and use of its proprietary technology platforms for “molecular glue” discovery, focused on platforms addressing the most challenging aspect of this effort, which is to select the novel E3 ligase to glue to the disease-causing protein to mark it for degradation. SEED was featured as one of leading TPD companies in two Nature Review articles in March 2024 and in October 2024.
SEED ’ s relationship with BeyondSpring
Before founding SEED in June 2019, BeyondSpring has incubated the TPD technology internally through collaboration with Dr. Ning Zheng, a Howard Hughes Medical Institute Investigator at The University of Washington on a unique “molecular glue” used to selectively tag certain oncogene proteins with E3 ligase, one of the ubiquitin ligase enzymes. Dr. Huang and Dr. Zheng were the first to discover the crystal structure of the only two classes of E3 ligases. This work forms the structural basis for the selection of small molecules to be studied as a potential “molecular glue.”
In November 2020, SEED completed its Series A-1/A-2 financing where SEED issued and sold an aggregate of 1,194,030 of its Series A-1 Preferred Shares to BeyondSpring and SEED Technology Limited, a majority-owned indirect subsidiary of the Company, or, collectively, the BYSI Entities, for an aggregate purchase price of $3.0 million, and 1,990,000 of its Series A-2 Preferred Shares to Eli Lilly for an aggregate purchase price of $5.0 million, each at a cash purchase price of $2.5125 per share. In June 2022, upon the achievement of certain milestones as described in the share purchase agreement, the BYSI Entities collectively purchased an additional 1,194,028 Series A-1 Preferred Shares for an aggregate purchase price of $3.0 million and Eli Lilly purchased an additional 1,990,000 Series A-2 Preferred Shares for an aggregate purchase price of $5.0 million, each at a cash purchase price of $2.5125 per share. In August 2024, SEED completed the first close of its Series A-3 financing, where SEED sold an aggregate of 5,647,059 of its Series A-3 Preferred Shares to Eisai and certain other third-party investors, for an aggregate purchase price of $24.0 million, each at a cash purchase price of $4.25 per share.
In January 2025, we entered into definitive agreements to sell a portion of our Series A-1 Preferred Shares of SEED for $35.4 million, or $4.25 per share, to certain third-party investors in three installments. The first closing of approximately $7.35 million occurred in February 2025. The second closing of approximately $13.19 million and the third closing of approximately $14.88 million are expected to occur no later than December 15, 2025 and 2026, respectively. Each agreement contains specified termination rights for us and each purchaser, including a mutual termination right in the event a closing shall not have occurred by such specified date as set forth in each agreement. As of the date of this Annual Report on Form 10-K, the BYSI Entities own approximately 40.12% of the outstanding equity interest in SEED, and are expected to own approximately 28.02% and 14.37% of the outstanding equity interest in SEED after the second and third closings, respectively, in each case calculated on an as-converted basis (excluding any shares that may be reserved under an employee stock ownership plan, or similar arrangement), and assuming there is no other change to SEED’s share capital prior to such closings. As a result, SEED’s operations met the criteria under ASC 205-20 as discontinued operations for financial reporting purposes. See Note 3 (Discontinued operations) to our consolidated financial statements for additional information.
SEED ’ s research collaborations with Eli Lilly and Eisai
Eli Lilly
In November 2020, SEED entered into a research collaboration and license agreement, or the Collaboration Agreement, with Eli Lilly, to discover and develop new chemical entities that could produce therapeutic benefit through TPD.
Under the terms of the Collaboration Agreement, SEED received a $10 million upfront cash payment. SEED will also be eligible to receive up to approximately $780 million in potential pre-clinical and clinical development, regulatory and commercial milestones, as well as tiered royalties on net sales of products that result from the collaboration. As of the date of this Annual Report, SEED has received $3 million of these milestone payments for pre-clinical development. With the proceeds of these payments, SEED has invested in developing additional breakthrough and proprietary methods for “molecular glue” discovery, in order to enhance its advantage in growing “molecular glue” drug discovery and development efforts.
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Eisai
In August 2024, SEED entered into strategic research collaboration with Eisai to discover and develop novel molecular glue degraders for neurodegeneration and oncology indications. Under the terms of the research collaboration, SEED will lead preclinical discovery activities for the selected targets, including E3 ligase selection and identification of the appropriate molecular glue degraders. Eisai will have exclusive rights to develop and commercialize compounds derived from this collaboration. SEED will be eligible to receive upfront payments and potential preclinical, clinical, regulatory and sales milestone payments of up to $1.5 billion, plus tiered royalties on net sales of products that result from the collaboration upon Eisai’s exercise of their exclusive rights under the strategic research collaboration.
SEED ’ s development pipeline
SEED’s development pipeline includes six internal projects, as well as three joint development programs with Eli Lilly and Eisai. These nine programs involve multiple novel E3s and target oncology, neurodegeneration, immunology, and antiviral indications. Additional programs are in development for anti-aging applications.
SEED’s internal lead program is a novel RBM39 degrader for multiple solid tumors, targeting IND filing around mid-2025. RBM39 is an RNA splicing factor implicated in multiple mechanism-targeted solid tumor indications. In July 2024, the FDA granted Rare Pediatric Disease and Orphan Drug designations to SEED’s IND candidate ST-01156.
Pipelines
The following table summarizes the current status of Plinabulin’s and our other immuno-oncology product candidates’ indication in development.
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The following table summarizes the current status of SEED’s pipeline.
Our Strategy
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Develop Plinabulin as a potential “ pipeline in a drug ” in multiple solid tumor cancer indications. We are exploring the potential of Plinabulin in combination with immuno-oncology agents and other synergistic standards of care to target severe unmet medical needs in oncology. Plinabulin is a first-in-class small molecule, which is a unique tubulin binder with mechanism to induce dendritic cell maturation and T-cell activation, and targets tumor vasculature based on its differentiated binding to tubulin. We believe that its unique mechanism supports the improved anti-cancer efficacy potential in combination with checkpoint inhibitors and tumor antigen generators, including chemotherapy or radiation. We have multiple ongoing investigator-initiated studies with PD-1 antibodies provided by Merck and BMS, and these studies were conducted at leading institutions including MD Anderson, Rutgers University, and Peking Union Medical College Hospital in Beijing, China. The goal of these studies is to advance Plinabulin in clinical trials to investigate its therapeutic potential immuno-oncology agent in multiple cancers, especially in PD-1/PD-L1 antibody progressed patients, which we believe represent high unmet medical needs.
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Advance Plinabulin through global clinical trials and obtain regulatory approvals in select geographies. We have treated over 700 cancer patients with Plinabulin with good tolerability. We have completed our Phase 3 clinical trial (DUBLIN-3 study) for second- and third-line NSCLC with EGFR wild type and have reported positive clinical data in publication “Lancet Respiratory Medicine” in September 2024. The study demonstrated that the combination of Plinabulin and docetaxel had significant improvement in overall survival, progression free survival, and objective response rate, and significant reduction in grade 4 neutropenia compared to docetaxel; this regimen represents a potential positive benefit/risk ratio for these very sick patient population. We plan to use our best efforts to file an NDA with the NMPA as soon as possible. We are also evaluating the feasibilities of filing NDAs with regulatory agencies of other jurisdictions. All of our clinical trials have been conducted globally by working with leading global contract research organizations, or CROs, such as ICON and Covance (now Labcorp) to assure the quality of the data. We believe that our global development strategy has provided significant advantages, including the ability to conduct trials in China with timely and cost-effective enrollment. In addition, as China is the second largest pharmaceutical market in the world, we believe obtaining potential approvals in China could lead to significant commercial opportunity for Plinabulin.
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Partner with one or more global pharmaceutical companies to further develop and commercialize Plinabulin in the U.S. and the rest of world. We believe Plinabulin, if approved, could have significant commercial potential in the U.S. and globally as an anti-cancer agent across several substantial solid tumor patient populations, such as NSCLC and ES-SCLC, among others. Additionally, our early clinical results in immune-oncology indicate that Plinabulin may play an important role in triple combination immunotherapy with chemotherapy to improve or expand effectiveness of current immune-oncology therapeutic regimens and reduce chemotherapy induced neutropenia. The opportunities created by Plinabulin’s unique mechanism of action likely surpass our resources, and we plan to seek partners to accelerate and broaden Plinabulin’s reach.
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Maximize the value of SEED ’ s targeted protein degradation (TPD) technology platform. Through ongoing collaborations with world-leading pioneer experts in the ubiquitin proteasome and “molecular glue” discovery field, including Nobel Prize winner Dr. Avram Hershko, SEED is developing a breakthrough TPD technology platform for “molecular glue” discovery focused on protein of interest. We believe the investments and collaborations with Eli Lilly and Eisai serve to validate this TPD platform and its enormous future potential. Further, SEED has since reached three R&D milestones under the Collaboration Agreement with Eli Lilly, which we believe demonstrates the team’s execution capabilities. Furthermore, SEED currently has a robust pipeline with nine programs (six internal and three with Eli Lilly and Eisai) in diverse indications including oncology, neurodegeneration, immunology and anti-viral, with a lead internal oncology asset RBM39 degrader expected to file IND around mid-2025. With over 600 E3 ligases in the cell, TPD has the potential to develop drugs for over 70% of undruggable targets with novel discovery agents in multiple disease areas. SEED will seek to form additional partnerships to expand its TPD platform into several therapeutic areas, while advancing its proprietary product pipeline.
The strategies around Plinabulin described above are dependent upon our ability to obtain additional funding. We continue to explore strategic options in the United States and globally to support the execution of our business plan and to maximize shareholder value. These options may include licensing and partnership arrangements, a sale of the Company or its assets, equity or debt financing, or a combination of the above.
Commercialization
In August 2021, Dalian Wanchunbulin Pharmaceuticals Ltd., or Wanchunbulin, our partially owned Chinese subsidiary, entered into an exclusive commercialization and co-development agreement with Jiangsu Hengrui Pharmaceuticals Co., Ltd., or Hengrui, to further develop and commercialize Plinabulin in Greater China. Under the terms of the agreement, Wanchunbulin granted Hengrui exclusive rights to commercialize and co-develop Plinabulin in the Greater China markets, including mainland China, Hong Kong, Macau and Taiwan. Wanchunbulin retains the manufacturing rights of Plinabulin in the Greater China markets and will receive all Plinabulin net sales proceeds in such markets. Hengrui will receive a pre-determined percentage of the net sales in each quarter. Wanchunbulin received an upfront payment of RMB 200 million (approximately $31 million), and will receive regulatory and sales milestones of up to RMB 1.1 billion (approximately $171 million). Hengrui will be responsible for all costs associated with commercialization of Plinabulin in the Greater China markets. Pursuant to the terms of the agreement, Wanchunbulin will be responsible for 100% of the clinical and regulatory costs for the first two indications for Plinabulin: prevention of CIN and second/third- line treatment of NSCLC (EGFR wild type). Hengrui will fund 50% of the clinical development costs for additional indications for Plinabulin in the Greater China markets, with a Joint Steering Committee overseeing the clinical strategy and priorities.
In the U.S. and for the rest of the world, we currently plan to seek a co-development and commercialization partner to maximize Plinabulin’s potential in multiple cancer indications, if approved.
Intellectual Property
The proprietary nature of, and protection for, our product candidates and their methods of use are an important part of our strategy to develop and commercialize novel medicines, as described in more detail below. We have obtained U.S. patents and filed patent applications in the U.S. and other countries relating to certain of our product candidates, and are pursuing additional patent protection for them and for other of our product candidates and technologies.
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Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for our product candidates and other commercially important products, technologies, inventions and know-how, as well as on our ability to defend and enforce our patents including any patent that we have or may issue from our patent applications, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and proprietary rights of other parties.
As of December 31, 2024, we owned or co-owned 164 patents, in 33 jurisdictions, including 22 issued U.S. patents. We also owned 13 pending U.S. non-provisional patent applications as well as corresponding patent applications pending in other jurisdictions and four pending U.S. provisional patent applications. In addition, we owned four pending international patent applications related to Plinabulin filed under the Patent Cooperation Treaty, or PCT, which we plan to file nationally in the U.S. and in other jurisdictions directed to use of Plinabulin in combination with a PARP inhibitor, Plinabulin micelle compositions, use of Plinabulin in combination with a cyclin-dependent kinase inhibitor, and use of biomarkers for Plinabulin therapy.
Our patent portfolio as of December 31, 2024 included 18 issued U.S. patents directed to Plinabulin synthesis, polymorphic forms of Plinabulin, Plinabulin compositions, Plinabulin analogs, and Plinabulin use in the treatment of various disorders including docetaxel-induced neutropenia and certain other CIN, various cancers such as lung cancer, breast cancer, melanoma, prostate cancer, RAS mutant tumors, and brain tumors, and use of Plinabulin in combination with gemcitabine to reduce thrombocytopenia. These U.S. patents were scheduled to expire between 2025 and 2039, excluding any potential patent term restorations. The patent portfolio also contained counterpart patents granted in 32 foreign jurisdictions including Japan, South Korea, China, European countries, and other countries.
The term of individual patents may vary based on the countries in which they are obtained. In most countries in which we file including the U.S., the term of an issued patent is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. In the U.S., the term of a patent may be lengthened in some cases by a patent term adjustment, which extends the term of a patent to account for administrative delays by the U.S. Patent and Trademark Office, or USPTO, in excess of a patent applicant’s own delays during the prosecution process, or may be shortened if a patent is terminally disclaimed over a commonly owned patent having an earlier expiration date. In addition, in certain instances, the term of one patent for a given drug product can be restored (extended) to recapture a portion of the term effectively lost as a result of the FDA regulatory review period. However, the restoration period cannot be longer than five years and the total patent term including the restoration period must not exceed 14 years following FDA approval. We plan to seek such an extension of one of our U.S. patents directed to Plinabulin or its use when appropriate.
In certain foreign jurisdictions similar extensions as compensation for regulatory delays are also available. The actual protection afforded by a patent varies on a claim by claim and country by country basis and depends upon many factors, including the type of patent, the scope of its coverage, the availability of any patent term extensions or adjustments, the availability of legal remedies in a particular country and the validity and enforceability of the patent. In particular, up to a five-year extension may be available in the EU and Japan. We plan to seek such extensions as appropriate.
Furthermore, the patent positions of biotechnology and pharmaceutical products and processes like those we intend to develop and commercialize are generally uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in such patents has emerged to date in the U.S. The scope of patent protection outside the U.S. is even more uncertain. Changes in the patent laws or in interpretations of patent laws in the U.S. and other countries have diminished, and may further diminish, our ability to protect our inventions and enforce our intellectual property rights and, more generally, could affect the value of intellectual property.
Additionally, while we have already secured a number of issued patents directed to our product candidates, we cannot predict the breadth of claims that may issue from our pending patent applications or may have or may be issued from patents and patent applications owned by others. Substantial scientific and commercial research has been conducted for many years in the areas in which we have focused our development efforts, which has resulted in other parties having a number of issued patents and pending patent applications relating to such areas. Patent applications in the U.S. and elsewhere are generally published only after 18 months from the priority date, and the publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made. Therefore, patents and patent applications relating to drugs similar to our current product candidates and any future drugs, discoveries or technologies we might develop may have already been issued or filed, which could prohibit us from commercializing our product candidates.
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The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Our ability to maintain and solidify our proprietary position for our product candidates and technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of the pending patent applications that we currently own, may file or license from others will result in the issuance of any patents. The issued patents that we own or may receive in the future, may be challenged, invalidated or circumvented, and the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors with similar technology. Furthermore, our competitors may be able to independently develop and commercialize similar drugs or duplicate our technology, business model or strategy without infringing our patents. Because of the extensive time required for clinical development and regulatory review of a drug we may develop, it is possible that, before any of our product candidates can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of any such patent.
We may rely, in some limited circumstances, on trade secrets and unpatented know-how to protect aspects of our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with consultants, scientific advisors and contractors and invention assignment agreements with our employees. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Our commercial success will also depend in part on not infringing the proprietary rights of other parties. The existence of any patent by others with claims covering or related to aspects of our product candidates would require us to alter our development of commercial strategies, redesign our product candidates or processes, obtain licenses or cease certain activities. Such licenses may not be available on reasonable commercial terms or at all, which could require us to cease development or commercialization of our product candidates. In addition, our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop or commercialize our product candidates would have a material adverse impact on us. If others have prepared and filed patent applications in the U.S. that also claim technology to which we have filed patent applications or otherwise wish to challenge our patents, we may have to participate in interferences, post-grant reviews, inter parties reviews, derivation or other proceedings in the USPTO and other patent offices to determine issues such as priority of claimed invention or validity of such patent applications as well as our own patent applications and issued patents.
For more information on these and other risks related to intellectual property, see “Item 1A. Risk Factors—Risks Related to Our Intellectual Property.”
Competition
Our industry is highly competitive and subject to rapid and significant change. While we believe that our development and commercialization experience, commercial strategy, Breakthrough Therapy Designation status, scientific knowledge and industry relationships provide us with competitive advantages, we face competition from pharmaceutical and biotechnology companies, including specialty pharmaceutical companies, and generic drug companies, academic institutions, government agencies and research institutions.
There are a number of large pharmaceutical and biotechnology companies that currently market and sell drugs or are pursuing the development of drugs for the treatment of cancer for which we are developing our product candidates. For treatment of NSCLC with EGFR wild type, with PD-1 and pemetrexed have moved into first-line therapy, only the ramucirumab/docetaxel combination and docetaxel are effectively approved for treatment of second/third-line NSCLC. Bristol-Myers Squibb Company and Merck & Co., Inc. currently market and sell Opdivo (nivolumab) and Keytruda (pembrolizumab), respectively, both of which are PD-1 inhibitors. Eli Lilly currently markets and sells Cyramza (ramucirumab). Even though a number of Phase 3 clinical trials as second- and third-line treatments of NSCLC had not shown success in overall survival compared with docetaxel, there might be other competitors in clinical studies if and when they receive regulatory approval.
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Our strategy in developing Plinabulin as an anti-cancer agent is in its unique mechanism as a potent dendritic cell maturation agent, which leads to tumor antigen specific T-cell activation. Plinabulin effectively activates GEF-H1, an immune defense protein, which is shown to prolong patient survival in a number of cancers. The immune mechanism of Plinabulin can effectively add more T-cells, or “hit the gas” to kill cancer cells, while PD-1/PD-L1 antibodies are known to let T-cells “see” cancer cells, or “release the break.” Thus, combining Plinabulin, PD-1/PD-L1 antibodies, and chemotherapy or radiation have the potential to elevate the anti-cancer benefit and re-sensitize patients who progressed on immunotherapies.
While we are investigating an alternative approach to disease treatment by using molecular glue technology to tag dysfunctional proteins with ubiquitin ligase and destroy such proteins, there are a number of companies who are also working on using such technology to target and destroy dysfunctional proteins.
Many of our competitors have longer operating histories, better name recognition, stronger management capabilities, better supplier relationships, a larger technical staff and sales force and greater financial, technical or marketing resources than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Our commercial opportunity could be reduced or eliminated if our competitors develop or market products or other novel therapies that are more effective, safer or less costly than our current product candidates, or any future product candidates we may develop, or obtain regulatory approval for their products more rapidly than we may obtain approval for our current product candidates or any such future product candidates. Our success will be based in part on our ability to identify, develop and manage a portfolio of product candidates that are safer and more effective than competing products.
Government Regulation
Government authorities in the U.S. at the federal, state and local level and in other countries extensively regulate, among other things, the research and clinical development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing, pricing, export and import of drug products, such as those we are developing. Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized to address the requirements of and in the format specific to each regulatory authority, submitted for review and approved by the regulatory authority. This process is very lengthy and expensive, and success is uncertain.
Drugs are also subject to other federal, state, local and foreign statutes and regulations. The regulation of pharmaceutical products by government authorities can be affected by a variety of factors, including government budget, funding and staffing levels, payment of user fees and reauthorization of user fee programs, ability to hire and retain key personnel, as well as statutory, regulatory and policy changes. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable legal and regulatory requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions or other actions. These could include, among other actions, the regulatory authority’s refusal to approve pending applications, withdrawal of an approval, clinical holds, untitled or warning letters, voluntary product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution, injunctions, disbarment, fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any such administrative or judicial enforcement or other action could have a material adverse effect on us.
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U.S. Regulation
U.S. Government Regulation and Product Approval
Government authorities in the U.S. at the federal, state and local level extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing, export and import of drug products such as those we are developing. In the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and its implementing regulations and biologics under the FDCA and the Public Health Service Act and its implementing regulations.
From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. In addition to new legislation, FDA regulations and policies are often revised or reinterpreted by the agency in ways that may significantly affect our business and our product candidates or any future product candidates we may develop. The FDA and other U.S. government agencies also have been or may be subject to reductions in funding and downsizing of agency staffing levels, which could materially impact our business and operations. It is impossible to predict whether further legislative or FDA regulation, policy, funding or staffing changes will be enacted or implemented and what the impact of such changes, if any, may be.
U.S. Drug Development Process
The process of obtaining regulatory approvals and maintaining compliance with applicable federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process, or after approval, may subject an applicant to administrative or judicial sanctions or other actions or lead to voluntary product recalls. Administrative or judicial actions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. The process required by the FDA before a drug may be marketed in the U.S. generally involves the following:
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completion of nonclinical laboratory tests, preclinical studies and formulation studies according to Good Laboratory Practices, or GLP, regulations;
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submission to the FDA of an IND, which must become effective before human clinical trials may begin;
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approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated;
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performance of adequate and well-controlled human clinical trials according to Good Clinical Practice requirements, or GCPs, to establish the safety and efficacy of the proposed product for its intended use;
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preparation and submission to the FDA of an NDA, for a drug;
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satisfactory completion of an FDA advisory committee review, if applicable;
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satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices, or cGMP;
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satisfactory completion of FDA inspection of selected clinical investigators, clinical trial sites and/or the clinical trial sponsor, to assure compliance with GCP requirements and the integrity of the clinical data;
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payment of user fees and
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FDA review and approval of the NDA.
The testing and approval process requires substantial time, effort and financial resources and we cannot be certain that any approvals for our product candidates, or any future product candidates we may develop, will be granted on a timely basis, if at all.
Once a drug product candidate is identified for development, it enters the nonclinical testing stage. Nonclinical tests include laboratory evaluations of product chemistry, toxicity, formulation and stability, as well as animal studies to assess potential safety and efficacy. Adherence to federal regulations, such as GLPs and the Animal Welfare Act enforced by the Department of Agriculture, is required during the conduct of these tests. An IND sponsor must submit the results of the nonclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, to the FDA as part of the IND prior to commencing any testing in humans. An IND sponsor must also include a protocol detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated if the initial clinical trial lends itself to an efficacy evaluation. Some nonclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions related to a proposed clinical trial and places the trial on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns or noncompliance, and may be imposed on all products within a certain class of products. The FDA also can impose partial clinical holds, for example, prohibiting the initiation of clinical trials of a certain duration or for a certain dose.
We are conducting our current clinical trials under two INDs. Investigator-led clinical trials are being conducted under separate INDs.
All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These regulations include the requirement that all research subjects provide informed consent in writing before their participation in any clinical trial. Further, an IRB representing each institution participating in a 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. An IRB is responsible for protecting the rights of clinical trial subjects and considers, among other things, whether the risks to individuals participating in the clinical trial are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the information regarding the clinical trial and the consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Each new clinical protocol and any amendments to the protocol must be submitted for FDA review, and to the IRBs, for approval. The Food and Drug Omnibus Reform Act, or FDORA, which was signed into law on December 29, 2022, made numerous amendments to the FDCA including provisions intended to, among other things, decentralize and modernize clinical trials and enhance diversity in clinical trial populations.
Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
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Phase 1. The product is initially introduced into a small number of healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion and, if possible, to gain early evidence on effectiveness. In the case of some products for severe or life-threatening diseases, especially when the product is suspected or known to be unavoidably toxic, the initial human testing may be conducted in patients.
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Phase 2. The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage and schedule.
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Phase 3. The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate data to evaluate the efficacy and safety of the product for approval, to establish the overall benefit-risk profile of the product, and to provide adequate information for the labeling of the product.
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Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and safety reports must be submitted to the FDA and clinical investigators within 15 calendar days for serious and unexpected suspected adverse events, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator’s brochure, or any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug candidate. Additionally, a sponsor must notify FDA of any unexpected fatal or life-threatening suspected adverse reaction no later than 7 calendar days after the sponsor’s receipt of the information. Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product has been associated with unexpected serious harm to subjects.
Concurrent with clinical trials, companies usually complete additional preclinical studies and must also develop additional information about the chemistry and physical characteristics of the product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product drug and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product drug does not undergo unacceptable deterioration over its shelf life.
U.S. Review and Approval Processes
Assuming successful completion of the required clinical testing, the results of product development, nonclinical studies and clinical trials, together with other detailed information regarding the manufacturing process, analytical tests conducted on the product, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA requesting approval to market the new drug in the U.S. for one or more indications. Under the Prescription Drug User Fee Act, as amended, applicants are required to pay fees to the FDA for reviewing an NDA. These user fees, as well as the annual fees required for commercial manufacturing establishments and for approved products, can be substantial. The NDA review fee alone can currently exceed $4 million, and is likely to increase over time. The user fee requirement is subject to certain limited deferrals, waivers and reductions.
The FDA reviews all NDAs submitted within 60 days of submission to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be re-submitted with the additional information. The re-submitted application also is 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’s established goal is to review 90% of NDA applications given “Priority” status – where there is evidence that the proposed product would be a significant improvement in the safety or effectiveness in the treatment, diagnosis, or prevention of a serious condition – within 6 months, and 90% of applications given “Standard” status within 10 months, whereupon a review decision is to be made. The FDA, however, may not approve a drug within these established goals, and its review goals are subject to change from time to time. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use. The FDA also evaluates whether the product’s manufacturing is cGMP-compliant to assure the product’s identity, strength, quality and purity. Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. 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. The FDA also may refer the NDA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. An advisory committee is a panel of experts, including clinicians and other scientific experts, who provide advice and recommendations when requested by the FDA. The FDA is not bound by the recommendation of an advisory committee, but it considers such recommendations when making decisions.
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The approval process is lengthy and difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical data or other data and information. Even if such data and information are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response letter if the agency decides not to approve the NDA in its present form. The complete response letter usually describes all of the specific deficiencies that the FDA identified in the NDA that must be satisfactorily addressed before it can be approved. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application or request an opportunity for a hearing.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require post-approval studies, including Phase 4 clinical trials, to further assess a product’s safety and effectiveness after NDA approval and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. The FDA also may conclude that an NDA may only be approved with a Risk Evaluation Mitigation Strategy, or REMS, designed to mitigate risks through, for example, a medication guide, physician communication plan, or other elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these measures may materially affect the potential market and profitability of the product.
Failure to satisfy FDA post-marketing requirements can result in FDA enforcement action, up to and including withdrawal of NDA approval, and the FDA may prevent or limit further marketing of a product based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing requirements and FDA review and approval.
Post-Approval Requirements
Any products for which we receive FDA approval would be subject to pervasive and continuing regulation by the FDA, as well as other regulatory agencies, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements. The FDA strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market. Products may be promoted only for the approved indications and in accordance with the provisions of the approved label. Further, manufacturers must continue to comply with cGMP requirements, which are extensive and require considerable time, resources and ongoing investment to ensure compliance. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.
Manufacturers and other entities involved in the manufacturing and distribution of approved products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. The cGMP requirements apply to all stages of the manufacturing process, including the production, processing, sterilization, packaging, labeling, storage and shipment of the product. Manufacturers must establish validated systems to ensure that products meet specifications and regulatory requirements, and test each product batch or lot prior to its release. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other regulatory requirements. We rely, and expect to continue to rely, on third parties for the production of clinical quantities of our product candidates and any future product candidates we may develop. Future FDA and state inspections may identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution or may require substantial resources to correct.
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The FDA may withdraw a product approval 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, problems with manufacturing processes, or failure to comply with regulatory requirements, may result in restrictions on the product’s marketing; mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; imposition of distribution or other restrictions under a REMS program may result in restrictions on the product’s marketing or even complete withdrawal of the product from the market. Further, the failure to maintain compliance with regulatory requirements may result in administrative or judicial actions, such as fines, untitled or warning letters, holds on clinical trials, product seizures, product detention or refusal to permit the import or export of products, refusal to approve pending applications or supplements, restrictions on marketing or manufacturing, injunctions or consent decrees, or civil or criminal penalties, or may lead to voluntary product recalls.
Patent Term Restoration and Marketing Exclusivity
Depending upon the timing, duration and specifics of FDA approval of the use of our product candidates, or any future product candidates we may develop, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application, except that this review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, if available, we intend to apply for restorations of patent term for one of our currently owned patents beyond their current expiration dates, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA; however, any such extension may not be granted to us.
Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the nonclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
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Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information, which is publicly available at www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. In the U.S., sales of any products for which we may receive regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, private health insurers and other organizations. Third-party payors generally decide which products they will pay for and establish reimbursement levels for those products. In the United States, no uniform policy for coverage and reimbursement exists, and the process for determining whether a payor will provide coverage for a product may be separate from the process for setting the reimbursement rate that the payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the FDA-approved products for a particular indication. Moreover, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
Third-party payors are increasingly challenging the price and examining the medical necessity and cost- effectiveness of medical products and services, in addition to their safety and efficacy, particularly for new and innovative products and therapies, which may result in lower average selling prices. In order to obtain coverage and reimbursement for any product that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of any products, in addition to the costs required to obtain regulatory approvals. Our product candidates, or any future product candidates we may develop, may not be considered medically necessary or cost-effective. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover the product after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit or enable it to realize an appropriate return on its investment in product development.
The U.S. government and state legislatures have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement, requirements for substitution of generic products for branded prescription drugs, and increased transparency around drug pricing practices. For example, the Affordable Care Act contains provisions that may reduce the profitability of drug products, including, for example, increased rebates for drugs reimbursed by Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs. There also has been increased public and governmental scrutiny of the cost of drugs and drug pricing strategies, including by the U.S. Senate and federal and state prosecutors. In May 2018, President Trump released the “American Patients First” Blueprint which, along with related drug pricing proposals, could cause significant operational and reimbursement changes for the pharmaceutical industry. Although a number of these and other proposed measures will require authorization through additional legislation to become effective, Congress and the current Trump administration have each indicated that they will continue to seek new legislative and/or administrative measures to control drug costs. For example, the Inflation Reduction Act of 2022, or IRA, enacted on August 16, 2022, seeks to reduce prescription drug costs by, among other provisions, allowing Medicare to negotiate prices for certain high-cost prescription drugs in Medicare Parts B and D, imposing an excise tax on pharmaceutical manufacturers that refuse to negotiate pricing with Medicare, requiring inflation rebates to limit annual drug price increases in Medicare, and redesigning the Medicare Part D formula. However, it is unclear how the IRA will be effectuated or changed under the current Trump administration or the degree of impact that the IRA will ultimately have upon our business. Further, a budget resolution passed by the House of Representatives in February 2025 proposed significant spending reductions for Medicaid and other federal programs, which, if enacted as part of a future U.S. federal budget, could impact our future business prospects. Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals including our product candidates, if any achieve approval.
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The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. In addition, the emphasis on cost containment measures in the U.S. has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates also may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Other Healthcare Laws and Compliance Requirements
If we obtain regulatory approval of our products, we may be subject to various federal and state laws targeting fraud and abuse in the healthcare industry. These laws may impact, among other things, our proposed sales, marketing and education programs and our clinical research activities, and they may constrain the business or financial arrangements and relationships with healthcare providers and other parties through which we may market, sell and distribute any products for which we obtain marketing approval. In addition, we may be subject to patient privacy regulations by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order, or recommendation of, an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;
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federal civil and criminal false claims laws, false statement laws, and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent, or making a false statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation to pay money to the federal government;
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Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes federal criminal and civil liability for executing a scheme to defraud any healthcare benefit program, including private third-party payors and making false statements relating to healthcare matters;
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the federal transparency laws, including the federal Physician Payments Sunshine Act, which is part of the Affordable Care Act, that requires applicable manufacturers of covered drugs to disclose payments and other transfers of value provided to physicians and teaching hospitals and physician ownership and investment interests;
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and
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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and are not preempted by HIPAA, thus complicating compliance efforts.
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The Affordable Care Act broadened the reach of the fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-Kickback Statute and the applicable criminal healthcare fraud statutes contained within 42 U.S.C. § 1320a-7b. Pursuant to the statutory amendment, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the Affordable Care Act provides that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act or the civil monetary penalties statute. These and similar laws may be subject to further amendment or reinterpretation, and implementing regulations may be revised or reinterpreted, in ways that may significantly affect our business. For example, in November 2020 the U.S. Department of Health and Human Services issued rules that amended the regulations to the federal Anti-Kickback Statute; however, implementation of these rules has been and may continue to be affected by subsequent legislative and regulatory action or litigation delaying or challenging these rules. Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs.
Although we would not submit claims directly to payors, manufacturers can be held liable under the federal False Claims Act and other healthcare laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. In addition, our future activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state, and third-party reimbursement for our products, and the sale and marketing of our products, will be subject to scrutiny under the False Claims Act. Penalties for a False Claims Act violation include three times the actual damages sustained by the government, plus mandatory civil penalties, and the potential for exclusion from participation in federal healthcare programs. The applicable civil penalties are subject to an annual increase based on inflation; for 2025, the penalties are between $14,308 and $28,619 for each separate false claim. In addition, although the federal False Claims Act is a civil statute, conduct that results in a False Claims Act violation may also implicate various federal criminal statutes. Further, private individuals have the ability to bring actions under the federal False Claims Act and certain states have enacted laws modeled after the federal False Claims Act.
Because of the breadth of these laws and the narrowness of available statutory exceptions and regulatory safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If our operations were found to be in violation of any of the federal and state laws described above or any other governmental regulations that apply to us, we could be subject to significant criminal, civil and administrative penalties including damages, fines, individual imprisonment, 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, contractual damages, reputational harm, diminished profits and future earnings, disgorgement, exclusion from participation in government healthcare programs and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. To the extent that any of our product candidates were sold in a foreign country, we could be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, implementation of corporate compliance programs, reporting of payments or transfers of value to healthcare professionals, and additional data privacy and security requirements.
Patient Protection and the Affordable Care Act
The Affordable Care Act, enacted in March 2010, includes measures that have or will significantly change the way health care is financed in the U.S. by both governmental and private insurers. Among the provisions of the Affordable Care Act of greatest importance to the pharmaceutical industry are the following:
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The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. The Affordable Care Act increased pharmaceutical manufacturers’ rebate liability on most branded prescription drugs from 15.1% of the average manufacturer price to 23.1% of the average manufacturer price, added a new rebate calculation for line extensions of solid oral dosage forms of branded products, and modified the statutory definition of average manufacturer price. The Affordable Care Act also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization and expanding the population potentially eligible for Medicaid drug benefits.
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In order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The Affordable Care Act expanded the types of entities eligible to receive discounted 340B pricing.
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The Affordable Care Act imposed a requirement on manufacturers of branded drugs to provide a 50% discount off the negotiated price of branded drugs dispensed to Medicare Part D patients in the coverage gap (i.e., the “donut hole”).
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The Affordable Care Act imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs, apportioned among these entities according to their market share in certain government healthcare programs, although this fee does not apply to sales of certain products approved exclusively for orphan indications.
In addition to these provisions, the Affordable Care Act established a number of bodies whose work may have a future impact on the market for certain pharmaceutical products. These include the Patient-Centered Outcomes Research Institute, established to oversee, identify priorities in, and conduct comparative clinical effectiveness research and the Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services, to test innovative payment and service delivery models to lower Medicare and Medicaid spending. However, the current administration has taken action to limit or change certain U.S. healthcare policies. For example, President Trump rescinded an executive order issued by former President Biden pursuant to which the Center for Medicare and Medicaid Innovation (CMMI) created three drug pricing experiments, and it is unclear whether CMMI will continue to pursue some or any of these models.
The Affordable Care Act has been subject to challenges, as well as numerous ongoing efforts by the U.S. Congress and the administrations of President Trump to repeal or amend the Affordable Care Act in whole or in part. For example, a case challenging the Affordable Care Act’s requirement that private insurers cover certain preventative services is currently pending before the U.S. District Court for the Northern District of Texas. In March 2023, the judge struck down the requirement and, on appeal, in June 2024 the U.S. Court of Appeals for the Fifth Circuit held, among other things, that the Affordable Care Act’s requirement that group health plans and health insurance issuers cover certain preventative services without cost-sharing is unconstitutional. The parties have petitioned to appeal the case to the U.S. Supreme Court, which granted certiorari in January 2025. Although we cannot predict the full effect on our business of the implementation of existing legislation or the enactment of additional legislation pursuant to healthcare and other legislative reform, we believe that legislation or regulations that would reduce reimbursement for, or restrict coverage of, our products could adversely affect how much or under what circumstances healthcare providers will prescribe or administer our product candidates if we gain approval for any of them.
Chinese Regulation
In China, we operate in an increasingly complex legal and regulatory environment. We are subject to a variety of Chinese laws, rules and regulations affecting many aspects of our business. This section summarizes the principal Chinese laws, rules and regulations relevant to our business and operations.
General Regulations on China Food and Drug Administration
In China, the NMPA monitors and supervises the administration of pharmaceutical products, as well as medical devices and equipment. The NMPA’s primary responsibility includes evaluating, registering and approving new drugs, generic drugs, imported drugs and traditional Chinese medicines; approving and issuing permits for the manufacture, export and import of pharmaceutical products and medical appliances; approving the establishment of enterprises for pharmaceutical manufacture and distribution; formulating administrative rules and policies concerning the supervision and administration of cosmetics, pharmaceuticals and medical equipment; and handling significant accidents involving these products. The local provincial drug administrative authorities are responsible for supervision and administration of drugs within their respective administrative regions.
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The PRC Drug Administration Law, promulgated by the Standing Committee of the National People’s Congress in 1984, as amended in 2001, 2013, 2015 and 2019, respectively, and the Implementing Measures of the PRC Drug Administration Law promulgated by the State Council in 2002, as amended in 2016, 2019 and 2024, respectively, set forth the legal framework for the administration of pharmaceutical products, including the research, development and manufacturing of drugs.
The PRC Drug Administration Law was revised to strengthen the supervision and administration of pharmaceutical products and to ensure the quality and safety of those products for human use. The revised PRC Drug Administration Law applies to the development, production, trade, application, supervision and administration activities of pharmaceutical products. It regulates and prescribes a framework for the administration of pharmaceutical preparations of medical institutions and for the development, research, manufacturing, distribution, packaging, pricing and advertisement of pharmaceutical products. The most recently revised PRC Drug Administration Law incorporates the drug marketing authorization holder system, reiterates that several kinds of drugs may be approved conditionally or enjoy priority to the drug marketing examination and approval procedures, applies a so-called implied license system for clinical trial approval and cancels several certification requirements. The revised Implementing Measures of the PRC Drug Administration Law provide detailed implementing regulations for the revised PRC Drug Administration Law.
Under these regulations, we need to follow related regulations for nonclinical research, clinical trials and production of new drugs.
Good Laboratories Practice Certification for Nonclinical Research
To improve the quality of animal research, the China Food and Drug Administration, or CFDA, promulgated the Administrative Measures for Good Laboratories Practice of Nonclinical Laboratory in 2003, which was amended in July 2017, and began to conduct the certification program of the GLP. In April 2007, the CFDA issued the Circular on Measures for Certification of Good Laboratory Practice, or CFDA Circular 214, which was amended on January 19, 2023, providing that the NMPA is responsible for certification of nonclinical research institutions. Under CFDA Circular 214, the NMPA will approve and issue GLP certificates to the applicants that meet the GLP requirements, and the GLP certificates are valid for 5 years.
Approval for Clinical Trials and Production of New Drugs
According to the Provisions for Drug Registration promulgated by the State Administration for Market Regulation in 2020, Circular on Chemical Drug Registration Classification and Requirements on Application Materials by the NMPA in June 2020, Drug Administration Law promulgated in 1984 and amended by the Standing Committee of the National People’s Congress in 2001, 2013, 2015 and 2019, Circular on Regulations for Special Approval on New Drug Registration issued by the CFDA in 2009, and Circular on Information Publish Platform for Pharmaceutical Clinical Trials issued by the CFDA in 2013, we must comply with the following procedures and obtain several approvals for clinical trials and production of new drugs.
Good Clinical Trial Practice
To improve the quality of clinical trials, the CFDA amended the Administration Rules of Quality of Drug Clinical Practice in April 2020. According to the Administration Rules of Quality of Drug Clinical Practice, clinical trial means systematical investigation of drugs conducted on human subjects (patients or healthy volunteers) to prove or reveal the function, adverse reactions and/or absorption, distribution, metabolism and excretion of the drug being investigated. The purpose of a clinical trial is to determine the therapeutic efficacy and safety of the drug.
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In April 2020, the NMPA and the National Health Commission promulgated the revised Administration Rules of Quality of Drug Clinical Practice, which became effective in July 2020, in order to further ensure the quality of clinical trials and the safety of human subjects. The revised Administration Rules of Quality of Drug Clinical Practice provides comprehensive and substantive requirements on the design and conduct of clinical trials in China. In particular, the revised Administration Rules of Quality of Drug Clinical Practice enhances the protection for study subjects and tightens the control over bio-samples collected under clinical trials.
The revised Administration Rules of Quality of Drug Clinical Practice also set out the qualifications and requirements for the investigators and centers participating in clinical trial, including: (i) professional certification at a clinical trial center, professional knowledge, training experience and capability of clinical trial, and being able to provide the latest resume and relevant qualification documents per request; (ii) being familiar with the trial protocol, investigator’s brochure and relevant information of the trial drug provided by the applicant; (iii) being familiar with and complying with the revised Administration Rules of Quality of Drug Clinical Practice and relevant laws and regulations relating to clinical trials; (iv) keeping a copy of the authorization form on work allocation signed by investigators; (v) investigators and clinical trial centers shall accept supervision and inspection organized by the applicant and inspection by the drug regulatory authorities; and (vi) in the case of investigators and clinical trial centers authorizing other individual or institution to undertake certain responsibilities and functions relating to clinical trial, they shall ensure such individual or institution are qualified and establish complete procedures to ensure the responsibilities and functions are fully performed and generate reliable data.
Clinical Trial Application
Upon completion of its nonclinical research, a research institution must apply for approval of a clinical trial application before conducting clinical trials.
On July 24, 2018, the NMPA issued the Announcement on Adjusting the Approval Process for Drug Clinical Trials, which provides that clinical trials shall be deemed to have been approved if the application is filed with the Center for Drug Evaluation, or CDE, and there is no negative or questionable comment received from the CDE in 60 working days from the date that the application is accepted and the application fee is paid.
On December 1, 2019, the newly revised PRC Drug Administration Law came into effect, which adopted the above-mentioned implied license system into state legislative level. It provides that the medical products administrative department under the State Council shall, within 60 working days from the date of acceptance of the application for clinical trial, decide whether to approve the application and notify the clinical trial applicant of the decision; if it fails to notify the clinical trial applicant within the aforesaid time limit, it shall be deemed that the application is approved.
On January 22, 2020, the revised Provisions for Drug Registration were issued by the State Administration for Market Regulation, or SAMR, which came into effect on July 1, 2020. The provisions provide that the CDE shall decide whether to approve an application for clinical trial within 60 working days upon acceptance. If the applicant is not notified within such time limit, it shall be deemed that the application is approved.
Special Examination and Approval for Domestic Category 1 Pharmaceutical Products
Domestic Category 1 New Drugs are Eligible for Preferred Procedures
According to Provisions for Drug Registration promulgated by the SAMR in 2020, drugs fall into one of three categories, namely chemical drugs, biological product or traditional Chinese medicine. And according to the Circular on the Chemical Drug Registration Classification and Requirements on Application Materials, which was promulgated by the NMPA on June 29, 2020 and came into effect on July 1, 2020, chemical drugs are classified into 5 categories. A Category 1 drug is a new drug that has never been marketed in any country.
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Pursuant to the revised Provisions for Drug Registration, during the clinical trial for new drugs used for severe life-threatening diseases or diseases which seriously impact the quality of life and for which there is no other effective treatment approach or there is adequate evidence to prove that said new drugs have obvious clinical advantages over existing treatment approach(es), the applicant may request for application of breakthrough therapeutic drug procedure. The clinical trials under the breakthrough therapeutic drug procedure may enjoy the following priority: (i) the applicant may submit an application for communication to the CDE during the key phase of the clinical trial of drugs, and the CDE shall arrange for review officers to communicate with the applicant; (ii) the applicant may submit research materials in phases to the CDE; and (iii) the CDE shall, based on the available research materials, give opinions or recommendations pertaining to the next step of the research scheme and feedback to the applicant. On December 10, 2020, the NMPA issued the revised Administration Measures for the Communication of Drug Development and Technical Review which stipulated detailed procedural rules of the communication.
Pursuant to the revised Provisions for Drug Registration, the following drugs with significant clinical value may enjoy a priority procedure for drug marketing authorization: (i) urgently needed clinical drugs and innovative drugs and improved new drugs developed for prevention and treatment of major infectious and orphan diseases; (ii) new varieties, dosage forms and specifications of children’s medicines that conform to the physiological characteristics of children; (iii) urgently needed vaccines and innovative vaccines for disease prevention and control; (iv) pharmaceuticals under breakthrough therapeutic drug procedures; (v) drugs meeting the requirements of conditional approvals; and (vi) other circumstances as further specified by the NMPA. The drug registration applicant may submit an application for priority review and approval for their drug applications simultaneously with filing the drug marketing application upon confirmation with the CDE beforehand. The drug marketing review time limit is stipulated as 130 working days for the drug applications, which enjoy a priority procedure for drug marketing authorization. On July 8, 2020, the NMPA issued Protocol for the Review of Breakthrough Therapeutic Drugs (Trial), Protocol for Review and Approval of Conditional Approval of Drugs Marketing Applications (Trial) as well as Protocol for Prioritized Review and Approval of Drugs Marketing Certificates (Trial), which stipulated detailed procedural rules for the breakthrough therapeutic drug procedure and priority procedure, procedural rules for drugs that meet the conditions for conditional approval for marketing, and procedures and detailed conditions of the priority review and approval, respectively.
Plinabulin has been granted Breakthrough Therapy Designation by the NMPA, may enable us to pursue a more expedited path to approval in China and bring therapies to patients more quickly.
The Advantages of Category 1 New Drugs over Category 5 Drugs
Prior to the enactment of the Reform Plan for Registration Category of Chemical Medicine, or the Reform Plan, Category 3 drugs are drugs which have already been marketed abroad by multinational companies, but are not yet approved in China, and Category 3 drugs now are reclassified as Category 5 according to the Reform Plan. NMPA issued the Circular on Chemical Drug Registration Classification and Requirements on Application Materials in June 2020 (effective in July 2020), which reaffirmed the principles of the classification of chemical drugs set forth by the Reform Plan, and made minor adjustments to the subclassifications of Category 5. According to such rule, Category 5.1 are innovative chemical drugs and improved new chemical drugs while Category 5.2 are generic chemical drugs, all of which shall have been already marketed abroad but not yet approved in China. Compared with the application for Category 5 drugs, the application for Category 1 domestic new drugs has a more straight-forward registration pathway. According to the Administration Measures for the Communication of Drug Development and Technical Review issued by NMPA on December 10, 2020, where breakthrough therapeutic drug procedure and priority procedure is granted, the application for clinical trial and marketing will be handled with priority and with enhanced communication with the CDE.
In comparison, according to Provisions for Drug Registration promulgated by the SAMR in 2020, the registration pathway for Category 5 drugs is complicated and evolving. Category 5 drug applications may only be submitted after a company obtains an NDA approval and receives the Certificate of Pharmaceutical Product, or CPP, granted by a major regulatory authority, such as the FDA or the European Medicines Agency, or EMA. Multinational companies may need to apply for conducting multi-regional clinical trials, which means that companies do not have the flexibility to design the clinical trials to fit the Chinese patients and standard-of-care. Moreover, a requirement to further conduct local clinical trials can potentially delay market access by several years from its international NDA approval. Further, according to Opinions on Reforming the Review and Approval Process for Drugs and Medical Devices issued by the State Council in August 2015, which is a guideline for future legislation and NMPA examination, the drugs which have already been marketed abroad may no longer be categorized as new drugs under Chinese law in the future, and therefore may not be able to enjoy any preferential treatment for new drugs. In order to implement this guideline, in March 2016, the CFDA issued the Reform Plan, which changed the registration category of chemical medicine stipulated in Provisions for Drug Registration. According to the Interpretation of Reform Plan issued by CFDA, a new drug refers to a drug that has never been marketed in China or abroad. And according to Provisions for Drug Registration promulgated by the SAMR in 2020 and the Circular on the Chemical Drug Registration Classification and Requirements on Application Materials which was promulgated by the NMPA on June 29, 2020 and came into effect on July 1, 2020, the interpretation on new drugs was also accepted.
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Our product candidates are all new therapeutic agents and we expect that all of our current product candidates fall under the Category 1 application process. Although the regulatory framework previously required approval of separate clinical trial applications prior to initiating each phase of clinical development, in December 2015, the CFDA approved our clinical trial application including all phases of clinical trials for Plinabulin as a direct anti-cancer agent in NSCLC when combined with docetaxel and for the prevention of CIN.
Changes to the Review and Approval Process
In August 2015, the State Council issued Opinions on Reforming the Review and Approval Process for Drugs and Medical Devices, providing several potential policy changes that could benefit the pharmaceutical industry:
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A plan to accelerate innovative drug approval with a special review and approval process, with a focus on areas of high unmet medical needs, including innovative drugs for HIV, malignant tumors, serious infectious diseases, orphan diseases; drugs sponsored by national science and technology major projects and national major research and development plans; innovative drugs to be manufactured locally in China; children’s drugs; drugs using advanced formulation technology, using innovative treatment methods, or having distinctive clinical benefits;
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A plan to adopt a policy which would allow institutions of drugs research and development to act as the marketing authorization holder;
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A plan to improve the review and approval of clinical trials, and to allow the new drugs which have not been marketed in abroad to conduct clinical trials in China at the same time as they are doing so in other countries and encourage domestic clinical trial institutions to participate in international multi-center clinical trials.
In November 2015, the CFDA released the Circular concerning Several Policies on Drug Registration Review and Approval, which further clarified the following policies potentially simplifying and accelerating the approval process of clinical trials:
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A one-time umbrella approval procedure allowing approval of all phases of a new drug’s clinical trials at once, rather than the current phase-by-phase approval procedure, will be adopted for new drugs’ clinical trial applications;
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A fast-track drug registration or clinical trial approval pathway will be available for the following applications: (1) registration of innovative new drugs treating and preventing HIV, malignant tumors, serious infectious diseases and orphan diseases, etc.; (2) registration of pediatric drugs; (3) registration of geriatric drugs that treat China-prevalent geriatric diseases; (4) registration of drugs sponsored by national science and technology major projects and national major research and development plans ; (5) registration for drugs with urgent clinical need using advanced technology, using innovative treatment methods, or having distinctive clinical benefits; (6) registration of foreign innovative drugs to be manufactured locally in China; (7) concurrent applications for new drug clinical trials which are already approved in the U.S. or European Union, or concurrent drug registration applications for drugs which have applied for marketing authorization and passed onsite inspections in the U.S. or European Union and are manufactured with the same production line in China; and (8) clinical trial applications for drugs with urgent clinical need and patent expiry within three years, and marketing authorization applications for drugs with urgent clinical need and patent expiry within one year.
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In December 2017, the CFDA released the Opinions on Encouraging Drug Innovations and Implying the Prioritized Review and Approval System, which further stipulated the scope of priority review and approval. The following drugs will be entitled to priority review and approval:
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Drugs with obvious clinical benefits if any of the following circumstances applies: (1) registration applications for innovative drugs that are not marketed in China or abroad; (2) registration applications for innovative drugs to be manufactured locally in China; (3) registration applications for drugs using advanced formulation technology, using innovative treatment methods, or having distinctive clinical benefits; (4) clinical trial applications for patented drugs with patent to be expired in three years and manufacturing applications for drugs with patent to be expired in one year; (5) concurrent applications for new drug clinical trials which are already approved in the U.S. or European Union, or concurrent drug registration applications for drugs which have applied for marketing authorization and passed onsite inspections in the U.S. or European Union and are manufactured using the same production line in China; (6) registration applications for traditional Chinese drugs (including ethnic drugs) with clear clinical directions in the prevention and treatment of severe diseases; (7) registration applications for new drugs sponsored by national science and technology major projects, national major research and development plans and of which clinical trials were conducted by national clinical medical research centers and recognized by the administration department of such centers.
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Drugs with obvious clinical benefits in the prevention and treatment of following diseases: (1) HIV; (2) pulmonary tuberculosis; (3) viral hepatitis; (4) orphan diseases; (5) malignant tumor; (6) pediatric drugs; (7) geriatric diseases.
On July 8, 2020, the NMPA issued Protocol for the Review of Breakthrough Therapeutic Drugs (Trial), Protocol for Review and Approval of Conditional Approval of Drugs Marketing Applications (Trial) as well as Protocol for Prioritized Review and Approval of Drugs Marketing Certificates (Trial), which replaced the Opinions on Encouraging Drug Innovations and Implying the Prioritized Review and Approval System.
In November 2015, the Standing Committee of the National People’s Congress issued the Decision on Authorizing the State Council to Conduct the Pilot Program of the System of the Marketing Authorization Holder in Several Regions and the Relevant Issues, which authorized the State Council to conduct the pilot program of the system of the holders of drug marketing licenses in Beijing, Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong and Sichuan, and authorized the State Council to conduct reforms of registration category for drugs. In May 2016, the General Office of the State Council issued Circular on the Pilot Program for the Drug Marketing Authorization Holder System, or Circular 41, which signals that the drug marketing authorization holder system is finally put into implementation. Circular 41 allows institutions of drugs research and development and research specialist staff in Beijing, Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong and Sichuan, to act as the applicant of drugs registration and to submit applications for drug clinical trials and drug marketing. For those drugs newly registered after the effective date of Circular 41, applicants are allowed to submit applications for becoming a drug marketing authorization holder at the same time as they submit applications for drug clinical trials or drug marketing. In July 2016, the CFDA issued Circular on Conducting Works regarding the Pilot Program for the Drug Marketing Authorization Holder System, which provides further details on the application procedures stipulated in Circular 41. In August 2017, the CFDA issued the Circular on the Matters relating to Promotion of the Pilot Program for the Drug Marketing Authorization Holder System. This notice was issued, among other things, to advance implementation of a system pilot program for holders of drug marketing authorization, to delineate the rights and obligations of such holders, to enhance the quality control system for the drug manufacturing process and to improve the responsibility system over drug manufacturing and marketing supply chains. In October 2018, the Standing Committee of the National People’s Congress issued the Decisions on Extending the Term of the Pilot Program for the Drug Marketing Authorization Holder System in Several Regions, which extended the expiration date of the pilot program from November 4, 2018 to November 4, 2019.
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On December 1, 2019, the newly revised PRC Drug Administration Law came into effect, which formally adopts and signals the nationwide implementation of the drug marketing authorization holder system. In accordance with the PRC Drug Administration Law, an enterprise or a drug research and development institution is permitted to act as the marketing authorization holder and to engage pharmaceutical manufacturers to produce drug products. Moreover, it provides that the drug marketing authorization holder shall establish a drug quality assurance system and shall be responsible for the non-clinical research, the clinical trials, the drug production and operation, the post-marketing research and the adverse reaction monitoring of the drugs, etc.
Furthermore, the PRC Drug Administration Law provides that priority in the drug registration approval process shall be given to drugs in short clinical supply and new drugs developed for the prevention and treatment of major infectious diseases, orphan diseases and other diseases.
On January 22, 2020, the revised Provisions for Drug Registration were issued by the SAMR, which came into effect on July 1, 2020. Pursuant to the revised Provisions for Drug Registration, the following drugs with significant clinical value may enjoy a priority procedure for drug marketing authorization: (1) urgently needed clinical drugs and innovative drugs and improved new drugs developed for prevention and treatment of major infectious and orphan diseases; (2) new varieties, dosage forms and specifications of children’s medicines that conform to the physiological characteristics of children; (3) urgently needed vaccines and innovative vaccines for disease prevention and control; (4) pharmaceuticals under breakthrough therapeutic drug procedures; (5) drugs meeting the requirements of conditional approvals; and (6) other circumstances as further specified by the NMPA. The drug registration applicant may submit an application for priority review and approval for their drug applications simultaneously with filing the drug marketing application upon confirmation with the CDE beforehand. The drug marketing review time limit is stipulated as 130 working days for the drug applications, which enjoy a priority procedure for drug marketing authorization. On July 8, 2020, the NMPA issued Protocol for Prioritized Review and Approval of Drugs Marketing Certificates (Trial), which stipulated procedures and detailed conditions of the priority review and approval, while replacing the Opinions on Encouraging Drug Innovations and Implying the Prioritized Review and Approval System by the CFDA.
On March 12, 2021, the National People’s Congress released the Fourteenth Five-Year Plan of the National Economy and Social Development of the People’s Republic of China, or the Fourteenth Five-Year Plan, which provides that the government will improve the accelerated review and approval mechanism for innovative drugs, vaccines and medical devices, enhance the review and approval of drugs and medical devices for the treatment of orphan diseases and diseases with urgent clinical needs, and promote the domestic marketing of new drugs and medical devices marketed abroad with urgent clinical needs.
On May 10, 2021, the General Office of the State Council issued the Implementing Opinions on Comprehensively Strengthening the Building of Drug Regulation Capability. It provides that the ability of the authorities on technical review shall be improved. Focusing on the strategic needs of coordinated regional development, existing regulatory resources shall be integrated, the establishment of inspection institutions for traditional Chinese medicine and biological products (vaccines) shall be optimized, and professional and technical abilities shall be strengthened. The coordinated working mechanism between research and review of drugs and medical devices which are innovative or with urgent clinical needs shall be improved and the application of new technologies and research and development of new products shall be encouraged. The authority shall give full play to the role of expert advisory committees in reviewing and making decisions, and disclose expert opinions, evaluation results and evaluation reports in accordance with the laws. Communication methods and channels shall be enhanced, communication frequency of innovative medicine and medical device conferences shall be increased, and technical guidance and services for applicants shall be strengthened. The system for importing overseas marketed drugs with urgent clinical needs shall also be improved.
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Non-Inferiority Standard
In China, a drug may receive regulatory approval without showing superiority in its primary endpoint. Rather, a drug may be approved for use if it shows non-inferiority in its primary endpoint and superiority in one of its secondary endpoints.
Accelerated or Conditional Approval
In October 2017, the General Office of the Central Committee of the Communist Party of China and the State Council issued the Opinions on Deepening the Reform of the Review and Approval System and Inspiring Innovation of Drugs and Medical Devices. This opinion provides that, among other things:
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the review and approval process should be accelerated for drugs or medical devices that are urgently in need for clinical practice;
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for drugs or medical devices that are (i) for treatment of severe and life threatening diseases that cannot be cured in an effective manner, or (ii) urgently in need for public health, if early and mid-term indicators in clinical trials for the aforementioned drugs or medical devices show efficacy and potential clinical value, the marketing of these drugs and medical devices may be approved conditionally, and companies who desire to market such drugs or medical devices shall develop risk control plans and conduct research according to applicable requirements;
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extend the protection term for patents related to certain new drugs in trials, given that clinical trials and the review and approval process may cause delay in bringing new drugs to the market; and
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clinical trial data obtained from international multi-centers may be used to register drugs and medical devices in China if such data meet applicable requirements for the registration of drugs and medical devices in China.
On November 19, 2020, the Announcement on the Technical Guidance Principles for Conditional Approval of Drugs (Trial) was issued by the CDE and came into effect on the same day. This Announcement stipulates the definition of severe and life-threatening diseases and drugs in need in public health and requires applicants to discuss and reach consensus with the CDE on the research and other contents promised to be completed after the marketing, including without limitation, submitting post-marketing clinical research plans, the anticipated completion date thereof, the submission date of the clinical research report and the post-marketing risk control plans, etc.
On December 1, 2019, the newly revised PRC Drug Administration Law came into effect, which reiterates that drugs (i) for treatment of severe and life-threatening diseases that cannot be cured in an effective manner or (ii) urgently in need to improve public health, may be approved conditionally, provided that indicators in clinical trials for these drugs show efficacy and potential clinical value. With regard to a drug that has been approved conditionally, the market authorization holder of the drug shall take corresponding risk management measures and complete the relevant research as required within the prescribed time limit. If the research fails to be completed as required within the prescribed time limit or fails to prove that the benefits outweigh the risks, then, at the worst, the drug marketing license may be revoked.
On January 22, 2020, the revised Provisions for Drug Registration were issued by the SAMR, which came into effect on July 1, 2020. Such revised Provisions of Drug Registration adopt the aforesaid conditional approval mechanism and further provide that, in addition to the aforementioned two categories of drugs, vaccines urgently needed in response to major public health emergencies or other vaccines urgently needed as determined by the National Health Commission of the PRC, of which the benefits outweigh the risks upon assessment, may also be approved conditionally. After a drug has been approved conditionally, the market authorization holder shall take corresponding risk management measures, complete the clinical trial and other relevant studies as required within the prescribed time limit, and apply for the registration for the drug in the form of a supplementary application.
On October 17, 2020, the revised Patent Law of the PRC was issued by the Standing Committee of the National People’s Congress, which came into effect on June 1, 2021. Such revised Patent Law of the PRC stipulates that in order to compensate for the time consumed in the examination and approval of new drugs for marketing, the patent administration department shall, at the request of the patentee, grant compensation for the term of the patent right for invention patents related to new drugs that have been approved for marketing in China.
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On July 8, 2020, the NMPA issued Protocol for Review and Approval of Conditional Approval of Drugs Marketing Applications (Trial) which stipulated procedures and detailed conditions of the conditional approval. On August 24, 2023, the NMPA issued the revised draft Protocol for Review and Approval of Conditional Approval of Drugs Marketing Applications (Trial) and the policy interpretations for such protocol for public comments. The draft protocol and its policy interpretations provide for strengthened post-marketing supervisions for conditionally approved drugs, and state that if a drug has been conditionally approved, clinical trials application targeting at conditional approval of similar drugs with the same mechanism, target, or indications in principle will not be approved. The NMPA solicited comments until September 25, 2023, and as of the date of this Annual Report, there is no timeline for its enactment.
On March 12, 2021, the National People’s Congress issued the Fourteenth Five-Year Plan, which provides that the accelerated evaluation and approval mechanism shall be improved for innovative drugs, vaccines, medical devices. The evaluation and approval of drugs and medical devices with urgent clinical needs or for orphan diseases shall be advanced. The import of overseas on market new drugs and medical devices with urgent clinical needs shall also be facilitated.
Four Phases of Clinical Trials
A clinical trial consists of Phases 1, 2, 3 and 4. Phase 1 refers to the initial clinical pharmacology and safety evaluation studies in humans. Phase 2 refers to the preliminary evaluation of a drug candidate’s therapeutic effectiveness and safety for particular indication(s) in patients, which provides evidence and support for the design of Phase 3 clinical trial and settles the administrative dose regimen. Phase 3 refers to clinical trials undertaken to confirm the therapeutic effectiveness of a drug. Phase 3 is used to further verify the drug’s therapeutic effectiveness and safety on patients with target indication(s), to evaluate overall benefit-risk relationships of the drug, and ultimately to provide sufficient evidence for the review of drug registration application. Phase 4 refers to a new drug’s post-marketing study to assess therapeutic effectiveness and adverse reactions when the drug is widely used, to evaluate overall benefit-risk relationships of the drug when used among general population or specific groups, and to adjust the administration dose, etc. On July 1, 2020, the revised Provisions for Drug Registration came into effect, which in the latest version removed the definitions of the four Phases.
Drug Clinical Practice Certification
To improve the quality of clinical trial, the CFDA promulgated the Administration Rules of Quality of Drug Clinical Practice in August 2003, which was further revised by the NMPA and the National Health Commission of the PRC, formerly known as the Ministry of Health or the National Health and Family Planning Commission, on April 23, 2020. The revised Administration Rules of Quality of Drug Clinical Practice came into effect on July 1, 2020.
In February 2004, the CFDA issued the Circular on Measures for Certification of Drug Clinical Practice Institutions (trial), providing that the NMPA is responsible for certification of clinical trial institutions, and that the National Health Commission of the PRC is responsible for relevant things in respect of certification of clinical trial institutions within its duties. Under the Circular on Measures for Certification of Drug Clinical Practice Institutions (trial), the NMPA and the National Health Commission of the PRC decide whether an institution is qualified for undertaking pharmaceutical clinical trial upon the evaluation of the institution’s organizational administration, its research personnel, its equipment and facilities, its management system and its standard operational rules. If all requirements are met, a GCP Certification will be issued by the NMPA and the result will be published on the NMPA’s website.
On December 1, 2019, the newly revised PRC Drug Administration Law came into effect, which provides that instead of the aforesaid certification, the drug clinical trial institutions are now subject to a record-filing system. In accordance therewith, the NMPA and the National Health Commission of the PRC jointly issued the Announcement on the Release of Regulations for Drug Clinical Trial Institutions on November 29, 2019, which changes the GCP certification system for drug clinical trial institutions to a filing system and overrides the Circular on Measures for Certification of Drug Clinical Practice Institutions (trial). A clinical trial institution shall, by itself or appoint third parties, to evaluate whether the institution is qualified for undertaking pharmaceutical clinical trial. If such evaluation determines that the institution is qualified then a filing is required to the newly established filing system run by the NMPA.
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New Drug Application
When Phase 1, 2 and 3 of the clinical trials have been completed, the applicant must apply to the NMPA for approval of an NDA. The NMPA then determines whether to approve the application according to the comprehensive evaluation opinion provided by the CDE of the NMPA. We have obtained approval of our clinical trial application for Plinabulin as a direct anti-cancer agent in NSCLC when combined with docetaxel in China, and we initiated clinical trials in June 2016. We must obtain approval of an NDA before our drugs can be manufactured and sold in the Chinese market.
Good Manufacturing Practice
All facilities and techniques used in the manufacture of products for clinical use or for sale in China must be operated in conformity with cGMP guidelines as established by the NMPA. Failure to comply with applicable requirements could result in the termination of manufacturing and significant fines. The NMPA issued the Good Manufacturing Practice for Drugs Used in Clinical Trial (Exposure Draft for Public Comment) on July 2018, which provides the requirements on quality management, personnel, facilities and equipment, packaging and certain other issues relating to drugs used in clinical trials. As of the date of this Annual Report, there is no timetable as to the enactment of the exposure draft.
Animal Test Permits
According to Regulations for the Administration of Affairs concerning Experimental Animals approved by the State Council and promulgated by the State Science and Technology Commission in November 1988 and amended in January 2011, July 2013 and March 2017, and Administrative Measures on the Certificate for Animal Experimentation (Trial) promulgated by the Ministry of Science and Technology and other regulatory authorities in December 2001, performing experiments on animals requires a Certificate for Use of Laboratory Animals. Applicants must satisfy the following conditions:
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Laboratory animals must be qualified and sourced from institutions that have Certificates for Production of Laboratory Animals;
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The environment and facilities for the animals’ living and propagating must meet state requirements;
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The animals’ feed and water must meet state requirements;
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The animals’ feeding and experimentation must be conducted by professionals, specialized and skilled workers, or other trained personnel;
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The management systems must be effective and efficient; and
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The applicable entity must follow other requirements as stipulated by Chinese laws and regulations.
International Multi-Center Clinical Trials Regulations
On January 30, 2015, the CFDA promulgated Notice on Issuing the International Multi-Center Clinical Trial Guidelines (Trial), or the Multi-Center Clinical Trial Guidelines, which took effect as of March 1, 2015, aiming to provide guidance for the regulation of application, implementation and administration of international multi-center clinical trials in China. Pursuant to the Multi-Center Clinical Trial Guidelines, international multi-center clinical trial applicants may simultaneously perform clinical trials in different centers using the same clinical trial protocol. Where the applicant plans to make use of the data derived from the international multi-center clinical trials for application to NMPA for approval of an NDA, such international multi-center clinical trials shall satisfy, in addition to the requirements set forth in the PRC Drug Administration Law and its implementation regulations, Provisions for Drug Registration and relevant laws and regulations, the following requirements:
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The applicant shall first conduct an overall evaluation on the global clinical trial data and further make trend analysis of the Asian and Chinese clinical trial data. In the analysis of Chinese clinical trial data, the applicant shall consider the representativeness of the research subjects, i.e., the participating patients;
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The applicant shall analyze whether the amount of Chinese research subjects is sufficient to assess and adjudicate the safety and effectiveness of the drug under clinical trial, and satisfy the statistical and relevant legal requirements; and
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The onshore and offshore international multi-centers clinical trial research centers shall be subject to on-site inspections of competent PRC governmental agencies.
International multi-center clinical trials shall follow international prevailing GCP principles and ethics requirements. Applications shall ensure the truthfulness, reliability and trustworthiness of clinical trials results; the researchers shall have the qualification and capability to perform relevant clinical trials; ethics committee shall continuously review the trials and protect the subjects’ interests, benefits and safety. Before the performance of the international multi-center clinical trial applicants shall obtain clinical trial approvals or complete filings pursuant to requirements under the local regulations where clinical trials are conducted, and register and disclose the information of all major researcher, clinical trial organizations on the NMPA drug clinical trial information platform.
When using international multi-center clinical trial data to support NDAs in China, applicants shall submit the completed global clinical trial report, statistical analysis report and database, along with relevant supporting data in accordance with ICH-CTD (International Conference on Harmonization-Common Technical Document) content and format requirements; subgroup research results summary and comparative analysis shall also be conducted concurrently.
In April 2020, the NMPA and the National Health Commission promulgated the revised Administration Rules of Quality of Drug Clinical Practice, which came into effect in July 2020. The revised Administration Rules of Quality of Drug Clinical Practice summarizes the requirements for initiating a multi-center clinical trial, that is, before initiating a multi-center clinical trial: (i) the applicant shall ensure that all the centers participating in the clinical trial comply with the trial protocol; (ii) the applicant shall provide each center with the same trial protocol, and each center shall comply with the same unified evaluation criterion for clinical trial and laboratory data and the same guidance for case report form; (iii) each center shall use the same case report form to record the data of each human subject obtained during the trial; (iv) before initiating a clinical trial, a written document is required to specify the responsibilities of the investigators of each center; and (v) the applicant shall ensure the communication among the investigators of each center.
Leveraging the clinical trial data derived from international multi-center clinical trials, we may avoid unnecessary repetitive clinical trials and thus further accelerate the NDA process in China.
Collecting and Using Patients ’ Human Genetic Resources and Derived Data
In June 1998, the Ministry of Science and Technology and the former Ministry of Health jointly established the Interim Measures for the Administration of Human Genetic Resources in China. In July 2015, the Ministry of Science and Technology issued the Service Guide for the Examination and Approval of Sampling, Collecting, Trading, Exporting Human Genetic Resources, which provides that foreign entities that collect and use patients’ human genetic resources in clinical trials shall be required to file for an advance approval with the Human Genetic Resources Administration Office, or the HGRAO through its online system.
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In October 2017, the Ministry of Science and Technology issued the Circular on Optimizing the Administrative Examination and Approval of Human Genetic Resources, which simplified the approval process for collecting and using human genetic resources for the purpose of seeking marketing authorization of drugs in China.
In May 2019, the State Council issued the Human Genetic Resources Regulation, or the HGR Regulation and revised in March 2024, which stipulates the approval requirements pertinent to research collaborations between Chinese and foreign-owned entities. Pursuant to this new rule, a new filing system (as opposed to the advance approval approach originally in place) is put in place for international clinical trials using Chinese patients’ biospecimens at clinical study sites without involving the export of such biospecimens outside of China. A notification filing that specifies the type, quantity and usage of the biospecimens, among others, with the HGRAO is required before conducting such clinical trials. The collection, use, and outbound transfer of Chinese patients’ biospecimens in international collaboration for basic scientific research involving export are still subject to the advance approval of the HGRAO.
In October 2020, the Standing Committee of the National People’s Congress of the PRC, or the SCNPC, promulgated the China Biosecurity Law, which became effective on April 15, 2021 and was amended on April 26, 2024. The China Biosecurity Law reaffirms the regulatory requirements stipulated by the HGR Regulation while potentially increasing the administrative fines significantly in cases in which foreign entities are alleged to have collected, preserved or exported Chinese human genetic resources.
In May 2023, the Ministry of Science and Technology promulgated the Implementing Rules of the Regulation on the Administration of Human Genetic Resources, which became effective on July 1, 2023. The Implementing Rules of the Regulation on the Administration of Human Genetic Resources further provide specific requirements on the collection, preservation, utilization and external provision of China’s human genetic resources.
Data Privacy and Data Protection
China continues to strengthen its regulation of network security, data protection, and personal information (including personal health information). For example, the PRC Civil Code, which was promulgated by the National People’s Congress in May 2020 and became effective in January 2021, provides that the personal information of a natural person shall be protected by the law. Any organization or individual that needs to obtain personal information of others shall obtain such information legally and ensure the safety of such information, and shall not illegally collect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal information of others.
In November 2016, the SCNPC promulgated the Cyber Security Law, which became effective in June 2017. The Cyber Security Law requires network operators to perform certain functions related to cybersecurity protection and strengthen the network information management. For instance, under the Cyber Security Law, network operators of key information infrastructure generally shall, during their operations in the PRC, store the personal information and important data collected and produced within the territory of the PRC. When collecting and using personal information, in accordance with the Cyber Security Law, network operators shall abide by the “lawful, justifiable and necessary” principles. The network operator shall collect and use personal information by announcing rules for collection and use, expressly notify the purpose, methods and scope of such collection and use, and obtain the consent of the person whose personal information is to be collected. The network operator shall neither collect the personal information unrelated to the services they provide, nor collect or use personal information in violation of the provisions of laws and administrative regulations or the agreements with such persons, and shall process the personal information they store in accordance with the provisions of laws and administrative regulations and agreements reached with such persons. The network operator shall not disclose, tamper with or destroy personal information that it has collected, or disclose such information to others without prior consent of the person whose personal information has been collected, unless such information has been processed to prevent a specific person from being identified and such information from being restored. Each individual is entitled to require a network operator to delete his or her personal information if he or she finds that collection and use of such information by such operator violate the laws, administrative regulations or the agreement by and between such operator and such individual, and is entitled to require any network operator to make corrections if he or she finds errors in such information collected and stored by such operator. Such operator shall take measures to delete the information or correct the error. Any individual or organization may neither acquire personal information by stealing or through other illegal ways, nor illegally sell or provide personal information to others. On September 12, 2022, the Cyberspace Administration of China, or CAC, issued the proposed amendment to the Cyber Security Law for public comment. The amendment included adjusting the types and ranges of administrative penalties for violations endangering network operation security and strengthening the responsibility of critical information infrastructure operations. The amendment also seeks to improve the legal liability systems of network information security and personal information protection.
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In July 2018, the National Health Commission promulgated the Measures on Standards, Security and Services of National Healthcare Big Data (for Trial Implementation), which set out the guidelines and principles for standards management, security management and services management of health and medical big data. Pursuant to the Measures on Health and Medical Big Data, the healthcare data produced by the PRC citizens in the PRC can be managed and used by the state for the purposes of the state strategic safety and the benefits of the life and health of the PRC citizens, provided that the state guarantees the PRC citizens their respective right of information, usage and personal privacy.
On December 28, 2021, the CAC, National Development and Reform Commission, or the NDRC, and several other administrations jointly promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022 and replace the Measures for Cybersecurity Review promulgated in April 2020 and effective in June 2020. According to the Cybersecurity Review Measures, critical information infrastructure operators that intend to purchase internet products and services and internet platform operators engaging in data processing activities that affect or may affect national security must be subject to the cybersecurity review, and an internet platform operator possessing personal information of over one million users and intending to be listed on a foreign stock exchange must be subject to the cybersecurity review.
In June 2021, the SCNPC promulgated the Data Security Law, which became effective on September 1, 2021. The Data Security Law establishes a tiered system for data protection in terms of their importance. Data categorized as “important data”, which will be determined by governmental authorities in the form of catalogs, shall be treated with higher levels of protection. Specifically, the Data Security Law provides that processors of important data shall appoint a “data security officer” and a “management department” to take charge of data security. In addition, such processor shall evaluate the risk of its data activities periodically and file assessment reports with relevant regulatory authorities. Since the Data Security Law is relatively new, uncertainties still exist in relation to its interpretation and implementation.
On July 7, 2022, the CAC promulgated the Security Assessment Measures for Outbound Data Transfer, effective from September 1, 2022, or the Security Assessment Measures, to regulate outbound data transfer activities, protect the information rights and interests of individuals, safeguard national security and social public interests, and promote the safe and free cross-border flow of data. Furthermore, the Security Assessment Measures provide that the security assessment for outbound data transfers shall follow principles of the combination of pre-assessment and continuous supervision and the combination of risk self-assessment and security assessment, so as to prevent the security risks arising from outbound data transfers and ensure the orderly and free flow of data according to the law. For outbound data transfers activities that have been carried out prior to the implementation of the Security Assessment Measures, and not in compliance with the Security Assessment Measures, rectification shall be completed within 6 months from the implementation of the Security Assessment Measures. The Security Assessment Measures further provide that a data processor intending to implement outbound data transfer under the following circumstances shall apply for security assessment to the CAC: (a) a data processor intending to provide critical data abroad; (b) a critical information infrastructure operator or a data processor processing the personal information of more than one million individuals intending to provide personal information abroad; (c) a data processor, who has cumulatively provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals abroad since January 1st of the previous year, intending to provide personal information abroad; and (d) other circumstances prescribed by the CAC for which application for security assessment for outbound data transfers is required. On March 22, 2024, the CAC promulgated the Provisions on Facilitating and Regulating Cross-border Data Flow, effective on the same date. The provisions require data processors to identify and declare important data in accordance with the regulations, and provide that unless the competent departments or areas so notify or publicly release certain data as important data, the data processors do not need to apply for security assessment for outbound important data transfer for such data. The provisions set forth various circumstances exempted from application for security assessment for outbound data transfer, execution of a standard contract for personal information outbound transfer and passing of the certification for personal information protection. To the extent in compliance with the national data classification and hierarchical protection system framework, the provisions allow the pilot free trade zones to promulgate their own negative list of data requiring application for security assessment for outbound data transfer, execution of a standard contract for personal information outbound transfer or passing of the certification for personal information. The provisions further provide for, subject to exemptions set forth therein and negative lists of pilot free trade zones, circumstances requiring application for security assessment for outbound data transfer, execution of a standard contract for personal information outbound transfer or passing of the certification for personal information protection. A data processor intending to implement outbound data transfer under the following circumstances should apply for security assessment to the CAC: (a) a critical information infrastructure operator intending to provide personal information or important data abroad; or (b) a data processor that is not a critical information infrastructure operator intending to provide important data abroad, or has since January 1st of the current year cumulatively provided personal information (excluding sensitive personal information) of over one million individuals, or sensitive personal information of over 10,000 individuals, abroad. For any data processors other than critical information infrastructure operators who have since January 1st of the current year cumulatively provided personal information (excluding sensitive personal information) of over 100,000 and less than one million individuals, or sensitive personal information of less than 10,000 individuals abroad, should execute a standard contract for outbound transfer of personal information with the recipient abroad or pass the certification for personal information protection. The approval for security assessment for outbound data transfer is valid for three years and may be applied for extension if the data processors need to carry on its outbound data transfer activities and there occurs no circumstance requiring re-application for security assessment for outbound data transfer. To the extent that any provision set forth in the Security Assessment Measures is inconsistent with the provisions set forth in the provisions, the provisions prevail.
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On September 24, 2024, the State Council published the Administrative Regulations on the Internet Data Security, effective from January 1, 2025, or the Data Security Measures. The Data Security Measures stipulates on personal information protection, the security of important data, the cross-border security management of network data, and the obligations of network platform service providers.
Additional regulations, guidelines, and measures relating to data privacy and data protection are expected to be adopted, including the Measures for Security Assessment for Cross-border Transfer of Personal Information and Important Data (Draft for Comment), published in 2017, the Measures for Security Assessment for Cross-border Transfer of Personal Information (Draft for Comment), published in 2019, each of which indicates a trend of more stringent compliance requirements, and, if adopted or effective, would require security assessment and review before transferring personal health information out of China.
Since our subsidiaries are located in China, we are required to comply with the requirements of China’s network and data protection regime. In addition, in the ordinary course of our business, we collect and store personal information, including personal information about our clinical trial subjects, customers, and employees in China. We may need to share such personal information with our subsidiaries, licensors, partners, or contractors located outside China. China’s network and data protection regime is constantly evolving, and we continue to face uncertainties as to whether our efforts to comply with these requirements will be sufficient. Although we develop and maintain compliance protocols and controls designed to maintain compliance with these requirements, development and maintenance of these protocols and controls is costly. In addition, our CROs, licensees, and partners are also required to comply with these laws, and our agreements with them require them to comply with these requirements, but there is always a risk that they may not fully comply with them.
PRC Enterprise Income Tax Law and Its Implementation
The Enterprise Income Tax Law of the PRC, or the EIT Law, and its implementation rules permit certain high and new technologies enterprises, or HNTEs, to enjoy a preferential enterprise income tax rate subject to these HNTEs meeting certain qualification criteria. One of our Chinese subsidiaries enjoys such preferential tax treatment.
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On March 23, 2016, the Ministry of Finance and the State Administration of Taxation, or SAT, issued the Circular on Comprehensively Promoting the Pilot Program of the Collection of Value-added Tax in Lieu of Business Tax. Effective from May 1, 2016, the PRC tax authorities collect VAT in lieu of business tax in all regions and industries. VAT is applicable at a rate of 6% in lieu of business taxes for certain services and 17%, as adjusted to 16% between May 1, 2018 and March 31, 2019 and as adjusted to 13% starting from April 1, 2019, for the sale of goods and provision of tangible property lease services not listed in Article 2 Sub-article 2 of the Provisional Regulations on Value Added Tax of the PRC promulgated by the State Council in December 1993 and further amended in 2008, 2016 and 2017, respectively. VAT payable on goods sold or taxable services provided by a general VAT taxpayer for a taxable period is the net balance of the output VAT for the period after crediting the input VAT for the period.
Regulations Relating to Intellectual Property Rights
Patent
General
Pursuant to the Patent Law of the PRC, most recently amended in October 2020, and its implementation rules, most recently amended in December 2023, patents in China fall into three categories, namely invention patent, utility model and design patent. Invention patent refers to a new technical solution proposed in respect of a product, method or its improvement; utility model refers to a new technical solution that is practicable for application and proposed in respect of the shape, structure or a combination of both of a product; and design patent refers to the new design of the whole or part of a certain product in shape, pattern or a combination of both and in color, shape and pattern combinations aesthetically suitable for industrial application. Under the Patent Law of the PRC, the term of patent protection starts from the date the patent was filed. Patents relating to utility-models and designs are effective for ten years from the initial date the patent application was filed, patents relating to designs are effective for fifteen years from the initial date the patent application was filed, and patents relating to invention are effective for twenty years from the initial date the patent application was filed. The Patent Law of the PRC adopts the principle of “first to file,” which means where more than one person files a patent application for the same invention, a patent will be granted to the person who first filed the application.
Moreover, in order to compensate for the time consumed in the examination and approval of new drugs for marketing, the patent administration department shall, at the request of the patent holder, grant compensation for the term of the patent right for invention patents related to new drugs that have been approved for marketing in China. The compensation period shall not exceed five years, and the total validity term of patent rights since the new drug approved to be marketed shall not exceed 14 years.
Compared with the Patent Law of the PRC revised in 2008, changes in the 2020 revised Patent Law mainly include: (i) clarifying the incentive mechanism for inventor or designer relating to service inventions; (ii) extending the duration of design patent; (iii) establishing a new system of “open licensing”; (iv) strengthening the joint liability of internet service providers for network patent infringement; (v) improving the distribution of burden of proof in patent infringement cases; (vi) increasing the compensation for patent infringement; and (vii) patent term adjustment to compensate delays of the China National Intellectual Property Administration, or CNIPA, or the CNIPA in the review of patent applications.
Existing patents can become invalid or unenforceable due to a number of factors, including lack of novelty, and/or lack of inventive step in technology, and deficiencies in patent application. In China, a patent must have novelty, inventive step and practical applicability. Under the Patent Law of the PRC, novelty means that before a patent application is filed, no identical invention or utility model has been publicly disclosed in any publication in China or abroad or has been publicly used or made known to the public by any other means, whether in or outside of China, nor has any other person filed with the patent authority an application that describes an identical invention or utility model and is recorded in patent application documents or patent documents published after the filing date. Inventive step means, compared with existing technology, an invention has prominent substantial features and represents notable progress, and a utility model has substantial features and represents any progress; practical applicability means an invention or utility model can be manufactured or used and may produce positive results. Patents in China are filed with the CNIPA. Normally, the CNIPA publishes an announcement for the invention patent 18 months after the application is filed, which may be shortened upon request by the applicant. The applicant must apply to the CNIPA for a substantive examination within three years from the date the application is filed.
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Article 19 of the Patent Law of the PRC provides that, for an invention or utility model completed in China, any applicant (not just Chinese companies and individuals), before filing a patent application outside of China, must first submit it to the CNIPA for a confidential examination. Failure to comply with this requirement will result in the denial of any Chinese patent for the subject invention or utility model. This added requirement of confidential examination by the CNIPA has raised concerns by foreign companies who conduct research and development activities in China or outsource research and development activities to service providers in China. Currently we have 10 invention patents granted by CNIPA and 15 invention patents under the application process.
Patent Enforcement
Unauthorized use of patents without consent from owners of patents, forgery of the patents belonging to other persons, or engagement in other infringement acts against patent rights, will subject the infringers to tortious liabilities. Serious offences of forgery of the patents belonging to other persons may be subject to criminal penalties.
When a dispute arises as a result of infringement of the patent owner’s patent right, Chinese law requires that the parties first attempt to settle the dispute through consultation between them. However, if the dispute cannot be settled through consultation, the patent owner, or an interested party who believes the patent is being infringed, may either file a civil legal suit or file an administrative complaint with the relevant patent administration authority. A Chinese court may issue a preliminary injunction upon the patent owner’s or an interested party’s request before instituting any legal proceedings or during the proceedings. Damages for infringement are calculated as the loss suffered by the patent holder arising from the infringement or the benefit gained by the infringer from the infringement. If it is difficult to ascertain damages in this manner, damages may be determined by using a reasonable multiple of the license fee under a contractual license. For intentional infringement of patent rights, in certain cases, the compensation amount shall be one to five times the amount determined pursuant to the aforesaid method. Where it is difficult to ascertain the losses of the patent holder, the benefits gained by the infringer and the license fee of the patent, the people’s court may, in light of such factors as patent right type as well as infringement nature and circumstances, determine a compensation amount ranging from RMB 30,000 to RMB 5,000,000. As in other jurisdictions, with one notable exception, the patent owner in China has the burden of proving that the patent is being infringed. However, if the owner of an invention patent for manufacturing process of a new product alleges infringement of its patent, the alleged infringer has the burden of proving that it has not infringed. To our knowledge, there are no disputes as to our infringement of any third party’s patent.
Medical Patent Compulsory License
According to the Patent Law of the PRC, for the purpose of public health, the CNIPA may grant a compulsory license for manufacturing patented drugs and exporting them to countries or regions covered under relevant international treaties to which the PRC has acceded.
Exemptions for Unlicensed Manufacture, Use, Sell or Import of Patented Drugs
The Patent Law of the PRC provides five exceptions for unlicensed manufacture, use, sell or import of patented drugs. None of following circumstances are deemed an infringement of the patent rights, and any person may manufacture, use, sell or import patented drugs without authorization granted by patent owner as follows:
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Any person who uses, promises to sell, sells or imports any patented product or product directly obtained in accordance with the patented methods after such product is sold by the patent owner or by its licensed entity or individual;
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Any person who has manufactured an identical product, has used an identical method or has made necessary preparations for manufacture or use prior to the date of patent application continues to manufacture such product or use such method only within the original scope;
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Any foreign transportation facility that temporarily passes through the territory, territorial waters or territorial airspace of China uses the relevant patents in its devices and installations for its own needs in accordance with any agreement concluded between China and that country to which the foreign transportation facility belongs, or any international treaty to which both countries are party, or on the basis of the principle of reciprocity;
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Any person who uses the relevant patents solely for the purposes of scientific research and experimentation; or
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Any person who manufactures, uses or imports patented drugs or patented medical equipment for the purpose of providing information required for administrative approval, or manufactures, uses or imports patented drugs or patented medical equipment for the abovementioned person.
However, even if patented drugs are utilized on the ground of exemptions for unlicensed manufacture, use, sell or import of patented drugs prescribed in Patent Law of the PRC, such patented drugs cannot be manufactured, used, sold or imported for any commercial purposes without authorization granted by the patent owner.
Trademarks
Trademarks are protected by the Trademark Law of the People’s Republic of China, or the PRC Trademark Law, adopted on August 23, 1982 and subsequently amended on February 22, 1993, October 27, 2001, August 30, 2013 and April 23, 2019, respectively, as well as the Implementation Regulation of the PRC Trademark Law adopted by the State Council on August 3, 2002 and amended on April 29, 2014. The Trademark Office of the CNIPA handles trademark registrations and grants a term of ten years to registered trademarks and another ten years if requested upon expiry of the first or any renewed ten-year term. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registration.
Trade Secrets
According to the Law Against Unfair Competition of the PRC promulgated in September 1993 and amended in November 2017 and April 23, 2019, respectively, the term “trade secrets” refers to technical information, business operation information and other commercial information that are not known to the public and have commercial value and for which corresponding confidentiality measures have been taken by their rights holders.
Under this law, business persons are prohibited from employing the following methods to infringe trade secrets: (1) obtaining the trade secrets from the legal owners or holders by any unfair methods such as stealing, solicitation, coercion or electronic intrusion; (2) disclosing, using or permitting others to use the trade secrets obtained illegally under item (1) above; (3) disclosing, using or permitting others to use the trade secrets, in violation of any confidentiality obligations or any requirements of the legal owners or holders to keep such trade secrets in confidence; or (4) instigating, inducing or helping others to obtain, disclose, use or allow others to use the trade secrets of the rights holders in violation of any confidentiality obligations or any requirements of the legal owners or holders to keep such trade secrets in confidence. Natural persons, legal persons and other unincorporated organizations other than business persons, if violating the aforementioned provisions, shall be deemed to have infringed upon trade secrets. If a third party knows or should have known of the above-mentioned illegal conduct but nevertheless obtains, uses or discloses trade secrets of others, the third party may be deemed to have committed a misappropriation of the others’ trade secrets. The parties whose trade secrets are being misappropriated may petition for administrative corrections, and regulatory authorities may stop any illegal activities and fine infringing parties in the amount of RMB100,000 to RMB1,000,000, and where the infringement is material, the fine shall range from RMB500,000 to RMB5,000,000. Alternatively, persons whose trade secrets are being misappropriated may file lawsuits in a Chinese court for loss and damages caused by the misappropriation.
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The measures to protect trade secrets include oral or written agreements or other reasonable measures to require the employees of, or persons in business contact with, legal owners or holders to keep trade secrets confidential. Once the legal owners or holders have asked others to keep trade secrets confidential and have adopted reasonable protection measures, the requested persons bear the responsibility for keeping the trade secrets confidential.
Regulations Relating to Foreign Exchange and Dividend Distribution
Foreign Exchange Regulation
The Foreign Exchange Administration Regulations, most recently amended in August 2008, are the principal regulations governing foreign currency exchange in China. Under Chinese foreign exchange regulations, payments of current account items, such as trade and service-related foreign exchange transactions, may be made in foreign currencies without prior approval from State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. In contrast, approval from or registration with appropriate government authorities is required when RMB is to be converted into a foreign currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans.
In November 2012, SAFE promulgated and revised in May 2015 the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds by foreign investors in China, and remittance of foreign exchange profits and dividends by a Foreign Investment Enterprise, or FIE, to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not previously possible. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in China will be conducted by way of registration, and banks must process foreign exchange business relating to the direct investment in China based on the registration information provided by SAFE and its branches.
Under the Circular of the SAFE on Further Improving and Adjusting the Policies for Foreign Exchange Administration under Capital Accounts promulgated by SAFE on January 10, 2014 and last amended by the Circular on Further Deepening the Reform to Facilitate Cross-border Trade and Investment promulgated by SAFE on December 4, 2023, administration over the outflow of the profits by domestic institutions has been further simplified. In principle, a bank is no longer required to examine transaction documents when handling the outflow of profits of no more than the equivalent of US$50,000 by a domestic institution. When handling the outflow of profits exceeding the equivalent of US$50,000, the bank, in principle, is no longer required to examine the financial audit report and capital verification report of the domestic institution, provided that it must examine, according to the principle of transaction authenticity, the profit distribution resolution of the board of directors (or the profit distribution resolution of the partners) relating to this profit outflow and the original copy of its tax record-filing form. After each profit outflow, the bank must affix its seal to and endorsements on the original copy of the relevant tax record-filing form to indicate the actual amount of the profit outflow and the date of the outflow.
On March 30, 2015, SAFE promulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or SAFE Circular 19, which became effective on June 1, 2015. According to SAFE Circular 19, the foreign exchange capital of foreign-invested enterprises may be settled on a discretionary basis, meaning that the foreign exchange capital in the capital account of an FIE for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based on the actual operational needs of the FIE. The proportion of such discretionary settlement is temporarily determined as 100%. The RMB converted from the foreign exchange capital will be kept in a designated account, and if an FIE needs to make further payment from such account, it still must provide supporting documents and go through the review process with the banks.
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Furthermore, SAFE Circular 19 stipulates that the use of capital by FIEs must adhere to the principles of authenticity and self-use within the business scope of enterprises. The capital of an FIE and capital in RMB obtained by the FIE from foreign exchange settlement must not be used for the following purposes:
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directly or indirectly used for the payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations;
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directly or indirectly used for investment in securities, unless otherwise provided by relevant laws and regulations;
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directly or indirectly used for granting the entrusted loans in RMB, unless permitted by the scope of business, repaying the inter-enterprise borrowing (including advances by the third party), or repaying the bank loans in RMB that have been sub-lent to the third party; and/or
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paying the expenses related to the purchase of real estate that is not for self-use, except for the foreign-invested real estate enterprises.
On June 9, 2016, SAFE promulgated the Circular on Reforming and Regulation of Administrative Policy on Settlement of Foreign Exchange of Capital Account, or SAFE Circular 16, which was last amended by the Circular on Further Deepening the Reform to Facilitate Cross-border Trade and Investment promulgated by SAFE on December 4, 2023. According to SAFE Circular 16, the foreign exchange capital of FIEs, foreign debt and funds raised through offshore listing may be settled on a discretionary basis, and can be settled at the banks. The proportion of such discretionary settlement is temporarily determined as 100%. The RMB converted from relevant foreign exchange will be kept in a designated account, and if a domestic enterprise needs to make further payment from such account, it still must provide supporting documents and go through the review process with the banks.
Furthermore, SAFE Circular 16 reiterates that the use of capital by domestic enterprises must adhere to the principles of authenticity and self-use within the business scope of enterprises. The foreign exchange income of capital account and RMB obtained by domestic enterprise from foreign exchange settlement must not be used for the following purposes:
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directly or indirectly used for the payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations;
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directly or indirectly used for investment in securities and investment in wealth management products except for wealth management products with a risk rating of level 2 or lower and structured deposits, unless otherwise provided by relevant laws and regulations;
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directly or indirectly used for extending the entrusted loans to non-affiliate enterprises, unless permitted by the scope of business; and/or
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used for purchase of real estate of residential nature that is not for self-use, except for the enterprises engaging in real estate development and operation business or real estate leasing and operation business.
On January 26, 2017, SAFE issued the Notice on Improving the Examination of Authenticity and Compliance to Further Promote Foreign Exchange Administration, or the SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits. Moreover, pursuant to SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound remittance.
On October 23, 2019, SAFE promulgated the Circular on Further Promoting the Facilitation of Cross-border Trade and Investment, or SAFE Circular 28, last amended by the Circular on Further Deepening the Reform to Facilitate Cross-border Trade and Investment promulgated by SAFE on December 4, 2023. On the basis of continuing to allow investment FIEs (including foreign investment companies, foreign-funded venture capital enterprises and foreign-funded equity investment enterprises) to use the registered capital for domestic equity investment in accordance with the laws and regulations, SAFE Circular 28 cancelled the restriction on the non-investment FIEs and allows the non-investment FIEs to use the registered capital for domestic equity investment under the premise of not violating the existing “negative list” and the authenticity and compliance of the domestic equity investment. SAFE Circular 28 further clarifies the two ways of using the foreign currency registered capital of non-investment FIEs for domestic equity investment, i.e., by way of transfer of the foreign currency registered capital in its original currency and by way of foreign exchange settlement of the foreign currency registered capital. On October 23, 2019, SAFE promulgated the Circular on Reducing Foreign Exchange Accounts, or SAFE Circular 29, which became effective on February 1, 2020. The Appendix B of SAFE Circular 29 provides operational guidance for SAFE Circular 28. SAFE Circular 29 further specifies that the domestic equity investment set forth in SAFE Circular 28 is not limited to direct investment in a domestic enterprise but also includes equity investment conducted in the form of “equity transfer.”
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Our Chinese subsidiaries’ distributions to the offshore parent and carrying out cross-border foreign exchange activities shall comply with the various SAFE registration requirements described above.
Share Option Rules
Under the Administration Measures on Individual Foreign Exchange Control issued by the People’s Bank of China on December 25, 2006, all foreign exchange matters involved in employee share ownership plans and share option plans in which Chinese citizens participate require approval from SAFE or its authorized branch. In addition, under the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Share Incentive Plans of Overseas Publicly-Listed Companies, or Share Option Rules, issued by the SAFE on February 15, 2012, Chinese residents who are granted shares or share options by companies listed on overseas stock exchanges under share incentive plans are required to (1) register with the SAFE or its local branches; (2) retain a qualified Chinese agent, which may be a Chinese subsidiary of the overseas listed company or another qualified institution selected by the Chinese subsidiary, to conduct the SAFE registration and other procedures with respect to the share incentive plans on behalf of the participants; and (3) retain an overseas institution to handle matters in connection with their exercise of share options, purchase and sale of shares or interests and funds transfers.
SAFE Regulations on Offshore Special Purpose Companies Held by Chinese Residents or Citizens
SAFE promulgated SAFE Circular 37 on July 4, 2014. SAFE Circular 37 regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by Chinese residents to seek overseas investment and financing and conduct round trip investment in China. Under SAFE Circular 37, an SPV refers to an offshore entity established or controlled, directly or indirectly, by Chinese residents or entities for the purpose of overseas investment and financing, with Chinese residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, while “round trip investment” refers to the direct investment in China by Chinese residents through SPVs, namely, establishing FIEs to obtain the ownership, control rights and management rights. Pursuant to SAFE Circular 37, before making contribution into an SPV, Chinese residents are required to complete foreign exchange registration with SAFE or its local branch. SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. Failure to comply with the registration procedures set forth in SAFE Circular 37, or making misrepresentation on or failure to disclose controllers of an FIE that is established through round-trip investment, may result in restrictions on the foreign exchange activities of the relevant FIE, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant Chinese residents to penalties under PRC foreign exchange administration regulations.
Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore SPV. For more information on compliance with SAFE Circular 37, please see “Item 1A. Risk Factors—Risks Related to Our Doing Business in China—Chinese regulations relating to investments in offshore companies by Chinese residents may subject our future Chinese resident beneficial owners or our Chinese subsidiaries to liability or penalties, limit our ability to inject capital into our Chinese subsidiaries or limit our Chinese subsidiaries’ ability to increase their registered capital or distribute profits.”
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We have completed the foreign exchange registration of PRC resident shareholders of Mr. Linqing Jia.
Regulation of Dividend Distribution
The principal laws, rules and regulations governing dividend distribution by FIEs in China are the Company Law of the PRC, which was most recently amended on December 29, 2023 and will become effective on July 1, 2024, the Foreign Investment Law, which took effect on January 1, 2020, and its implementation regulations, which took effect on January 1, 2020. Under these laws and regulations, FIEs may pay dividends only out of their accumulated profit, if any, as determined in accordance with Chinese accounting standards and regulations. Both Chinese domestic companies and foreign-invested Chinese enterprises are required to allocate 10% of their respective accumulated after-tax profits each year, if any, to fund certain statutory common reserve funds until the aggregate amount of these reserve funds has reached 50% of the registered capital of the enterprises. At the discretion of the shareholders of an FIE, it may, after accruing the statutory common reserve funds, allocate a portion of its after-tax profits, based on PRC accounting standards, to discretionary common reserve funds. A Chinese company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year but the statutory common reserve funds and the discretionary common reserve funds are not allowed to be distributed as cash dividend.
Labor Laws and Social Insurance
Pursuant to the PRC Labor Law promulgated in July 1994 and amended in August 2009 and December 2018, and the PRC Labor Contract Law promulgated in June 2007 and amended in December 2012, employers must execute written labor contracts with full-time employees. All employers must comply with local minimum wage standards. Violations of the PRC Labor Contract Law and the PRC Labor Law may result in the imposition of fines and other administrative and criminal liability in the case of serious violations.
In addition, according to the PRC Social Insurance Law promulgated in October 2010, and amended on December 29, 2018, and Administrative Regulations on the Housing Provident Fund promulgated in April 1999 and amended in March 2002 and March 2019, respectively, employers like our Chinese subsidiaries in China must provide employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance, and housing provident fund.
Foreign Investment Law
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. On December 26, 2019, the State Council of the PRC passed the Regulation for Implementing the Foreign Investment Law of the PRC, which took effect on January 1, 2020. The Foreign Investment Law and its implementing regulations embody an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. According to the Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons, business entities or other organizations of a foreign country in China.
On September 6, 2024, according to the Foreign Investment Law, the Ministry of Commerce of PRC, or the MOFCOM, and NDRC published the Special Administrative Measures (Negative List) for Foreign Investment Access (Edition 2024), or the “Negative List”, which came into effect on November 1, 2024. The Negative List provides the scope of “restricted” or “prohibited” industries that have certain restrictions on foreign investment such as market entry clearance. Foreign investment in industries not included in the “negative list” are granted national treatment.
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Regulations Relating to Overseas Listings
The relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in accordance with the Law around July 2021. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
On February 17, 2023, the China Securities Regulatory Commissions, or the CSRC, promulgated Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures and relevant five guidelines, which became effective on March 31, 2023. The Overseas Listing Trial Measures comprehensively improves and reforms the existing regulatory regime for overseas offering and listing of PRC domestic companies’ securities and regulates both direct and indirect overseas offering and listing of PRC domestic companies’ securities by adopting a filing-based regulatory regime. According to the Overseas Listing Trial Measures, any of our offering and listing in an overseas market in future may be subject to the filing with the CSRC.
According to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas markets, either in direct or indirect means, are required to fulfill the filing procedure with the CSRC and report relevant information. The Overseas Listing Trial Measures provides that an overseas listing or offering is explicitly prohibited, if any of the following: (i) such securities offering and listing is explicitly prohibited by provisions in laws, administrative regulations and relevant state rules; (ii) the intended securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with law; (iii) the domestic company intending to make the securities offering and listing, or its controlling shareholder(s) and the actual controller, have committed relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or undermining the order of the socialist market economy during the latest three years; (iv) the domestic company intending to make the securities offering and listing is currently under investigations for suspicion of criminal offenses or major violations of laws and regulations, and no conclusion has yet been made thereof; or (v) there are material ownership disputes over equity held by the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the controlling shareholder(s) and/or actual controller.
The Overseas Listing Trial Measures provides that if the issuer meets the following criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect overseas offering by PRC domestic companies: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent fiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer’s business activities are conducted in mainland China, or its main place(s) of business are located in mainland China, or the majority of senior management staff in charge of its business operations and management are PRC citizens or have their usual place(s) of residence located in mainland China. Where an issuer submits an application for initial public offering to competent overseas regulators, such issuer must file with the CSRC within three business days after such application is submitted. The Overseas Listing Trial Measures also requires subsequent reports to be filed with the CSRC on material events, such as change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings. Subsequent securities offerings of an issuer in the same overseas market where it has previously offered and listed securities shall be filed with the CSRC within three working days after offerings are completed.
Furthermore, according to the Overseas Listing Trial Measures, if a domestic company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. However, since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement of Overseas Listing Trial Measures remain unclear.
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On February 17, 2023, CSRC also issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, which, among others, provided that (1) the domestic companies that have already been listed overseas on or before the effective date of the Overseas Listing Trial Measures (i.e. March 31, 2023) shall be deemed as existing issuers, or the Existing Issuers. Existing Issuers are not required to complete the filling procedures immediately, and they shall be required to file with the CSRC when subsequent matters such as refinancing are involved; (2) on or prior to the effective date of the Overseas Listing Trial Measures, domestic companies that have already submitted valid applications for overseas offering and listing but have not obtained approval from overseas regulatory authorities or stock exchanges may reasonably arrange the timing for submitting their filing applications with the CSRC, and must complete the filings before the completion of their overseas offering and listing; (3) a six-month transition period will be granted to domestic companies which, prior to the effective date of the Overseas Listing Trial Measures, have already obtained the approval from overseas regulatory authorities or stock exchanges (such as the completion of hearing in the market of Hong Kong or the completion of registration in the market of the United States), but have not completed the indirect overseas listing; if domestic companies fail to complete the overseas listing within such six-month transition period, they shall file with the CSRC according to the requirements; and (4) the CSRC will solicit opinions from relevant regulatory authorities and complete the filings of the overseas listing of companies with contractual arrangements which duly meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets and two kinds of resources.
On February 24, 2023, the CSRC, together with other authorities, jointly issued the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises, or the Confidentiality and Archives Administration Provisions, which came into effect on March 31, 2023. The Confidentiality and Archives Administration Provisions requires PRC domestic enterprises or its overseas listing vehicles, among others, seeking to offer or list its securities in overseas markets either directly or indirectly, to establish and improve their confidentiality and archives administration systems and take other necessary measures to prevent them from disclosing state secrets, secrets related to state authorities’ affairs or undermining national or public interests. It further stipulates that it shall be subject to approval or filing procedures of competent authorities in accordance with relevant laws and regulations that PRC domestic enterprises or its overseas listing vehicles, among others, provide or publicly disclose documents or materials involving state secrets or secrets of state authorities or causing possible adverse effect on national security or public interests etc. to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals.
Furthermore, according to the Negative List promulgated by the MOFCOM and the NDRC that became effective on March 2, 2022, domestic enterprises engaged in activities in any field prohibited from foreign investment under the Negative List shall be subject to review and approval by the relevant authorities of the PRC when listing and trading overseas. If it is determined that any approval, filing or other administrative procedure from the CSRC or other PRC governmental authorities is required for any future offering or listing, we cannot assure that we can obtain the required approval or accomplish the required filings or other regulatory procedures in a timely manner, or at all. If we fail to obtain the relevant approval or complete the filings and other relevant regulatory procedures, we may face sanctions by the CSRC or other PRC regulatory agencies, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offerings before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our ordinary shares.
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Rest of the World Regulation
For other countries outside of the U.S. and China, the requirements governing the conduct of clinical trials, drug licensing, pricing and reimbursement vary from country to country. In all cases the clinical trials must be conducted in accordance with GCP requirements and the applicable regulatory requirements and the ethical principles having their origin in the Declaration of Helsinki.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Manufacturing and Supply
We outsource the production of the active pharmaceutical ingredient of Plinabulin to external service providers, Johnson Matthey Pharma Services (JMPS) and Asymchem Laboratories (Asymchem), and the production of the final drug formulation to Pharmaceutics International Inc. (Pii) and for contingency planning purposes, we have also established relationships with other contract manufacturing organizations. We expect to continue our outsourcing relationships with contract manufacturers to meet the ongoing requirements for the development of Plinabulin. We have framework agreements with these external service providers, under which they provide services to us on a short-term, project-by-project basis. We also have a long-term commercial supply agreement in place with Pii to prepare for the commercial supply if approved.
Currently, our contract manufacturers obtain materials for the manufacturing activities they perform for us from multiple suppliers who we believe have sufficient capacity to meet our demands. In addition, we believe that adequate alternative sources for such supplies exist. However, a risk exists that an interruption supplies would materially harm our business. We typically order materials and services on a purchase order basis and do not enter into long-term dedicated capacity or minimum supply arrangements.
We rely on BASF SE as the sole supplier of the stabilizing agent, Kolliphor HS15, used in Plinabulin’s current formulation. If BASF SE becomes unable or unwilling to supply Kolliphor HS15, we will not be able to replace BASF SE and we would be required to reformulate Plinabulin. We will seek to find another formulation while continuing to use Kolliphor HS15, in accordance with our discussions with the FDA.
Manufacturing of pharmaceuticals is subject to extensive regulations that impose various procedural and documentation requirements governing record keeping, manufacturing processes and controls, personnel, quality control and quality assurance, among others. The contract manufacturing organizations we plan to use to manufacture our current product candidates, or any future product candidates we may develop, will be required to operate under cGMP conditions. These cGMP conditions are regulatory requirements for the production of pharmaceuticals that will be used in humans.
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Organizational Structure
The diagram below depicts our current organizational structure.
Human Capital Resources
We are a research and development-focused biotechnology organization. Our research and development employees perform diverse responsibilities including managing clinical research studies, analyzing clinical trial data, preparing regulatory documents, and scaling up manufacturing processes. Our general and administrative employees focus on support functions such as finance, accounting and HR.
We place a premium on hiring employees with experience in both large, established pharmaceutical organizations and smaller emerging biotech companies. We offer employees a breadth of responsibilities and upper-level management positions that would not usually be afforded to them in larger organizations. We encourage a participatory culture built around our passion for working on breakthrough therapies in an agile, team-based organization. Our compensation and benefits offerings are designed to attract and retain top talent through the use of short-term (i.e., competitive base salaries and bonuses) and long-term incentives (i.e., stock-based compensation).
We offer employees 80% paid premium healthcare coverage benefits and up to 6% match for our 401(k) savings plan. We offer employees company paid major holidays as well as paid personal and sick time. We also have a mentorship program where employees may benefit from career guidance.
As of February 28, 2025, we had 40 full-time employees, including 19 employed by SEED. Of these, 24 were engaged in full-time research and development and laboratory operations and 16 were engaged in full-time general and administrative functions. As of February 28, 2025, 13 of our employees were located in China and 27 were located in the U.S. We have also engaged and may continue to engage independent contractors who are not full-time employees, to assist us with our operations. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have never experienced any employment related work stoppages, and we consider our relations with our employees to be good.
Corporate Information
BeyondSpring Inc. was incorporated as an exempted company under the laws of the Cayman Islands on November 21, 2014. In July 2015, we completed our internal restructuring.
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Our principal executive offices are located at 100 Campus Drive, West Side, 4th Floor, Suite 410, Florham Park, New Jersey 07932 and our telephone number is +1 (646) 305-6387. Our registered office in the Cayman Islands is located at the offices of Harneys Fiduciary (Cayman) Limited, 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman KY1-1002, Cayman Islands. Our agent for service of process in the U.S. is CT Corporation System located at 28 Liberty Street, 42nd Floor, New York, New York 10005. Our website is www.beyondspringpharma.com. The information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K and is not incorporated by reference herein.
Available Information
We make available free of charge on or through the Investor section of our website certain reports and amendments to those reports that we file with or furnish to the SEC, in accordance with the Exchange Act. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
We announce material information to the public about the Company, the progress and results of its clinical trials and research and development programs, and other matters through a variety of means, including filings with the SEC, press releases, public webcasts and presentations, the Company’s website (www.beyondspringpharma.com), and/or social media, including its LinkedIn account (https://www.linkedin.com/company/beyondspring-pharmaceuticals/) and X account (@BeyondSpringInc), in order to achieve broad, non-exclusionary distribution of information to the public. We encourage investors and others to review the information we make public in these locations, as such information could be deemed to be material information. Please note that this list may be updated from time to time. Information that is contained in and can be accessed through our website, our LinkedIn posts and our X posts, are not incorporated into, and does not form a part of, this Annual Report.