What changed in this filing

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Item 1A. Risk Factors

2021-03-01 compared with 2020-02-28 · 329 added, 141 removed, 796 unchanged (37% of the section changed)

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Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

RISK FACTORS SUMMARY

The following is a summary of the principal factors that cause an investment in the company to be speculative or risky:

• The ongoing COVID-19 pandemic has adversely affected and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

• During our operating history, the markets in which we have participated have changed significantly, which may make it difficult to evaluate our current business and predict our future performance.

• Our quarterly or annual operating results may fluctuate in the future.

As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline.

• We have a history of net losses and we may not achieve or maintain profitability.

• We are dependent on our collaborators, and our failure to successfully manage these relationships could prevent us from developing and commercializing many of our products and achieving or sustaining profitability, and could lead to disagreements with our current or former collaborators.

• We are dependent on a limited number of customers.

• Our product supply agreements with customers have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products.

• With respect to customers purchasing our products for the manufacture of active pharmaceutical products (API) for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations.

• We are dependent on a limited number of products in our biocatalysts business.

• We are dependent on a limited number of contract manufacturers for large scale production of substantially all of our enzymes.

• If we are unable to develop and commercialize new products for the pharmaceutical, fine chemicals, biotherapeutics, diagnostics and life science tools markets, our business and prospects will be harmed.

• Our biotherapeutic programs are early stage, highly regulated and expensive.

Our ability to obtain additional development partners for the programs, to advance our product candidates to clinical trials and to ultimately receive regulatory approvals is highly uncertain.

• If either Nestlé Health Science or Takeda terminate their development programs under their respective license agreements with us, any potential revenue from those license agreements will be significantly reduced or non-existent, and our results of operations and financial condition will be materially and adversely affected.

• Our business could be adversely affected if our customers’ products are not received well in the market, if their products, or the processes used by our customers to manufacture their final products, fail to be approved, or if our customers discontinue their development activities for any reason.

• We or our customers may not be able to obtain regulatory approval for the use of our products in food and food ingredients, if required, and, even if approvals are obtained, complying on an ongoing basis with the numerous regulatory requirements applicable to these products will be time-consuming and costly.

• Our efforts to deploy our technology in the life science tools markets may fail.

• The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

• Clinical trials are difficult to design and implement, expensive, time-consuming and involve an uncertain outcome, and the inability to successfully conduct clinical trials and obtain regulatory approval for our product candidates would substantially harm our business.

• Results of preclinical studies and early clinical trials of product candidates may not be predictive of results of later studies or trials.

Our product candidates may not have favorable results in later clinical trials, if any, or receive regulatory approval.

• If any of our product candidates do not work as intended or cause undesirable side effects, it could hinder or prevent receipt of regulatory approval or realization of commercial potential for them or our other product candidates and could substantially harm our business.

• Even if we obtain regulatory approval for any products that we develop alone or with collaborators, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense.

• Our efforts to prosecute and protect our intellectual property may not be successful.

• Our ability to compete may decline if we do not adequately protect our proprietary technologies or if we lose some of our intellectual property rights.

• Third parties may claim that we are infringing their intellectual property rights or other proprietary rights, which may subject us to costly and time-consuming litigation and prevent us from developing or commercializing our products.

• We may be involved in lawsuits to protect or enforce our intellectual property rights, which could be expensive, time-consuming and unsuccessful.

• We may not be able to enforce our intellectual property rights throughout the world.

• If our biocatalysts, or the genes that code for our biocatalysts, are stolen, misappropriated or reverse engineered, others could use these biocatalysts or genes to produce competing products.

• Confidentiality agreements with employees and others may not adequately prevent disclosures of trade secrets and other proprietary information.

• We may need additional capital in the future in order to expand our business.

• If we are unable to maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected.

• We are dependent on information technology systems, infrastructure and data, and any failure of these systems could harm our business.

Security breaches, loss of data, and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business, results of operations and financial condition.

• Competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete or may use their greater resources to gain market share at our expense.

• Business interruptions resulting from disasters or other disturbances could delay us in the process of developing our products and could disrupt our sales.

Our business continuity and disaster recovery plans may not adequately protect us from a serious disaster or other disturbance.

• Epidemic diseases, or the perception of their effects, could have a material adverse effect on our business, financial condition, results of operations or cash flows.

• Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

Risks Relating to Our Business and Strategy

The ongoing COVID-19 pandemic has adversely affected and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

In the United States, the COVID-19 pandemic has and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition, including as a result of compliance with governmental orders governing the operation of businesses during the pandemic, the temporary closure of our Redwood City, California facilities and disruption of our research and development operations.

We believe that these disruptions have had a negative impact on revenue for the twelve months ended December 31, 2020, although we are unable to fully determine and quantify the extent to which this pandemic has affected the amount and timing of our total revenues.

In the future, our business could be materially adversely affected, directly or indirectly, by the widespread outbreak of contagious disease, including the ongoing COVID-19 pandemic.

National, state and local governments in affected regions have implemented and may continue to implement safety

precautions, including quarantines, border closures, increased border controls, travel restrictions, governmental orders and shutdowns, business closures, cancellations of public gatherings and other measures.

Organizations and individuals are taking additional steps to avoid or reduce infection, including limiting travel and staying home from work.

These measures are disrupting normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide.

The potential impact and duration of COVID-19 or another pandemic or public health crisis has had and could continue to have, significant repercussions across regional, national and global economies and financial markets, and could trigger a period of regional, national and global economic slowdown or regional, national or global recessions.

The outbreak of COVID-19 in many countries continues to adversely impact regional, national and global economic activity and has contributed to significant volatility and negative pressure in financial markets.

As a result, we may experience difficulty accessing debt and equity capital on attractive terms, or at all, due to the severe disruption and instability in the global financial markets.

In addition, our customers may terminate or amend their agreements for the purchase of our products or services due to bankruptcy, lack of liquidity, lack of funding, operational failures, or other reasons.

We continue to monitor our operations and applicable government recommendations, and we have made modifications to our normal operations because of the COVID-19 pandemic, including requiring most office-based employees to work remotely.

Notwithstanding these measures, the COVID-19 pandemic could affect the health and availability of our workforce as well as those of the third parties we rely on taking similar measures.

If members of our management and other key personnel in critical functions across our organization are unable to perform their duties or have limited availability due to COVID-19, we may not be able to execute on our business strategy and/or our operations may be negatively impacted.

We may also experience limitations in employee resources, including because of sickness of employees or their families or the desire of employees to avoid contact with individuals or large groups of people.

In addition, we have experienced and will continue to experience disruptions to our business operations resulting from quarantines, self-isolations and other restrictions on the ability of our employees to perform their jobs.

The COVID-19 pandemic has disrupted, and may continue to disrupt, our business operations.

The extent and severity of the impact on our business and clinical trials will be determined largely by the extent of disruptions in the supply chains for our products and product candidates;

disruptions in access by patients to therapies for which our products are components of the supply chain;

delays in the performance of R&D service work, and delays in current and future clinical trials that we or our collaboration partners may conduct.

In addition, the impact of the COVID-19 pandemic on the operations of the FDA and other health authorities may delay potential approvals of product candidates for which our products are components of the supply chain.

While it is not possible at this time to estimate the entirety of the impact that the COVID-19 pandemic will have on our business, operations, employees, customers, suppliers or our collaboration partners, continued spread of COVID-19, measures taken by governments, actions taken to protect employees and the broad impact of the pandemic on all business activities may materially and adversely affect our business, results of operations and financial condition.

During our operating history, the markets in which we have participated have changed significantly, which may make it difficult to evaluate our current business and predict our future performance.

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Our financial condition and operating results have varied significantly in the past and may continue to fluctuate from quarter to quarter and year to year in the future due to a variety of factors, many of which are beyond our control.

Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this report:

Factors relating to our

business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this report:

• our ability to achieve or maintain profitability;

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• our dependence on a limited number of customers;

• our product supply agreements with customers have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products.

• with respect to customers purchasing our products for the manufacture of active pharmaceutical products (API) for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations;

• our dependence on a limited number of products in our biocatalysis business;

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• our ability to obtain additional development partners for our biotherapeutic programs;

• potential of Nestlé Health Science terminating any development program under its license agreement with us;

• potential of Nestlé Health Science or Takeda terminating any development program under their license agreements with us;

• our ability to deploy our technology platform in the fine chemicals market;

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• our or our customers’ ability to obtain regulatory approval for the sale and manufacturing of food products using our enzymes;

• our ability to deploy our technology platform in the in vitro molecular diagnostics market;

• our ability to deploy our technology platform in life science tools markets;

• our ability to successfully achieve domestic and foreign regulatory approval for product candidates;

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If we are unable to expand our biocatalysis business, through new or expanded collaborations, development of new products or services, or increased sales of existing products and services, our net losses may increase and we may never achieve profitability.

In addition, some of our collaboration agreements, including our collaboration with Nestlé Health Science, provide for milestone payments and/or future royalty payments, which we will only receive if we and our collaborators develop and commercialize products.

In addition, some of our collaboration agreements, including our collaboration with Nestlé Health Science and Takeda, provide for milestone payments and/or future royalty payments, which we will only receive if we and our collaborators develop and commercialize products.

We also may fund development of additional proprietary biocatalysis and/or biotherapeutic products.

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We currently have license agreements, research and development agreements, supply agreements and/or distribution agreements with various collaborators.

For example, we have ongoing collaborations with GSK, Merck, Novartis and Nestlé Health Science that are important to our business and financial results.

For example, we have ongoing collaborations with GSK, Merck, Novartis, Nestlé Health Science and Takeda that are important to our business and financial results.

We may have limited or no control over the amount or timing of resources that any collaborator is able or willing to devote to our partnered products or collaborative efforts.

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Further, our collaborators may not develop products arising out of our collaborative arrangements or devote sufficient resources to the development, manufacture, marketing or sale of these products.

Moreover, disagreements with a collaborator could develop, and any conflict with a collaborator could lead to litigation and could reduce our ability to enter into future collaboration agreements and negatively impact our relationships with one or more existing collaborators.

If any of these events occur, especially if they occur in our collaborations with GSK, Merck Novartis or Nestlé Health Science, or if we fail to maintain our agreements with our collaborators, we may not be able to commercialize our existing and potential products or grow our business or generate sufficient revenues to support our operations, we may not receive contemplated milestone payments and royalties under the collaboration, and we may be involved in litigation.

with one or more existing collaborators.

If any of these events occur, especially if they occur in our collaborations with GSK, Merck, Novartis, Nestlé Health Science or Takeda, or if we fail to maintain our agreements with our collaborators, we may not be able to commercialize our existing and potential products or grow our business or generate sufficient revenues to support our operations, we may not receive contemplated milestone payments and royalties under the collaboration, and we may be involved in litigation.

Our collaboration opportunities could be harmed and our financial condition and results of operations could be negatively affected if:

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The loss or reduction of business from one or a combination of our significant customers could, materially adversely affect our revenues, financial condition and results of operations.

We are dependent on a limited number of products in our protein catalysts business.

Our current product sales are derived from a limited number of protein catalyst products.

We expect a limited number of protein catalyst products to continue to account for a significant portion of our product sales for the foreseeable future.

Our product supply agreements with customers have finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products.

Our product supply agreements with customers generally have a finite duration, may not be extended or renewed and generally do not require the customer to purchase any particular quantity or quantities of our products.

While our products are not considered commodities and may not be easily substituted for by our customers, particularly when our products are used in the manufacture of active pharmaceutical ingredients, our customers may nevertheless terminate or fail to renew their product supply agreements with us or significantly curtail their purchases thereunder under certain circumstances.

Any such termination or reduction could materially adversely affect our revenues, financial condition and results of operations.

For the year ended December 31, 2020, we derived a majority of our product revenue from these product supply agreements.

With respect to customers purchasing our products for the manufacture of active pharmaceutical products (API) for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations.

With respect to customers purchasing our products for the manufacture of API for which exclusivity due to patent protection has or is about to expire, we can expect that the quantity of our products sold to such customers for such products may decline as generic competition for the API increases.

While we anticipate that we may, in some cases, also be able to sell products to these generic competitors for the manufacture of these APIs, the overall effect on our revenues, financial condition and results of operations could be materially adverse.

We are dependent on a limited number of products in our biocatalysts business.

Our current product sales are derived from a limited number of biocatalyst products.

We expect a limited number of biocatalyst products to continue to account for a significant portion of our product sales for the foreseeable future.

This product concentration increases the risk of quarterly fluctuations in our revenues and operating results.

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our in-house facility in Redwood City, California, and at two third-party contract manufacturing organizations, Lactosan GmbH & Co.

KG ("Lactosan"), in Kapfenberg, Austria, and DPhar SpA (“DPhar”), in Agnani, Italy.

KG (“Lactosan”), in Kapfenberg, Austria, and DPhar S.p.A.

(“DPhar”), in Anagni, Italy.

Generally, we perform smaller scale manufacturing in-house and outsource the larger scale manufacturing to these contract manufacturers.

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In addition, if we contract with other manufacturers, we may experience delays of several months in qualifying them, which could harm our relationships with our collaborators or customers and could negatively affect our revenues or operating results.

If we are unable to develop and commercialize new products for the pharmaceutical, fine chemicals, biotherapeutics and molecular diagnostics markets, our business and prospects will be harmed.

We plan to launch new products for the pharmaceutical, fine chemicals, therapeutics and molecular diagnostics markets.

If we are unable to develop and commercialize new products for the pharmaceutical, fine chemicals, biotherapeutics, diagnostics and other life science tools markets, our business and prospects will be harmed.

We plan to launch new products for the pharmaceutical, fine chemicals, biotherapeutics, diagnostics and other life science tools markets.

These efforts are subject to numerous risks, including the following:

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We are developing and have developed novel biotherapeutic candidates, including CDX-6114, the novel oral enzyme product candidate for the treatment of PKU that we licensed to Nestlé Health Science.

We are also developing protein sequences for use in gene therapy products for Fabry Disease, Pompe Disease, and an undisclosed blood factor for Takeda.

The successful development of biotherapeutic candidates involves many risks and uncertainties, requires long timelines and may lead to uncertain results.

In addition, drug development is highly regulated and requires areas of expertise and capital resources we do not currently possess.

In order to market a drug product in the United States, we must undergo the following process required by the FDA:

In order to market a biologic product in the United States, we must undergo the following process required by the FDA:

• completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with GLP requirements;

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If we fail to comply with applicable FDA or other regulatory requirements at any time during the drug development process, clinical testing, the approval process or after approval, we may become subject to administrative or judicial penalties, including the FDA’s refusal to approve a pending application, withdrawal of an approval, warning letters, product recalls, and additional enforcement actions.

In October 2017, we entered into the Nestlé Agreement with Nestlé Health Science pursuant to which we granted to Nestlé Health Science an option to obtain an exclusive, worldwide, royalty-bearing, sublicenseable license to develop and commercialize certain products based on our therapeutic enzyme product candidates for the treatment of hyperphenylalaninemia (“HPA”), including CDX-6114, as well as an exclusive right of first negotiation to obtain an exclusive worldwide license to develop and commercialize any enzyme discovered by us for use in the field of the prevention, diagnosis, treatment and management of inborn errors of amino acid metabolism.

HPA is a medical condition characterized by mildly or strongly elevated concentrations of the amino acid phenylalanine in the blood.

PKU can result in severe HPA.

In February 2019, Nestlé Health Science exercised its option to receive an exclusive license to further develop and commercialize CDX-6114 and our other therapeutic enzyme product candidates covered by specified patent applications for the treatment of PKU.

Our efforts to advance our biotherapeutic candidates that we develop are subject to numerous risks, including the following:

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To obtain regulatory approval to market any product candidate, preclinical studies and costly and lengthy clinical trials are required, and the results of the studies and trials are highly uncertain.

A failure of one or more pre-clinical or clinical trials can occur at any stage, and many companies that have believed their drug candidates performed satisfactorily in pre-clinical and clinical testing have nonetheless failed to obtain marketing approval of their product candidates.

A failure of one or more pre-clinical or clinical trials can occur at any stage,

and many companies that have believed their drug candidates performed satisfactorily in pre-clinical and clinical testing have nonetheless failed to obtain marketing approval of their product candidates.

• We may find it difficult to enroll patients in our clinical trials for product candidates.

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If these third parties do not successfully carry out their responsibilities or comply with regulatory requirements, we may receive lower quality products or services, suffer reputational harm and not be able to obtain regulatory approval for product candidates.

• Our efforts to use CodeEvolver ® protein engineering technology platform to generate new lead biotherapeutic candidates, whether under our collaboration with Nestlé Health Science or otherwise, may not be successful in creating candidates of value.

• Our efforts to use CodeEvolver ® protein engineering technology platform to generate new lead biotherapeutic candidates, whether under our collaborations with Nestlé Health Science, Takeda or otherwise, may not be successful in creating candidates of value.

• We will be exposed to potential product liability risks through the testing of experimental therapeutics in humans, which may expose us to substantial uninsured liabilities.

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• Changes in methods of treatment of disease, such as gene therapy, could cause us to stop development of our product candidates or reduce or eliminate potential demand for CDX-6114, if approved, or any other product candidates that we may develop in the future.

If Nestlé Health Science terminates its development program under its license agreement with us, any potential revenue from that license agreement will be significantly reduced or non-existent, and our results of operations and financial condition will be materially and adversely affected.

We have invested significant time and financial resources in the development of CDX-6114 and other product candidates for the treatment of HPA now included in the Nestlé Agreement (each a “Compound”).

In February 2019, Nestlé Health Science exercised its option to obtain an exclusive, worldwide, royalty-bearing, sub-licensable license for the global development and commercialization of CDX-6114 for the management of PKU.

As a result of the option exercise, we earned a milestone and recognized $3.0 million in revenues in the first quarter of 2019.

Upon exercising its option, Nestlé Health Science assumed all responsibilities for future clinical development and commercialization of CDX-6114, with the exception of the completion of an extension study, CDX-6114-004, which was substantially completed in the fourth quarter of 2019.

Under the Nestlé Agreement, we are eligible to receive from Nestlé Health Science development and approval milestones of up to $85.0 million, sales-based milestones of up to $250.0 million, and tiered royalties, at percentages ranging from the middle single digits to low double-digits, of net sales of products containing a licensed Compound as its sole active ingredient.

We have received milestone payments under the Nestlé Agreement to date.

However, there is no guarantee that we will receive further milestone payments under the Nestlé Agreement.

Nestlé Health Science may terminate the entire agreement in the event of serious safety issues related to any Compound or product subject to the agreement and at its convenience.

We may terminate the Nestlé Agreement if Nestlé Health Science challenges the validity or enforceability of any of our patents covering the Compound.

Either party may terminate the agreement in the event of the other party’s uncured material breach or insolvency.

Depending on the timing of any such termination, we may not be entitled to receive potential milestone payments, as these payments terminate with termination of the Nestlé Agreement.

If Nestlé Health Science terminates its rights and obligations with respect to the Nestlé Agreement, then depending on the timing of such event:

• the development of our product candidates subject to the agreement may be terminated or significantly delayed;

If either Nestlé Health Science or Takeda terminate their development programs under their respective license agreements with us, any potential revenue from those license agreements will be significantly reduced or non-existent, and our results of operations and financial condition will be materially and adversely affected.

We have invested significant time and financial resources in the development of CDX-6114 and other product candidates for the treatment of HPA now included in the Nestlé License Agreement as well as in the development of candidates for the treatment of Fabry disease and Pompe disease which are now included in the Takeda Agreement.

Under the Nestlé License Agreement, we are eligible to receive from Nestlé Health Science development and approval milestones of up to $85.0 million, sales-based milestones of up to $250.0 million, and tiered royalties, at percentages ranging from the middle single digits to low double-digits, of net sales of products containing a licensed Compound as its sole active ingredient.

Under the Takeda Agreement, we are eligible to earn up to $15.4 million of research and development fees and pre-clinical milestone payments from Takeda for the Initial Programs.

We are eligible to receive certain development and commercialization milestone payments up to $100.0 million per target gene, the modulation of which would lead to the treatment of the disease indications by the applicable Product.

We are also eligible to receive tiered royalties based on net sales of Products at percentages ranging from the middle-single digits to low single-digits.

While we have received milestone payments under the Nestlé License Agreement to date there is no guarantee that we will receive further milestone payments under the Nestlé Agreement or Takeda Agreement in the future.

Under the Nestle Agreement and the Takeda Agreement, either Nestlé Health Science and Takeda, as applicable, may each terminate the entire agreement or specified programs thereunder at will under certain circumstances as described in more detail under “Item 1.

Business--Our Market Opportunities--Pharmaceutical Market--Our Solutions for the Pharmaceutical Market--Biotherapeutic Product Discovery and Development” in this Annual Report on Form 10-K.

If Nestlé Health Science terminates its rights and obligations with respect to the Nestlé License Agreement and/or Takeda terminates its rights and obligations with respect to the Takeda Agreement, then depending on the timing of such event:

• the development of our product candidates subject to the respective agreements may be terminated or significantly delayed;

• our cash expenditures could increase significantly if it is necessary for us to hire additional employees and allocate scarce resources to the development and commercialization of product candidates;

• we would bear all of the risks and costs related to the further development and commercialization of product candidates that were previously the subject of the Nestlé Agreement, including the reimbursement of third parties;

• we would bear all of the risks and costs related to the further development and commercialization of product candidates that were previously the subject of the respective agreements, including the reimbursement of third parties;

• in order to fund further development and commercialization of new product candidates or programs, we may need to seek out and establish alternative collaboration arrangements with third-party partners;

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There can be no assurance that our customer(s) will not receive any objections from the FDA to their Notice of Determination.

If the FDA were to disagree with our customer’s determination, they could ask our customer to voluntarily withdraw the final commercial product from the market or could initiate legal action to halt its sale.

If the FDA were to disagree with our customer’s determination, they could ask our customer to voluntarily withdraw the final commercial product from the market or could initiate legal action to

halt its sale.

Such actions by the FDA could have an adverse effect on our business, financial condition, and results of our operations.

Food ingredients that are not GRAS are regulated as food additives and require FDA approval prior to

commercialization.

Food ingredients that are not GRAS are regulated as food additives and require FDA approval prior to commercialization.

The food additive petition process is generally expensive and time consuming, with approval, if secured, potentially taking years.

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If we fail to comply with such requirements on an ongoing basis, we may be subject to fines or other penalties, or may be prevented from selling our products which are used in food and food ingredients and our business may be harmed.

Our efforts to deploy our technology in the in vitro molecular diagnostics market may fail.

Our efforts to deploy our technology in the life science tools markets may fail.

We have recently begun to use our CodeEvolver ® protein engineering technology platform to develop new products for customers using NGS and PCR/qPCR for in vitro molecular diagnostic applications.

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• changes in our financial priorities, greater than anticipated costs of completing a trial or our inability to continue funding the trial.

In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials.

Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

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• proximity and availability of clinical trial sites for prospective patients.

We expect that some of our product candidates will focus on diseases with limited patient pools from which to draw for enrollment in clinical trials.

Disruptions caused by the COVID-19 pandemic may increase the likelihood that we or our collaborators encounter such difficulties or delays in enrolling patients in clinical trials.

In addition, we expect that some of our product candidates will focus on diseases with limited patient pools from which to draw for enrollment in clinical trials.

The eligibility criteria of our clinical trials will further limit the pool of available trial participants.

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Failure can occur at any time during the preclinical study or clinical trial process.

Despite promising preclinical or

clinical results, any product candidate can unexpectedly fail at any stage of preclinical or clinical development.

Despite promising preclinical or clinical results, any product candidate can unexpectedly fail at any stage of preclinical or clinical development.

The historical failure rate for product candidates in our industry is high.

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We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.

For example, certain policies of the Trump administration may impact our business and industry.

Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine oversight activities such as implementing statutes through rulemaking, issuance of guidance and review and approval of marketing applications.

It is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority.

If these executive actions impose restrictions on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements, or if we or our collaborators are unable to maintain regulatory compliance, marketing approval that has been obtained may be lost.

Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products from being developed or commercialized in a timely manner, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes.

Average review times at the agency have fluctuated in recent years as a result.

In addition, government funding of agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs and biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

For example, the results of the 2020 U.S.

Presidential Election may impact our business and industry.

Namely, the Trump administration took several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications.

It is difficult to predict whether or how these orders will be implemented, or whether they will be rescinded and replaced under the Biden administration.

The policies and priorities of the new administration are unknown and could materially impact the regulations governing our product candidates.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions.

Average review times at the FDA have fluctuated in recent years as a result.

In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new biologics or modifications to approved biologics to be reviewed and/or approved by necessary government agencies, which could adversely affect our business.

For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S.

government has shut down and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities.

If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

Separately, in response to the COVID-19 pandemic, on March 10, 2020 the FDA announced its intention to postpone most inspections of foreign manufacturing facilities and products, and on March 18, 2020 the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities.

Subsequently, on July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system.

The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities.

Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our or our collaborators’ regulatory submissions, which could have a material adverse effect on our business.

Our product candidates for which we intend to seek approval as a biologic products may face competition sooner than anticipated.

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As a result, its ultimate impact, implementation, and meaning are subject to uncertainty.

While it is uncertain when the FDA will fully adopt processes intended to implement BPCIA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity.

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Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

Our business operations and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.

Our business operations and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations.

These laws may constrain the business or financial arrangements and relationships through which we will conduct our operations, including how we research, market, sell and distribute our product candidates, if approved.

Such laws include:

federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under U.S.

federal and state healthcare programs such as Medicare and Medicaid.

A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

federal false claims laws, including the civil False Claims Act, which, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S.

federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S.

federal government.

In addition, the government may assert that a claim including items and services resulting from a violation of the U.S.

federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services;

similar to the U.S.

federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations, which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as health plans, healthcare clearinghouses and healthcare providers as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information;

federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals beginning in 2022, and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

• analogous U.S.

state laws and regulations, including:

state anti-kickback and false claims laws, which may apply to our future business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers;

state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s

voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S.

federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources;

state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities;

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 often are not preempted by HIPAA, thus complicating compliance efforts;

• similar healthcare laws and regulations in the EU and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the privacy and security of certain protected information, such as the General Data Protection Regulation (“GDPR”), which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in the European Economic Area (“EEA”) (including health data).

Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs.

It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations.

If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid or similar programs in other countries or jurisdictions, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations.

The successful commercialization of product candidates developed by us or our partners will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels and pricing policies.

Failure to obtain or maintain coverage and adequate reimbursement for such product candidates, if approved, could limit our or our partners’ ability to market those products and decrease our ability to generate revenue.

The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers and other third-party payors are essential for most patients to be able to afford prescription medications such as our product candidates, assuming FDA approval.

Our ability to achieve acceptable levels of coverage and reimbursement for products by governmental authorities, private health insurers and other organizations will have an effect on our ability to successfully commercialize our product candidates.

Assuming we obtain coverage for our product candidates by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high.

We cannot be sure that coverage and reimbursement in the United States, the EU or elsewhere will be available for our product candidates or any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.

Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs or biologics when an equivalent generic drug, biosimilar or a less expensive therapy is available.

It is possible that a third-party payor may consider our product candidates as substitutable and only offer to reimburse patients for the less expensive product.

Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing third-party therapeutics may limit the amount we will be able to charge for our product candidates.

These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in our product candidates.

For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs.

Additionally, separate reimbursement for the product itself or the treatment or procedure in which the product is used may not be available, which may impact physician utilization.

If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates, and may not be able to obtain a satisfactory financial return on our product candidates.

No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States.

Therefore, coverage and reimbursement for products can differ significantly from payor to payor.

As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries have and will continue to put pressure on the pricing and usage of our product candidates.

In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems.

Other countries allow companies to fix their own prices for medical products, but monitor and control company profits.

Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates.

Accordingly, in markets outside the United States, the reimbursement for our product candidates may be reduced compared with the United States and may be insufficient to generate commercially-reasonable revenue and profits.

Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates.

We expect to experience pricing pressures in connection with the sale of our product candidates due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional legislative changes.

The downward pressure on healthcare costs in general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense.

As a result, increasingly high barriers are being erected to the entry of new products.

Enacted and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and may affect the prices we may set.

In the United States, the EEA and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect our future results of operations.

In particular, there have been and continue to be a number of initiatives at the U.S.

federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare.

For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively the ACA, was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers.

Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following:

• an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs;

• a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

• an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;

• a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

• extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

• expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA.

Supreme Court is currently reviewing the constitutionality of the ACA, although it is unclear when a decision will be made or how the Supreme Court will rule.

It is also unclear how this decision or other efforts, if any, to challenge, repeal, or replace the ACA will impact the law, our business or financial condition.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted.

For example, the Budget Control Act of 2011 resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021, unless additional action is taken by Congress.

In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from

three to five years.

These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other health care funding, which could negatively affect our future customers and accordingly, our financial operations.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives.

For example, CMS may develop new payment and delivery models, such as bundled payment models.

In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products.

We expect that additional U.S.

federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S.

federal government will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Legally-mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects.

In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.

This could reduce the ultimate demand for our product candidates or put pressure on our product pricing.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action in the United States or any other jurisdiction.

If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

We rely on third parties to conduct our clinical trials and perform some of our research and preclinical studies.

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Comparable foreign regulatory authorities may require compliance with similar requirements.

The facilities and quality systems of our third-party contractor manufacturers must pass a pre-approval inspection for compliance with the applicable regulations as a condition of marketing approval of our product

We do not control the manufacturing activities of, and are completely dependent on, our contract manufacturers for compliance with cGMP regulations.

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It is also possible that we may not obtain issued patents from our pending patent applications or other inventions we seek to protect.

We sometimes permit certain intellectual property to lapse or go abandoned under appropriate circumstances.

We sometimes permit certain patents or patent applications to lapse or go abandoned under appropriate circumstances.

Due to uncertainties inherent in prosecuting patent applications, sometimes patent applications are rejected and we subsequently abandon them.

It is also possible that we may develop proprietary products or technologies in the future that are not patentable or that the patents of others will limit or altogether preclude our ability to conduct business.

In addition, any patent issued to us may provide us with little or no competitive advantage, in which case we may abandon such patent or license it to another entity.

In addition, any patent issued to us or to our licensor may provide us with little or no competitive advantage, in which case we may abandon such patent or license it to another entity, or terminate the license agreement.

Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop technology or products that are similar to ours or that compete with ours.

Patent, trademark, and trade secret laws afford only limited protection for our technology platform and products.

Patent, trademark, copyright and trade secret laws afford only limited protection for our technology platform, services and products.

The laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States.

Despite our efforts to protect our proprietary rights, unauthorized parties have in the past attempted, and may in the future attempt, to operate under aspects of our intellectual property or products or to obtain and use information that we regard as proprietary.

Third parties may also design around our proprietary rights, which may render our protected technology and products less valuable, if the design around is favorably received in the marketplace.

In addition, if any of our products or technology is covered by third-party patents or other intellectual property rights, we could be subject to various legal actions.

We cannot assure you that our technology platform and products do not infringe patents held by others or that they will not in the future.

Despite our efforts to protect our proprietary rights, unauthorized parties have in the past attempted, and may in the future attempt, to operate under aspects of our intellectual property, technology, services or products or to obtain and use information that we regard as proprietary.

Third parties may also design around our proprietary rights, which may render our protected technology, services and products less valuable, if the design around is favorably received in the marketplace.

In addition, if any of our products, services or technology is covered by third-party patents or other intellectual property rights, we could be subject to various legal actions.

We cannot assure you that our technology platform, services and products do not infringe patents held by others or that they will not in the future.

Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement, invalidity, misappropriation, or other claims.

Any such litigation could result in substantial costs and diversion of our resources.

Moreover, any settlement of or adverse judgment resulting from litigation relating to intellectual property could require us to obtain a license to continue to make, use or sell the products or technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology.

Our ability to compete may decline if we do not adequately protect our proprietary technologies or if we lose some of our intellectual property rights.

Our success depends in part on our ability to obtain patents and maintain adequate protection of our intellectual property for our technologies and products and potential products in the United States and other countries.

We have adopted a strategy of seeking patent protection in the United States and in foreign countries with respect to certain of the technologies used in or relating to our products and processes.

Our success depends in part on our ability to obtain patents and maintain adequate protection of our intellectual property for our technologies, services and products in the United States and other countries.

We have adopted a strategy of seeking patent protection in the United States and in foreign countries with respect to certain of the technologies used in or relating to our services, products and processes.

As such, as of December 31, 2020, we owned or controlled approximately 1,635 issued patents and pending patent applications in the United States and in various foreign jurisdictions.

Our intellectual property rights, as of December 31, 2019, have terms that expire between 2020 and 2040.

We also have license rights to a number of issued patents and pending patent applications in the United States and in various foreign jurisdictions.

Our owned and licensed patents and patent applications include those directed to our enabling technologies and to the methods and products that support our business in the pharmaceuticals manufacturing and complex chemistry markets.

We intend to continue to apply for patents relating to our technologies, methods and products as we deem appropriate.

Numerous patents in our portfolio involve complex legal and factual questions and, therefore, enforceability cannot be predicted with any certainty.

Our patents and patent applications, if issued, as of December 31, 2020, have terms that expire between 2021 and approximately 2041.

We also have l icense rights to a number of issued patents and pending patent applications in the United States and in various foreign jurisdictions.

Our owned and licensed patents and patent applications include those directed to our enabling technologies and to the methods and products that support our business in the biotherapeutics, molecular diagnostics, food and other markets.

We intend to continue to apply for patents relating to our technologies, methods, services and products as we deem appropriate.

Issuance of claims in patent applications and enforceability of such claims once issued involve complex legal and factual questions and, therefore, we cannot predict with any certainty whether any of our issued patents will survive invalidity claims asserted by third parties.

Issued patents and patents issuing from pending applications may be challenged, invalidated, or circumvented.

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Any litigation or proceedings could divert our management's time and efforts.

Even unsuccessful claims filed by third parties could result in significant legal fees and other expenses, diversion of management time, and disruption in our business.

Uncertainties resulting from initiation and continuation of any patent or related litigation could harm our ability to compete.

Even unsuccessful claims brought by third parties could result in significant legal fees and other expenses, diversion of management time, and disruption in our business.

Uncertainties resulting from initiation and continuation of any patent or

related litigation could harm our ability to compete.

We have not assessed the applicability of the AIA and new regulations on our patent portfolio.

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Moreover, third parties could practice our inventions in territories where we do not have patent protection.

Such third parties may then try to import products made using our inventions into the United States or other territories.

Such third parties may then try to import products made using our inventions into the United States or other countries.

If competitors are able to use our technology, our ability to compete effectively could be harmed.

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Third parties may claim that we are infringing their intellectual property rights or other proprietary rights, which may subject us to costly and time consuming litigation and prevent us from developing or commercializing our products.

Our commercial success also depends in part on our ability to operate without infringing patents and proprietary rights of third parties, and without breaching any licenses or other agreements that we have entered into with regard to our technologies, products and business.

We cannot ensure that patents have not been issued to third parties that could block our ability to obtain patents or to operate as we would like.

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We cannot assure you that if this third party intellectual property is asserted against us that we would ultimately prevail.

We may be involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and unsuccessful.

We may be involved in lawsuits to protect or enforce our intellectual property rights, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe our intellectual property rights or those of our licensors.

To prevent infringement or unauthorized use, we have in the past filed, and may in the future be required to file, infringement claims, which can be expensive and time-consuming.

See Item 3, “Legal Proceedings.” In addition, in a patent infringement proceeding, a court may decide that a patent we own or in-license is not valid, is unenforceable and/or is not infringed.

In legal proceedings against a third party to enforce a patent directed at one of our technologies or products, the defendant could counterclaim that our patent is invalid and/or unenforceable in whole or in part.

In addition, in an infringement proceeding, a court may decide that the intellectual property that we own or in-

license is not valid, is unenforceable and/or is not infringed.

In addition, in legal proceedings against a third party to enforce a patent directed at one of our technologies, services or products, the defendant could counterclaim that our patent is invalid and/or unenforceable in whole or in part.

In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace.

Grounds for a validity challenge include an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement.

Grounds for an unenforceability assertion could include an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution.

Grounds for a patent validity challenge include an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement.

Grounds for an unenforceability assertion could include an allegation that someone connected with prosecution of the patent withheld relevant information from the United States Patent and Trademark Office (“USPTO”) or made a misleading statement during prosecution.

Third parties may also raise similar claims before the USPTO, even outside the context of litigation.

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Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources.

Uncertainties resulting from the initiation

and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.

Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

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Our planned activities will require additional expertise in specific industries and areas applicable to the products and processes developed through our technology platform or acquired through strategic or other transactions, especially in the end markets that we seek to penetrate.

These activities will require the addition of new personnel, and the development of additional expertise by existing personnel.

These activities will require the addition of new personnel, and the development of additional

expertise by existing personnel.

The inability to attract personnel with appropriate skills or to develop the necessary expertise could impair our ability to grow our business.

If our protein catalysts, or the genes that code for our protein catalysts, are stolen, misappropriated or reverse engineered, others could use these biocatalysts or genes to produce competing products.

Third parties, including our contract manufacturers, customers and those involved in shipping our protein catalysts, often have custody or control of our protein catalysts.

If our protein catalysts, or the genes that code for our protein catalysts, were stolen, misappropriated or reverse engineered, they could be used by other parties who may be able to reproduce these protein catalysts for their own commercial gain.

If our biocatalysts, or the genes that code for our biocatalysts, are stolen, misappropriated or reverse engineered, others could use these biocatalysts or genes to produce competing products.

Third parties, including our contract manufacturers, customers and those involved in shipping our biocatalysts, often have custody or control of our biocatalysts.

If our biocatalysts, or the genes that code for our biocatalysts, were stolen, misappropriated or reverse engineered, they could be used by other parties who may be able to reproduce these biocatalysts for their own commercial gain.

If this were to occur, it may be difficult for us to challenge this type of use, especially in countries with limited intellectual property protection or in countries in which we do not have patents covering the misappropriated biocatalysts.

Confidentiality agreements with employees and others may not adequately prevent disclosures of trade secrets and other proprietary information.

We rely in part on trade secret protection to protect our confidential and proprietary information and processes.

However, trade secrets are difficult to protect.

We have taken measures to protect our trade secrets and proprietary information, but these measures may not be effective.

We rely in part on trade secret and confidentiality protection to protect our confidential and proprietary information and processes.

However, trade secrets and confidential information are difficult to protect.

We have taken measures to protect our trade secrets and confidential and proprietary information, but these measures may not be effective.

We require employees and consultants to execute confidentiality agreements upon the commencement of an employment or consulting arrangement with us.

These agreements generally require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s

relationship with us be kept confidential and not disclosed to third parties.

These agreements generally require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties.

These agreements also generally provide that inventions conceived by the individual in the course of rendering services to us shall be our exclusive property.

Nevertheless, our proprietary information may be disclosed, third parties could reverse engineer our biocatalysts and others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.

Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Nevertheless, our confidential and proprietary information may be disclosed, third parties could reverse engineer our biocatalysts and others may independently develop substantially equivalent confidential and proprietary information and techniques or otherwise gain access to our trade secrets.

Costly and time-consuming litigation could be necessary to enforce and determine the scope of our confidential and proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

We may need additional capital in the future in order to expand our business.

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If we are unable to comply with the terms of our credit facility, our business and financial condition would be materially and adversely affected.

On June 30, 2017 we entered into a credit facility ("Credit Facility") financing arrangement secured by a lien on substantially all of our personal property other than our intellectual property.

On June 30, 2017 we entered into a credit facility (“Credit Facility”) financing arrangement with Western Alliance Bank which is secured by a lien on substantially all of our personal property other than our intellectual property.

Although we have made no loans or draws under the Credit Facility as of December 31, 2020, the Credit Facility includes affirmative and negative covenants including, among others, covenants requiring us to achieve consolidated product revenues at minimum levels and restricting our ability to transfer collateral, incur additional indebtedness, engage in mergers or acquisitions, pay dividends or make other distributions, make investments, create liens and sell assets.

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Draws under the Credit Facility would create debt service obligations for us.

Although we have not drawn on the Credit Facility to date, any future draws under the Credit Facility and the related debt service requirements could adversely affect our ability to

operate our business and may limit our ability to take advantage of potential business opportunities.

Although we have not drawn on the Credit Facility to date, any future draws under the Credit Facility and the related debt service requirements could adversely affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities.

For example, the Credit Facility presents the following risks, certain of which apply regardless of whether we draw on the Credit Facility:

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Based on our analysis, we determined that the fair value of goodwill at the reporting unit level exceeded their carrying value and that no impairment was necessary as of December 31, 2020.

Nevertheless, we may experience additional events or changes in circumstances in the future that we determine to be indicators of impairment and that may in turn require us to undertake impairment analysis in future periods.

Nevertheless, we may experience additional events or changes

in circumstances in the future that we determine to be indicators of impairment and that may in turn require us to undertake impairment analysis in future periods.

Depending on the circumstances and judgments made at such future time, the outcome of the analysis may require us to recognize impairment.

We may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or other long-lived assets is determined, resulting in an adverse impact on our financial position and results of operations.

Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations.

Financial accounting standards may change or their interpretation may change.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change becomes effective.

Changes to existing rules or the re-examining of current practices may adversely affect our reported financial results or the way we conduct our business.

In particular, in order to be able to comply with the requirements of the revenue recognition standard under Accounting Standards Update (ASU) 2014-09 Revenue from Contracts with Customers (Topic 606) and related amendments (“ASC 606”), we have updated and enhanced our internal accounting processes and our internal controls over financial reporting.

This has required, and will continue to require, additional investments by us, and may require incremental resources that could increase our operating costs in future periods.

Further, the timing of recognition for our product sales under certain license and supply agreements and research and development revenues, on or after January 1, 2018, have been changed as a result of ASC 606.

We have investments in non-marketable securities, which may subject us to significant impairment charges.

We have investments in illiquid non-marketable equity and debt securities acquired in private transactions.

At December 31, 2020, 1.1% of our consolidated assets were comprised of investment securities, which are illiquid investments.

Investments in illiquid, or non-marketable, securities are inherently risky and difficult to value.

We account for our non-marketable equity securities under the measurement alternative.

Under the measurement alternative, the carrying value of our non-marketable equity investments is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment.

Adjustments are determined primarily based on a market approach as of the transaction date and are recorded as a component of other income (expense), net.

We measure investments in non-marketable equity securities without a readily determinable fair value using a measurement alternative that measures these securities at the cost method minus impairment, if any, plus or minus changes resulting from observable price changes on a non-recurring basis.

We measure available for sale investments in non-marketable debt at fair value.

Unrealized gains and losses on these securities are recognized in other comprehensive income until realized.

We evaluate our investment in non-marketable securities when circumstances indicate that we may not be able to recover the carrying value.

We may impair these securities and establish an allowance for a credit loss when we determine that there has been an “other-than-temporary” decline in estimated fair value of the debt or equity security compared to its carrying value.

The impairment analysis requires significant judgment to identify events or circumstances that would likely have a material adverse effect on the fair value of the investment.

Because a portion amount of our assets are comprised of non-marketable investment securities, any future impairment charges from the write down in value of these securities could have a material adverse effect on our financial condition or results of operations.

If we are unable to maintain effective internal control over financial reporting in the future, the accuracy and timeliness of our financial reporting may be adversely affected.

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We may be subject to significant consequences, including penalties and fines, for any failure to comply with such laws, regulations and directives.

For example, the General Data Protection Regulation (the "GDPR") is in effect across the European Economic Area (the "EEA"), which imposes several stringent requirements for controllers and processors of personal data and increased our obligations, for example, by imposing higher standards when obtaining consent from individuals to process their personal data, requiring more robust disclosures to individuals, strengthening individual data rights, shortening timelines for data breach notifications, limiting retention periods and secondary use of information, increasing requirements pertaining to health data as well as pseudonymized (i.e., key-coded) data, and imposing additional obligations when we contract third-party processors in connection with the processing of personal data.

For example, the GDPR is in effect across the EEA, which imposes several stringent requirements for controllers and processors of personal data and increased our obligations, for example, by imposing higher standards when obtaining consent from individuals to process their personal data, requiring more robust disclosures to individuals, strengthening individual data rights, shortening timelines for data breach notifications, limiting retention periods and secondary use of information, increasing requirements pertaining to health data as well as pseudonymized (i.e., key-coded) data, and imposing additional obligations when we contract third-party processors in connection with the processing of personal data.

The GDPR provides that European Union member states may make their own further laws and regulations limiting the processing of genetic, biometric, or health data, which could limit our ability to use and share personal data or could cause our costs to increase and harm our business and financial condition.

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For example, some countries have adopted laws mandating that some Personal Information regarding customers in their country be maintained solely in their country.

Having to maintain local data centers and redesign product,

service and business operations to limit Personal Information processing to within individual countries could increase our operating costs significantly.

Having to maintain local data centers and redesign product, service and business operations to limit Personal Information processing to within individual countries could increase our operating costs significantly.

Our product gross margins are variable and may decline from quarter to quarter.

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Our future success will depend on our ability to maintain a competitive position with respect to technological advances.

In addition, as we enter

new markets, we will face new competition and will need to adapt to competitive factors that may be different from those we face today.

In addition, as we enter new markets, we will face new competition and will need to adapt to competitive factors that may be different from those we face today.

We are aware that other companies, including Royal DSM, N.V.

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The market for the manufacture and supply of APIs and intermediates is large with many established companies.

These companies include many of our large innovator and generic pharmaceutical customers, such as Merck, GSK, Novartis, Pfizer, Bristol Myers, Squibb, Kyorin, Urovant and Teva Pharmaceutical Industries Ltd., which have significant internal research and development efforts directed at developing processes to manufacture APIs and intermediates.

These companies include many of our large innovator and generic pharmaceutical customers, such as Merck, GSK, Novartis, Pfizer, Bristol-Myers, Kyorin, Urovant and Teva which have significant internal research and development efforts directed at developing processes to manufacture APIs and intermediates.

The processes used by these companies include classical conventional organic chemistry reactions, chemo catalytic reactions, biocatalytic reactions or combinations thereof.

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The market for supplying enzymes for use in pharmaceutical manufacturing is quite fragmented.

There is competition from large industrial enzyme companies, such as Novozymes, and Dupont, as well as subsidiaries of larger contract research/contract manufacturing organizations (“CRO/CMO”), such as Royal DSM N.V.

(“DSM”), Cambrex Corporation, Lonza, WuXi STA, and Almac Group Ltd.

Some fermentation pathway design companies, like Ginkgo Bioworks and Zymergen, whose traditional focus has been to design microorganisms that express small molecule chemicals, could extend into designing organisms that express enzymes.

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In addition, certain of our competitors may also benefit from local government subsidies and other incentives that are not available to us.

As a result, our competitors may be

able to develop competing and/or superior technologies and processes, and compete more aggressively and sustain that competition over a longer period of time than we could.

As a result, our competitors may be able to develop competing and/or superior technologies and processes, and compete more aggressively and sustain that competition over a longer period of time than we could.

Our technologies and products may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors.

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We are subject to value added tax, customs tax, sales and use tax, withholding tax, payroll tax, income tax and other taxes in connection with the operation of our business.

Regulators from the various jurisdictions in which we operate periodically perform audits, and we are regularly subject to, and are currently undergoing, audits and assessments by tax authorities in the United States and foreign jurisdictions for prior tax years.

Regulators from the various jurisdictions in which we operate periodically

perform audits, and we are regularly subject to, and are currently undergoing, audits and assessments by tax authorities in the United States and foreign jurisdictions for prior tax years.

Although we believe our tax estimates are reasonable, and we intend to defend our positions if necessary, the final outcome of tax audits and related proceedings is inherently uncertain and could be materially different than that reflected in our historical income tax provisions and accruals.

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Any losses or damages we incur could have a material adverse effect on our cash flows and success as an overall business.

Epidemic diseases, or the perception of their effects, could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Outbreaks of epidemic, pandemic, or contagious diseases, such as the recent novel coronavirus or, historically, the Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, or the H1N1 virus, could disrupt our business.

Business disruptions could include disruptions or restrictions on our ability to travel or to distribute our products, as well as temporary closures of the facilities of our customers, partners, suppliers or contract manufacturers.

Any disruption of our customers, partners, suppliers or contract manufacturers would likely impact our sales and operating results.

For example, we derive a portion of our revenues from contracts with customers and collaboration partners located in China, which has recently experienced an outbreak of the novel coronavirus.

While at this point, the extent to which the coronavirus outbreak may impact our results is uncertain, it could result in delays in delivering our products and services to customers and collaboration partners or decreased demand for our products and services, which may negatively impact our sales and operating results.

In addition, a significant outbreak of epidemic, pandemic, or contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and services.

Any of these events could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

Ethical, legal and social concerns about genetically engineered products and processes could limit or prevent the use of our products, processes, and technologies and limit our revenues.

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This adverse publicity could lead to greater regulation and trade restrictions on imports of genetically altered products.

The protein catalysts that we develop have significantly enhanced characteristics compared to those found in naturally occurring enzymes or microbes.

The biocatalysts that we develop have significantly enhanced characteristics compared to those found in naturally occurring enzymes or microbes.

While we produce our biocatalysts only for use in a controlled industrial environment, the release of such biocatalysts into uncontrolled environments could have unintended consequences.

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• assume significant liabilities including litigation risk.

existing business relationships with current and/or prospective collaborators, customers and/or suppliers, risks associated with entering markets in which we have no or limited prior experience and potential loss of key employees.

Acquisitions involve numerous risks, including problems integrating the purchased operations, technologies or products, unanticipated costs and other liabilities, diversion of management’s attention from our core businesses, adverse effects on existing business relationships with current and/or prospective collaborators, customers and/or suppliers, risks associated with entering markets in which we have no or limited prior experience and potential loss of key employees.

We do not have extensive experience in managing the integration process and we may not be able to successfully integrate any businesses, assets, products, technologies, or personnel that we might acquire in the future without a significant expenditure of operating, financial and management resources, if at all.

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We cannot assure you that any contract manufacturer that we have used in the past or shall use in the future has or will have adequate insurance coverage to cover against potential claims.

In addition, although we currently maintain product liability insurance for our products in amounts we believe to be commercially reasonable, if the coverage limits of these insurance policies are not adequate, a claim brought against us, whether covered by insurance or not, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

insurance or not, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

This insurance may not provide adequate coverage against potential losses, and if claims or losses exceed our liability insurance coverage, we may go out of business.

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In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating loss carryforwards (“NOLs”), to offset future taxable income.

If the Internal Revenue Service challenges our analysis that our existing NOLs are not subject to

limitations arising from previous ownership changes, our ability to utilize NOLs could be limited by Section 382 of the Code.

If the Internal Revenue Service challenges our analysis that our existing NOLs are not subject to limitations arising from previous ownership changes, our ability to utilize NOLs could be limited by Section 382 of the Code.

Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code.

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Of those shares, approximately 1.7 million shares were held by current directors, executive officers and other affiliates, or may otherwise be subject to Rule 144 under the Securities Act of 1933, or the Securities Act.

As of December 31, 2019, approximately 321,000 shares of common stock issuable upon vesting of outstanding restricted stock units and performance stock units and up to approximately 4.4 million shares of common stock issuable upon exercise of outstanding options were eligible for sale in the public market to the extent permitted by the provisions of the applicable vesting schedules, and Rule 144 and Rule 701 under the Securities Act.

As of December 31, 2020, approximately 0.3 million shares of common stock issuable upon vesting of outstanding restricted stock units and performance stock units and up to approximately 4.6 million shares of common stock issuable upon exercise of outstanding options were eligible for sale in the public market to the extent permitted by the provisions of the applicable vesting schedules, and Rule 144 and Rule 701 under the Securities Act.

If these additional shares of common stock are issued and sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

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• additions or losses of one or more significant pharmaceutical products;

• announcements or developments regarding pharmaceutical products manufactured using our protein catalysts and intermediates;

• announcements or developments regarding pharmaceutical products manufactured using our biocatalysts and intermediates;

• the entry into, modification or termination of collaborative arrangements;

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• general market conditions in our industry;

• general economic and market conditions, including the recent financial crisis.

• general economic and market conditions.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.

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Our operating results and cash flows are subject to volatility due to fluctuations in foreign currency exchange rates.

Our primary exposure to fluctuations in foreign currency exchange rates relates to cash denominated in currencies other than the U.S.

The weakening of foreign currencies relative to the United States dollar adversely affects our foreign currency-denominated cash.

In periods when the United States dollar declines in value as compared to the foreign currencies in which we incur expenses, our foreign-currency based cash decrease when translated into United States dollars.

Conversely, the strengthening of foreign currencies relative to the United States dollar will generally be beneficial to our foreign currency-denominated cash when translated into United States dollars.

Our primary exposure to fluctuations in foreign currency exchange rates relates to cash denominated in currencies other than the United States dollar ("USD").

The weakening of foreign currencies relative to the USD adversely affects our foreign currency-denominated cash.

In periods when the USD declines in value as compared to the foreign currencies in which we incur

expenses, our foreign-currency based cash decrease when translated into United States dollars.

Conversely, the strengthening of foreign currencies relative to the USD will generally be beneficial to our foreign currency-denominated cash when translated into USD.

The effect of a 10% unfavorable change in exchange rates on foreign denominated receivables and cash as of December 31, 2020 would have had foreign exchange losses of approximately $0.1 million recognized as a component of other expense in our consolidated statement of operations.

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Quantitative and Qualitative Disclosures About Market Risk” for additional discussion on the impact of foreign exchange risk.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us or our business.

We do not have any control over these analysts.

If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock in a negative manner, our stock price would likely decline.

If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

General Risk Factors

Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported results of operations.

Financial accounting standards may change or their interpretation may change.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change becomes effective.

Changes to existing rules or the re-examining of current practices may adversely affect our reported financial results or the way we conduct our business.

This has required, and will continue to require, additional investments by us, and may require incremental resources that could increase our operating costs in future periods.

We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.

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Moreover, if we are not able to maintain compliance with the requirements of Section 404, our stock price could decline, and we could face sanctions, delisting or investigations by the Nasdaq Global Market, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.

We may also be subject to more stringent state law requirements.

For example, in September 2018, California Governor Jerry Brown signed into law Senator Bill 826 (SB 826), which generally requires public companies with principal executive offices in California to have a minimum number of females on the company's board of directors.

As of December 31, 2019, each public company with principal executive offices in California was required to have at least one female on its board of directors.

By December 31, 2021, each public company will be required to have at least two females on its board of directors if the company has at least five directors, and at least three females on its board of directors if the company has at least six directors.

The new law does not provide a transition period for newly listed companies.

Similarly, in January 2020, New York enacted a new law that mandates a study on the number of female directors on the board of corporations doing business in New York.

Additionally, on September 30, 2020, California Governor Gavin Newsom signed into law Assembly Bill 979 (AB 979), which generally requires public companies with principal executive offices in California to include specified numbers of directors from "underrepresented communities." A director from an "underrepresented community" means a director who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, Alaska Native, gay, lesbian, bisexual or transgender.

By December 31, 2021, each public company with principal executive offices in California is

required to have at least one director from an underrepresented community.

By December 31, 2022, a public company with more than four but fewer than nine directors will be required to have a minimum of two directors from underrepresented communities, and a public company with nine or more directors will need to have a minimum of three directors from underrepresented communities.

Similar to SB 826, AB 979 does not provide a transition period for newly listed companies.

If we fail to comply with either SB 826 or AB 979, we could be fined by the California Secretary of State, with a $100,000 fine for the first violation and a $300,000 fine for each subsequent violation of either law, and our reputation may be adversely affected.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about us or our business.

We do not have any control over these analysts.

If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock in a negative manner, our stock price would likely decline.

Epidemic diseases, or the perception of their effects, could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Outbreaks of epidemic, pandemic, or contagious diseases, such as the COVID-19 pandemic or, historically, the Ebola virus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome or the H1N1 virus, could disrupt our business.

Any disruption of our customers, partners, suppliers or contract manufacturers would likely impact our sales and operating results.

Any of these events could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

UNRESOLVED STAFF COMMENTS

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What changed 10-K

Item 1A. Risk Factors