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Item 1A. Risk Factors

2024-02-28 compared with 2023-02-27 · 311 added, 546 removed, 415 unchanged (67% 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.

Additional discussion of the material risks and uncertainties summarized in this risk factor summary, as well as certain other risks and uncertainties that we face, can be found in this section.

RISK FACTORS SUMMARY

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• 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.

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

• 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.

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

• Biotherapeutic programs are highly regulated and expensive.

• We are dependent on a limited number of customers.

• Our product supply agreements with customers have finite duration and may not be extended or renewed.

• The demand for our product depends in part on our customers' research and development and the clinical and market success of their products.

• With respect to customers purchasing our products for the manufacture of API, the termination or expiration of such patent protection may materially and adversely affect our revenues, financial condition or results of operations.

• We are dependent on a limited number of contract manufacturers for large scale production of substantially all of our enzymes, including CDX-616.

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

• 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.

• If we are unable to develop and commercialize new products for the target markets, our business and prospects will be harmed.

• Competitors and potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete.

• 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.

• Revenues in in future years from our sales of CDX-616 to Pfizer are subject to a number of factors which are outside of our control and may not materialize.

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

• We have invested significant resources to enable fully enzymatic nucleic acid synthesis, which is based on novel ideas and technologies that are largely unproven.

• Future revenues from our sales of CDX-616 to Pfizer are subject to a number of factors which are outside of our control and may not materialize.

• 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.

• We have recently enhanced our strategic focus to concentrate on certain programs and business lines.

As a result of this refined focus on returning the foundational, revenue-generating pharmaceutical manufacturing business and the ECO Synthesis TM manufacturing platform, we may fail to capitalize on other opportunities that may be more profitable or for which there is a greater likelihood of success.

• Given our recent change in strategic direction, we may receive limited revenue or no future value from certain of our existing license agreements.

• We use hazardous materials in our business, and we must comply with environmental laws and regulations.

• Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

• As a public reporting company, we are subject to rules and regulations established from time to time by the SEC and Nasdaq regarding our internal controls over financial reporting.

We may not complete needed improvements to our internal controls over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock and your investment.

• If we engage in any acquisitions, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations.

• 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.

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

• We may not be able to comply with the terms of our five-year loan and security agreement (our “ Loan Agreement ” ) with Innovatus Life Sciences Lending Fund, I, LP, an affiliate of Innovatus Capital Partners (“Innovatus”).

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

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

• Clinical trials are difficult to design and implement, expensive, time-consuming and involve an uncertain outcome.

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

• We may not be able to maintain orphan drug designations for certain of our product candidates, and may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.

• We have obtained rare pediatric disease designation for CDX-6512 and CDX-6210, however, there is no guarantee that such designation will result in approval of CDX-6512 or CDX-6210, and even if we obtain approval of CDX-6512 or CDX-6210 for the indication for which we have been awarded rare pediatric disease designation, there is no guarantee that such approval will result in an aware of a rare pediatric disease priority review voucher.

• 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.

• 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.

• 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.

• 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.

• Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for our partners to obtain marketing approval for and commercialize product candidates developed by us.

• Compliance with European Union chemical regulations could be costly and adversely affect our business and results of operations.

• We rely on third parties to conduct our clinical trials and perform some of our research and preclinical studies, which if not satisfactorily carried out or fail to meet expected deadlines, may have an adverse effect on our business and prospects.

• We contract with third parties for the manufacturing and supply of product candidates, which supply may become limited or interrupted or may not be of satisfactory quality and quantity.

• Even if our customers or collaborators obtain regulatory approval for any products utilizing our enzymes, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense.

• If we or our customers fail to comply with certain healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

• Our efforts to prosecute, maintain, protect and/or defend our intellectual property rights may not be successful.

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

• Confidentiality and non-use agreements with employees, consultants, advisors, and other third parties may not adequately prevent disclosures and non-use of trade secrets and other proprietary information.

• We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company.

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

• We do not intend to pay cash dividends for the foreseeable future.

• 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.

• We face risks associated with our international business.

• Market and economic conditions may negatively impact our business, financial condition, and share price.

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

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

• Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations and financial condition.

• Evolving expectations around environmental, social and governance matters may expose us to reputational and other risks.

Risks Relating to Our Business and Strategy

Risks Related to Our Business and Strategy

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

We have incurred net losses since our inception, including losses of $33.6 million in 2022, $21.3 million in 2021 and $24.0 million in 2020.

As of December 31, 2022 and 2021, we had an accumulated deficit of $421.3 million and $387.7 million, respectively.

If we are unable to expand o ur business, through new or expanded col laborations, 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 and Takeda, and our performance enzyme agreements, including the agreements with GSK, Merck and Novartis, provide for milestone payments, usage 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 performance enzymes and/or biotherapeutic products.

There can be no assurance that any of these products will become commercially viable or that we will ever achieve profitability on a quarterly or annual basis.

We have incurred net losses since our inception, including losses of $76.2 million, $33.6 million, and $21.3 million for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, we had an accumulated deficit of $497.5 million.

If we are unable to continue to successfully develop and commercialize products in our pharmaceutical manufacturing business, increase sales of existing products and services, develop and commercialize our ECO Synthesis ™ manufacturing platform, and or develop new products or services, or otherwise expand our business, whether through new or expanded collaborations or other products and services, our net losses may increase and we may never achieve profitability.

In addition, some of our agreements, including the agreements with GSK, Merck, Novartis, Nestlé Health Science, Aldevro n and Roche provide for milestone payments, usage payments, and/or future royalty or other payments, which we will only receive if we and/or our collaborators develop and commercialize products or achieve technical milestones.

We also intend to continue to fund the development of additional proprietary performance enzyme products and advance new technologies like our ECO Synthesis ™ manufacturing platform.

There can be no assurance that any of these products or services will become commercially viable or that we will ever achieve profitability on a quarterly or annual basis.

If we fail to achieve profitability, or if the time required to achieve profitability is longer than we anticipate, we may not be able to continue our business.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

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.

Our ability to maintain and manage collaborations in our markets is fundamental to the success of our business.

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

For example, we have ongoing collaborations and agreements 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.

Any of our collaborators may fail to perform its obligations.

These collaborators may breach or terminate their agreements with us or otherwise fail to conduct their collaborative activities successfully and in a timely manner.

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, 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:

• we do not achieve our research and development objectives under our collaboration agreements in a timely manner or at all;

• we develop products and processes or enter into additional collaborations that conflict with the business objectives of our other collaborators;

• we, our collaborators and/or our contract manufacturers do not receive the required regulatory and other approvals necessary for the commercialization of the applicable product;

• we disagree with our collaborators as to rights to intellectual property that are developed during the collaboration, or their research programs or commercialization activities;

• we are unable to manage multiple simultaneous collaborations;

• our collaborators or licensees are unable or unwilling to implement or use the technology or products that we provide or license to them;

• our collaborators become competitors of ours or enter into agreements with our competitors;

• our collaborators become unable or less willing to expend their resources on research and development or commercialization efforts due to general market conditions, their financial condition or other circumstances beyond our control;

• our collaborators experience business difficulties, which could eliminate or impair their ability to effectively perform under our agreements.

Even after collaboration relationships expire or terminate, some elements of the collaboration may survive.

For instance, certain rights, licenses and obligations of each party with respect to intellectual property and program materials may survive the expiration or termination of the collaboration.

Disagreements or conflicts between and among the parties could develop even though the collaboration has ended.

These disagreements or conflicts could result in expensive arbitration or litigation, which may not be resolved in our favor.

Finally, our business could be negatively affected if any of our collaborators or suppliers undergoes a change of control or were to otherwise assign the rights or obligations under any of our agreements.

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

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

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, an undisclosed blood factor deficiency and a certain undisclosed rare genetic disorder for Takeda.

Biotherapeutic programs are highly regulated and expensive, and our enzyme products are complex and subject to quality control requirements.

The ability of our customers, future customers or collaborators, including any company developing RNAi therapeutics, to advance product candidates utilizing our products to clinical trials and to ultimately receive regulatory approvals is highly uncertain.

Although we are no longer developing our own portfolio of biotherapeutics product candidates, we continue to develop enzyme products, including our ECO Synthesis ™ manufacturing platform, that may be used by our customers, future customers or collaborators in connection with their biotherapeutic product candidates.

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 biologic product in the United States, we or our collaborators 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;

• submission to the FDA of an IND, which must become effective before human clinical studies may begin in the United States;

• approval by an independent IRB representing each clinical site before the clinical study may be initiated at the site;

• performance of adequate and well-controlled human clinical studies (generally divided into three phases) in accordance with GCP requirements to establish the safety, purity and potency (or efficacy) of the product candidate for each proposed indication;

• preparation of and submission to the FDA of a BLA after completion of all clinical studies;

Our customers are subject to extensive regulations by the FDA and similar regulatory authorities in other countries for conducting clinical trials and commercializing products for therapeutic, vaccine or diagnostic use.

These regulations result in our customers imposing quality requirements on us for the manufacture of our enzyme products through supplier qualification processes and customer contracts and specifications

In order to market a biologic or drug product in the United States, our customers, future customers or collaborators must undergo the following process required by the FDA:

• completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA's Good Laboratory Practice requirements;

• submission to the FDA of an Investigational New Drug Application (“IND”), which must become effective before human clinical studies may begin in the United States;

• approval by an independent institutional review board (“IRB”) representing each clinical site before the clinical study may be initiated at the site;

• performance of adequate and well-controlled human clinical studies in accordance with Good Clinical Practice (“GCP”) requirements to establish the safety, purity and potency (or efficacy) of the product candidate for each proposed indication;

• preparation of and submission to the FDA of a Biologics License Application (“BLA”) or New Drug Application (“NDA”)after completion of all clinical studies;

• potential review of the product candidate by an FDA advisory committee;

• satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities where the product candidate is produced to assess compliance with cGMP requirements;

• FDA review and approval of a BLA prior to any commercial marketing or sale of the product in the United States.

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.

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

• satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities where the product candidate is produced to assess compliance with current Good Manufacturing Practice (“cGMP”) requirements;

• FDA review and approval of a BLA or NDA prior to any commercial marketing or sale of the product in the United States;

• any post-approval requirements, if applicable.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and the results are inherently unpredictable.

If we are ultimately unable to obtain regulatory approval for biotherapeutic product candidates, our business will be harmed.

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 preclinical or clinical trials can occur at any stage, and many companies that have believed their drug candidates performed satisfactorily in preclinical 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.

Any enrollment difficulties could delay clinical trials and any potential product approval.

• We may experience difficulty or delay in obtaining the FDA’s acceptance of an IND for product candidates we may seek to enter into clinical development, which would delay initiation of Phase 1 clinical testing.

Delays in the commencement or completion of clinical testing could significantly affect our product development costs or the product development costs of our present and any future collaborators.

We do not know whether planned clinical trials will begin on time or be completed on schedule, if at all.

The commencement and completion of clinical trials can be delayed for a number of reasons.

For example, a clinical trial may be suspended or terminated by us, by the IRB of the institution in which such trial is being conducted, or by the FDA due to a number of factors, including unforeseen safety issues, changes in governmental regulations or lack of adequate funding to continue the clinical trial.

• We have limited experience in drug development or regulatory matters related to drug development.

As a result, we rely or will rely on third parties to conduct our preclinical and clinical studies, assist us with drug manufacturing and formulation and perform other tasks for us.

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 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.

• Third parties may develop intellectual property that could limit our ability to develop, market and commercialize product candidates.

• 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 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 hyperphenylalaninemia 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 payments from Nestlé Health Science that include (i) development and approval milestones of up to $85.0 million, (ii) sales-based milestones of up to $250.0 million in the aggregate, which aggregate amount is achievable if net sales exceed $1.0 billion in a single year, and (iii) tiered royalties, at percentages ranging from the mid-single digits to low double-digits, of net sales of product.

Under the Takeda Agreement, we are eligible to earn potential payments that include (i) reimbursement of research and development fees and preclinical development milestone payments for the three initial programs of $10.5 million , in aggregate, and $3.4 million for the fourth program, (ii) clinical development and commercialization-based milestone, per target gene, of up to $104.0 million, and (iii) tiered royalty payments based on net sales of applicable products at percentages ranging from the mid-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 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;

this may not be possible, or we may not be able to do so on terms which are acceptable to us, in which case it may be necessary for us to limit the size or scope of one or more of our programs or increase our expenditures and seek additional funding by other means.

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

Our future capital requirements may be substantial, particularly as we continue to develop our business.

Although we believe that, based on our current level of operations, our existing cash, cash equivalents and equity securities will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next 12 months, we may need additional capital if our current plans and assumptions change.

Our need for additional capital will depend on many factors, including the financial success of our performance enzyme business, our spending to develop and commercialize new and existing products and the amount of collaboration funding we may receive to help cover the cost of such expenditures, the effect of any acquisitions of other businesses, technologies or facilities that we may make or develop in the future, our spending on new market opportunities, including opportunities in the biotherapeutics markets, and the filing, prosecution, enforcement and defense of patent claims.

If our capital resources are insufficient to meet our capital requirements, and we are unable to enter into or maintain collaborations with partners that are able or willing to fund our development efforts or commercialize any products that we develop or enable, we will have to raise additional funds to continue the development of our technology and products and complete the commercialization of products, if any, resulting from our technologies.

In addition, we may choose to raise additional capital due to market conditions or strategic considerations, such as funding investments in our biotherapeutics business, even if we believe we have sufficient funds for our current or future operating plans.

We may seek to obtain such additional capital through equity offerings, debt financings, credit facilities and/or strategic collaborations.

If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution.

If we raise debt financing or enter into credit facilities, we may be subject to restrictive covenants that limit our ability to conduct our business.

Strategic collaborations may also place restrictions on our business.

We may not be able to raise sufficient additional funds on terms that are favorable to us, if at all.

If we fail to raise sufficient funds and fail to generate sufficient revenues to achieve planned gross margins and to control operating costs, our ability to fund our operations, take advantage of strategic opportunities, develop products or technologies, or otherwise respond to competitive pressures could be significantly limited.

If this happens, we may be forced to delay or terminate research or development programs or the commercialization of products resulting from our technologies, curtail or cease operations or obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights, or grant licenses on terms that are not favorable to us.

If adequate funds are not available, we will not be able to successfully execute our business plan or continue our business.

If our customers, future customers or collaborators are ultimately unable to obtain regulatory approval for their biotherapeutic product candidates utilizing our enzyme products, our business may be harmed.

In addition, if our customers, future customers or collaborators 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, they 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, any of which may have an adverse effect on our financial condition.

We believe our enzyme products are exempt from compliance with the Food, Drug, and Cosmetic Act (“FDCA”) and the current GMP (“cGMP”) regulations of the FDA, as our products are further processed and incorporated into final drug or biologic products by our customers and we do not make claims related to their safety or effectiveness.

Our products are manufactured following the voluntary quality standards of ISO 9001:2015.

In the event we, or our suppliers, produce products that fail to comply with required quality standards, we may incur delays in fulfilling orders, write-downs, damages resulting from product liability claims and harm to our reputation.

In the future, our products could become subject to more onerous regulation, or the FDA could disagree with our assessment that our enzyme products are exempt from current GMP regulations.

In addition, the FDA could conclude that the products we provide to our customers are actually subject to the pharmaceutical, drug or biologic quality-related regulations for manufacturing, processing, packing or holding of drugs, biologics, or finished pharmaceuticals, and could take enforcement action against us, including requiring us to stop distribution of our products until we are in compliance with applicable regulations, which would reduce our revenue, increase our costs and adversely affect our business, prospects, results of operations and financial condition.

We are dependent on a limited number of customers.

Our current revenues are derived from a limited number of key customers.

For the years ended December 31, 2022 and 2021, customers that each individually contributed 10% or more of our total revenue accounted for 56% and 44% of our total revenues in 2022 and 2021, respectively.

Although we continue to expand our customer base, our current revenues are derived from a limited number of key customers.

For the years ended December 31, 2023 and 2022, customers that each individually contributed 10% or more of our total revenue accounted for 35% and 56% of our total revenues, respectively.

We expect a limited number of customers to continue to account for a significant portion of our revenues for the foreseeable future.

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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.

We are working to develop new relationships with existing or new customers, but despite these efforts we may not, at the time that any of our existing product supply agreements expire or are terminated, or purchases thereunder curtailed, have other contracts in place generating similar or material revenue.

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

For the year ended December 31, 2023, 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 ingredients (“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.

The demand for our products depends in part on our customers’ research and development and the clinical and market success of their products.

Our business, financial condition, and results of operations may be harmed if our customers spend less on, or are less successful in, these activities.

In addition, customer spending may be affected by, among other things, general market and economic conditions beyond our control.

Our customers are engaged in research, development, production, and marketing of pharmaceutical products and intermediates.

The amount our customers spend on research, development, production, and marketing, as well as the outcomes of such research, development, and marketing activities, have a large impact on our sales and profitability, particularly the amount our customers choose to spend on our offerings.

Available resources, the need to develop new products, and consolidation in the industries in which our customers operate may have an impact on such spending.

Our customers and potential customers finance their research and development spending from private and public sources.

A reduction in available financing for and spending by our customers, for these reasons or because of continued unstable or unpredictable economic and marketplace conditions, could have a material adverse effect on our business, financial condition, and results of operations.

If our customers are not successful in attaining or retaining product sales due to market conditions, reimbursement issues, or other factors, our results of operations may be materially adversely affected.

With respect to customers purchasing our products for the manufacture of APIs 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, or lead to 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, or lead to 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 contract manufacturers for large scale production of substantially all of our enzymes, including CDX-616.

We are working to qualify new contract manufacturers to produce certain of our enzymes, including CDX-616, however those efforts may not be successful and therefore we may experience limitations on our ability to supply our enzymes to customers.

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

We are working to qualify new contract manufacturers to produce certain of our enzymes, however those efforts may not be successful and therefore we may experience limitations on our ability to supply our enzymes to customers.

Manufacturing of our enzymes is conducted primarily in four locations:

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

KG (“Lactosan”), in Kapfenberg, Austria, ACS Dobfar S.p.A.

(“ACSD”) (formerly known as DPhar S.p.A.), in Anagni, Italy, and Alphazyme LLC in Florida, United States.

our in-house facility in Redwood City, California, and at three third-party contract manufacturing organizations, Lactosan in Kapfenberg, Austria, ACSD ( in Anagni, Italy, and Alphazyme in Jupiter, Florida, United States.

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

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Enzyme manufacturing capacity limitations at our third-party manufacturers and manufacturing delays could negatively affect our business, reputation, results of operations and financial condition.

The failure of any contract manufacturer to supply us our required volumes of enzyme on a timely basis, or to manufacture our enzymes in compliance with our specifications or applicable quality requirements or in volumes sufficient to meet demand, would adversely affect our ability to sell pharmaceutical and fine and complex chemicals products, could harm our relationships with our collaborators or customers and could negatively affect our revenues and operating results.

The failure of any contract manufacturer to supply us our required volumes of enzyme on a timely basis, or to manufacture our enzymes in compliance with our specifications or applicable quality requirements or in volumes sufficient to meet demand, would adversely affect our ability to sell pharmaceutical and complex chemicals products, could harm our relationships with our customers or collaborators and could negatively affect our revenues and operating results.

We may be forced to secure alternative sources of supply, which may be unavailable on commercially acceptable terms, and could cause delays in our ability to deliver products to our customers, increase our costs and decrease our profit margins.

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If we require additional manufacturing capacity and are unable to obtain it in sufficient quantity, we may not be able to increase our product sales, or we may be required to make substantial capital investments to build that capacity or to contract with other manufacturers on terms that may be less favorable than the terms we currently have with our suppliers.

If we choose to build our own additional manufacturing facility, it could take two years or longer before our facility is able to produce commercial volumes of our enzymes.

If we choose to build our own additional manufacturing facility, it could take several years or longer before our facility is able to produce commercial volumes of our enzymes.

Any resources we expend on acquiring or building internal manufacturing capabilities could be at the expense of other potentially more profitable opportunities.

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.

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 customers or collaborators and could negatively affect our revenues or operating results.

Our ability to maintain and manage collaborations in our markets is fundamental to the success of our business.

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

For example, we have ongoing collaborations and agreements with GSK, Merck, Novartis, Roche and Aldevron 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.

Any of our collaborators may fail to perform its obligations.

These collaborators may breach or terminate their agreements with us or otherwise fail to conduct their collaborative activities successfully and in a timely manner.

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, 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 or Novartis, 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:

• we do not achieve our research and development objectives under our collaboration agreements in a timely manner or at all;

• we develop products and processes or enter into additional collaborations that conflict with the business objectives of our other collaborators;

• our collaborators and/or our contract manufacturers do not receive the required regulatory and other approvals necessary for the commercialization of the applicable product;

• we disagree with our collaborators as to rights to intellectual property that are developed during the collaboration, or their research programs or commercialization activities;

• we are unable to manage multiple simultaneous collaborations;

• our collaborators or licensees are unable or unwilling to implement or use the technology or products that we provide or license to them;

• our collaborators become competitors of ours or enter into agreements with our competitors;

• our collaborators experience business difficulties, which could eliminate or impair their ability to effectively perform under our agreements.

Takeda recently confirmed that it will end research, discovery and preclinical work in certain rare disease areas that may overlap with the programs on which we collaborate under the Strategic Collaboration and License Agreement (the “Takeda Agreement”) we entered into with Shire Human Genetic Therapies, Inc., a wholly-owned subsidiary of Takeda, in March 2020.

Takeda announced in April 2023 the discontinuance of these development programs .

Even after collaboration relationships expire or terminate, some elements of the collaboration may survive.

For instance, certain rights, licenses and obligations of each party with respect to intellectual property and program materials may survive the expiration or termination of the collaboration.

Disagreements or conflicts between and among the parties could develop even though the collaboration has ended.

These disagreements or conflicts could result in expensive arbitration or litigation, which may not be resolved in our favor.

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

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

We plan to launch new products for the pharmaceutical, biotherapeutics, diagnostics and other life science tools markets such as our ECO Synthesis ™ manufacturing platform.

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

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• we may face difficulties in transferring the developed technologies to our customers and the contract manufacturers that we may use for commercial scale production of intermediates and enzymes in these markets;

• the biotherapeutics products that use our tools may not receive regulatory approval or be commercially viable;

• the contract manufacturers that we may use may be unable to scale their manufacturing operations to meet the demand for these products and we may be unable to secure additional manufacturing capacity;

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• we may face pricing pressures from existing or new competitors, some of which may benefit from government subsidies or other incentives.

We have invested significant resources to enable fully enzymatic nucleic acid synthesis, which is based on novel ideas and technologies that are largely unproven.

Our ECO Synthesis™ manufacturing platform is currently in development to enable the commercial-scale manufacture of RNAi therapeutics through an enzymatic route.

While we believe fully enzymatic nucleic acid synthesis will offer certain improvements over phosphoramidite chemistry, including with respect to required infrastructure investments, batch size limitations and waste disposal challenges, the enzymatic route is novel and has not yet been commercialized.

As such, we may be faced with unforeseen results, delays and setbacks, in addition to the other foreseeable risks and uncertainties associated with the ongoing development of the ECO Synthesis™ manufacturing platform and other products.

Other challenges with a new technology such as our ECO Synthesis™ manufacturing platform include having an unknown and unproven regulatory path, uncertainly around the value that we can realize from the technology, uncertainty around the timeline for adoption of the technology by customers, and uncertainly around our ability to manufacture and partner with customers on manufacturing and utilizing the technology.

There can be no assurance that these events we may experience in the future related to enzymatic synthesis will not cause significant delays or unanticipated costs, or that such development problems can be solved.

Any delay or difficulties in developing and commercializing our ECO Synthesis™ manufacturing platform or any of our other current or future products could adversely affect our business and operations.

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.

The biocatalysis industry and each of our target markets are characterized by rapid technological change.

The biocatalysis and performance enzyme industries and each of our target markets are characterized by rapid technological change.

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.

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

(“DSM”), BASF, Bayer and Novozymes have alternative methods for obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity.

We are aware that other companies, including DSM, BASF, Bayer and Novozymes have alternative methods for obtaining and generating genetic diversity or use mutagenesis techniques to produce genetic diversity.

Academic institutions such as the California Institute of Technology, the Max Planck Institute and the Austrian Centre of Industrial Biotechnology are also working in this field.

Technological development by others may result in our technology, products and services , as well as products developed by our customers using our biocatalysts, becoming obsolete.

Our primary competitors in the performance enzymes for pharmaceutical products are companies marketing either conventional, non-enzymatic processes or biocatalytic enzymes to manufacturers of pharmaceutical intermediates and APIs, and also existing in-house technologies (both biocatalysts and conventional catalysts) within our client and potential client companies.

Our primary competitors in the performance enzymes for the pharmaceutical products markets include (i) companies marketing either conventional, non-enzymatic processes or biocatalytic enzymes;

(ii) manufacturers of pharmaceutical intermediates and APIs;

and (iii) existing in-house technologies (both biocatalysts and conventional catalysts) within our client and potential client companies.

The principal methods of competition and competitive differentiation in this market are price, product quality and performance, including manufacturing yield, safety and environmental benefits, and speed of delivery of product.

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There is also competition in the enzyme customization and optimization area from several smaller companies, such as BRAIN AG, Arzeda, c-LEcta GmbH and Evocatal GmbH.

We entered the fine chemicals market in 2013, by applying our protein engineering technology in the food market.

We face similar forms of competition in this market as in the pharmaceutical markets with the exception that the risk of losing opportunities to larger competitors in fine chemicals is greater given the larger scale of opportunities available in the fine chemicals market compared to the pharmaceutical market.

Our significant competitors in the fine chemicals markets include companies that have been in these marketplaces for many years, such as DuPont Industrial Biosciences (“DuPont Genencor”), DSM, Novozymes and A.B.

These companies have greater resources in these markets than we do and have long-term supply arrangements already in place with customers.

Our ability to compete in these markets may be limited by our relatively late entrance.

We also face competition in both the fine chemicals and pharmaceutical markets from emerging companies offering whole cell metabolic pathway approaches to these markets.

There are numerous companies that participate in the biotherapeutics market generally and the PKU market specifically.

Many of these companies are large, successful and well-capitalized.

BioMarin Pharmaceutical Inc.

(“BioMarin”) and Daiichi Sankyo Company market Kuvan ® in the United States, Europe and Japan for the treatment of a certain type of PKU.

In addition, BioMarin gained US FDA approval in 2018 and began commercial sales of Palynziq TM as an injectable enzyme substitution therapy for the potential treatment of PKU.

Several companies, i.e., Synlogic, Homology Medicines and Rubius have reported clinical efforts to develop biotherapeutic candidates for PKU.

Beyond targeting PKU, Takeda (who acquired Shire Plc in 2019), Genzyme / Sanofi S.A., BioMarin and other companies market or are actively developing new enzyme therapeutics.

There are numerous companies that are developing other forms of therapeutics, such as small molecules, gene therapies, as well as therapies based on gene editing, which could compete with biotherapeutics.

We face competitive challenges related to our ECO Synthesis™ manufacturing platform.

Phosphoramidite chemistry is the current and long-established industry standard for the manufacture of RNA therapeutics.

Primary competitors in this space include CDMOs, such as Agilent Technologies, which has made significant capital investment to expand their RNA manufacturing capabilities using phosphoramidite chemistry.

In addition, CDMOs and large pharmaceutical companies are seeking to make incremental improvements to phosphoramidite chemistry, including the development of ligation-based approaches, liquid-phase synthesis, and solvent recycling.

There are also multiple early-stage competitors who are pursuing fully enzymatic approaches to the manufacture of RNA, including EnPlusOne, a private startup company, and a UK-based consortium led by CPI and consisting of multiple academic and research organizations, including The University of Manchester and large pharmaceutical companies, including AstraZeneca plc and Novartis.

Our ability to compete successfully in any of these markets will depend on our ability to develop proprietary products that reach the market in a timely manner and are technologically superior to and/or are less expensive than other products on the market.

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We cannot be certain that any products we develop in the future will compare favorably to products offered by our competitors or that our existing or future products will compare favorably to any new products that are developed by our competitors.

As more companies develop new intellectual property in our markets, the possibility of a competitor acquiring patent or other rights that may limit our products or potential products increases, which could lead to litigation.

Our limited resources relative to many of our competitors may cause us to fail to anticipate or respond adequately to new developments and other competitive pressures.

This failure could reduce our competitiveness and market share, adversely affect our results of operations and financial position, and prevent us from obtaining or maintaining profitability.

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.

The COVID-19 pandemic has had, and continues to have, a significant impact globally, prompting governments and businesses to take unprecedented measures in response.

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 from mid-March 2020 through the end of April 2020 and disruption of our research and development operations.

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 technology, products and services due to bankruptcy, lack of liquidity, lack of funding, operational failures or other reasons.

Revenues in in future years from our sales of CDX-616 to Pfizer are subject to a number of factors which are outside of our control and may not materialize.

Starting the first and second quarters of 2021, we began to receive purchase orders from Pfizer, Inc.

(“Pfizer”) for large quantities of our proprietary enzyme product, CDX-616, for use by Pfizer in the manufacture of a critical intermediate for its proprietary active pharmaceutical ingredient, nirmatrelvir.

Revenues in future years from our sales of CDX-616 to Pfizer are subject to a number of factors which are outside of our control and may not materialize.

Starting the first and second quarters of 2021, we began to receive purchase orders from Pfizer for large quantities of our proprietary enzyme product, CDX-616, for use by Pfizer in the manufacture of a critical intermediate for its proprietary active pharmaceutical ingredient, nirmatrelvir.

Pfizer markets, sells and distributes nirmatrelvir, in combination with the active pharmaceutical ingredient ritonavir, as its PAXLOVID™ (nirmatrelvir tablets;

ritonavir tablets) product, which received emergency use authorization (“EUA”) by the U.S.

Food and Drug Administration (“FDA”) in late 2021 for the treatment of mild-to-moderate COVID-19 in adults and pediatric patients (12 years of age and older weighing at least 40 kg) with positive results of direct severe acute respiratory syndrome coronavirus 2 (“SARS-CoV-2”) viral testing, and who are at high risk for progression to severe COVID-19, including hospitalization or death.

The FDA has the authority to issue an EUA under certain circumstances, such as during a public health emergency, pursuant to a declaration by the Secretary of the Department of Health and Human Services (“HHS”), that an emergency exists justifying the issuance of EUAs for certain types of products (referred to as EUA declarations).

On March 27, 2020, the Secretary of HHS declared that circumstances exist justifying authorization of drugs and biologics during the COVID-19 pandemic, subject to the terms of any EUA that is issued for a specific product.

Once an EUA declaration has been issued, the FDA can issue EUAs for products that fall within the scope of that declaration.

To issue an EUA, the FDA Commissioner must conclude that (1) the chemical, biological, radioactive or nuclear agent (“CBRN”) that is referred to in the EUA declaration can cause serious or life-threatening diseases or conditions;

(2) based on the totality of scientific evidence available, it is reasonable to believe that the product may be effective in diagnosing, treating, or preventing the disease or condition attributable to the CBRN and that the product’s known and potential benefits outweigh its known and potential risks;

and (3) there is no adequate, approved, and available alternative to the product.

the authorization to market products under an EUA is limited to the period of time the EUA declaration is in effect, and the FDA can revoke an EUA in certain circumstances.

The FDA’s policies regarding an EUA can change unexpectedly.

We cannot predict how long Pfizer’s EUA will remain in place.

The FDA’s policies regarding products used to diagnose, treat or mitigate COVID-19 remain in flux as the FDA responds to new and evolving public health information and clinical evidence.

Therefore, it is possible that Pfizer’s EUA may be revoked, which could adversely affect our financial condition and results of operations.

Revenues in 2023 and in future years from our sales of CDX-616 to Pfizer and other potential customers (including sublicensees of Pfizer technology from The Medicines Patent Pool (the “MPP”)) are subject to a number of factors which are outside of our control, including, without limitation, the following, all of which could reduce or eliminate our sales of CDX-616, and therefore materially and adversely affect our business, results of operations and financial condition:

ritonavir tablets) product, which received FDA approval in May 2023 for the treatment of mild-to-moderate COVID-19 in adults who are at high risk for progression to severe COVID-19, including hospitalization or death.

Potential revenues in future years from our sales of CDX-616 to Pfizer and other potential customers (including sublicensees of Pfizer technology from The Medicines Patent Pool (the “MPP”)) are subject to a number of factors which are outside of our control, including, without limitation, the following, all of which could reduce or eliminate our sales of CDX-616, and therefore materially and adversely affect our business, results of operations and financial condition:

• Pfizer has no future binding commitment to purchase any particular quantity or quantities of CDX-616 from us, and we are dependent upon Pfizer continuing to place orders with us (whether on a spot basis or under a long-term agreement, when and if executed) for their requirements, if any, for CDX-616;

• to our knowledge, sublicensees of Pfizer technology from the MPP have no obligation to purchase CDX-616 from us under their sublicenses with the MPP;

• the EUA granted by the FDA for the use of PAXLOVID™ for the treatment of COVID-19 infections in humans could be withdrawn at any time;

• future vaccine development and usage and the development and usage of other new therapies for the treatment or elimination of COVID-19 may eliminate or reduce demand for PAXLOVID™;

• new variants of COVID-19 may emerge which PAXLOVID™ is not effective in treating;

• Pfizer may not ultimately receive full marketing authorization for PAXLOVID™ from the FDA and other international regulatory authorities;

• Pfizer could reformulate or make changes in the manufacturing process for nirmatrelvir which would eliminate or reduce demand for the use of CDX-616 in its manufacture;

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

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

At December 31, 2022, 8.2% of our consolidated assets consisted of investment securities, which are illiquid investments.

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

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

As of December 31, 2023, 7.1% of our consolidated assets consisted of investment securities, which are illiquid investments.

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

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

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

Some of our technology, products and services are genetically engineered or involve the use of genetically engineered products or genetic engineering technologies.

Some of our technology, products and services, such as our ECO Synthesis ™ manufacturing platform, are genetically engineered or involve the use of genetically engineered products or genetic engineering technologies.

If we and/or our collaborators are not able to overcome the ethical, legal, and social concerns relating to genetic engineering, our technology, products and services may not be accepted.

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• public attitudes about the safety and environmental hazards of, and ethical concerns over, genetic research and genetically engineered products and processes, which could influence public acceptance of our technologies, products and processes;

• public attitudes regarding, and potential changes to laws governing ownership of genetic material, which could harm our intellectual property rights with respect to our genetic material and discourage collaborators from supporting, developing, or commercializing our technology, products and services ;

• public attitudes regarding, and potential changes to laws governing ownership of, genetic material, which could harm our intellectual property rights with respect to our genetic material and/or discourage collaborators from supporting, developing, or commercializing our technology, products and services ;

• governmental reaction to negative publicity concerning genetically modified organisms, which could result in greater government regulation of genetic research and derivative products.

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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.

Any adverse effect resulting from such a release could have a material adverse effect on our business and financial condition, and we may have exposure to liability for any resulting harm.

Any adverse effect resulting from such a release could have a material adverse effect on our business and financial condition, damage our reputation, and/or expose us to liability for any resulting harm.

We have recently enhanced our strategic focus to concentrate on certain programs and business lines.

As a result of this refined focus, we may fail to capitalize on other opportunities that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we have recently focused our efforts on developing certain programs and business lines.

As a result, we may forego or delay pursuit of business opportunities that later prove to have greater commercial potential.

Further our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

In addition, our spending on current and future research and development programs, such as ECO Synthesis ™ manufacturing platform that is in development, may not yield any commercially viable products.

If we do not accurately evaluate the commercial potential or target market for a particular program or business line, our business and results of operations could be harmed.

Given our recent change in strategic direction, we may receive limited revenue or no future value from certain of our existing license agreements .

While we have historically invested significant time and financial resources in the development of biotherapeutics assets, including candidates for the treatment of Fabry disease and Pompe disease, which are included in the Takeda Agreement, in July 2023, we announced we are terminating investment in our biotherapeutics business and in other programs.

As a result, we are renegotiating some of these, along with other license agreements for product candidates in our biotherapeutics, food and feed, and non-core life science assets.

For example, we entered into the Acquisition Agreement with Nestlé under which they acquired rights to our co-developed lipase enzyme CDX-7108 and we received an upfront payment and the right to downstream milestones and royalties, terminating our prior SCA and development agreement with Nestlé.

While we are working to amend or terminate some of our agreements and enter into new agreements in such a way that we may be able to receive future revenue or other benefits, we may be unsuccessful in doing so.

As a result, it remains uncertain as to whether we will receive any value or benefit from these license agreements going forward.

Further, renegotiating these agreements may be costly and could divert management attention, which could have an adverse impact on our business and results of operations.

We use hazardous materials in our business and we must comply with environmental laws and regulations.

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Federal, state, local and foreign laws and regulations govern the use, manufacture, storage, handling and disposal of, and human exposure to, these materials.

We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our total assets.

We may face liability for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our total assets.

Although we believe that our activities comply in all material respects with environmental laws, there can be no assurance that violations of environmental, health and safety laws will not occur in the future as a result of human error, accident, equipment failure or other causes.

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Environmental laws could become more stringent over time imposing greater compliance costs and increasing risks and penalties associated with violations, which could impair our research, development or production efforts and harm our business.

In addition, we may have to indemnify some of our customers or suppliers for losses related to our failure to comply with environmental laws, which could expose us to significant liabilities.

In addition, we may be required to indemnify some of our customers or suppliers for losses related to our failure to comply with environmental laws, which could expose us to significant liabilities.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

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We are subject to the rules and regulations established from time to time by the Securities and Exchange Commission, and Nasdaq.

We are subject to the rules and regulations established from time to time by the SEC and Nasdaq.

These rules regulations require, among other things, that we establish and periodically evaluate procedures with respect to our internal controls over financial reporting.

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In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and may seriously harm our business.

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

Our future capital requirements may be substantial, particularly as we continue to develop our business.

Our need for additional capital will depend on many factors, including the financial success of our performance enzyme business, our spending to develop and commercialize new and existing enzyme products and the amount of collaboration funding we may receive to help cover the cost of such expenditures, the effect of any acquisitions of other businesses, technologies or facilities that we may make or develop in the future, our spending on new market opportunities, including the ongoing commercialization of our ECO Synthesis ™ manufacturing platform , and the filing, prosecution, enforcement and defense of patent claims.

If our capital resources are insufficient to meet our capital requirements, and we are unable to enter into or maintain collaborations with partners that are able or willing to fund our development efforts or commercialize any enzyme products that we develop or enable, we will have to raise additional funds to continue the development of our technology and products and complete the commercialization of products, if any, resulting from our technologies.

In addition, we may choose to raise additional capital due to market conditions or strategic considerations, such as funding the ongoing commercialization of our ECO Synthesis ™ manufacturing platform , even if we believe we have sufficient funds for our current or future operating plans.

We may seek to obtain such additional capital through equity offerings, including pursuant to the EDA, debt financings, credit facilities and/or strategic collaborations.

If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution.

In addition, under our Loan Agreement, we are subject to restrictive covenants that limit our ability to conduct our business and could be subject to additional covenants to the extent we seek other debt financing in the future.

Strategic collaborations may also place restrictions on our business.

We may not be able to raise sufficient additional funds on terms that are favorable to us, if at all.

If adequate funds are not available, we will not be able to successfully execute our business plan or continue our business.

Covenants and other provisions in our Loan Agreement with Innovatus restrict our business and operations in many ways, and if we do not effectively manage our covenants, our financial conditions and results of operations could be adversely affected.

In addition, our operations may not provide sufficient cash to meet the repayment obligations of our debt incurred under the Loan Agreement.

Pursuant to the Loan Agreement, Innovatus has been granted a security interest in substantially all of our assets.

If an event of default occurs under the Loan Agreement, Innovatus may foreclose on its security interest and liquidate some or all of these assets, which would harm our business, financial condition and results of operations.

In the event of a default in connection with our bankruptcy, insolvency, liquidation, or reorganization, Innovatus would have a prior right to substantially all of our assets to the exclusion of our general unsecured creditors.

Only after satisfying the claims of Innovatus and any unsecured creditors would any amount be available for our equity holders.

The pledge of these assets and other restrictions imposed in the Loan Agreement may limit our flexibility in raising capital for other purposes.

Because substantially all of our assets are pledged to secure the Loan Agreement obligations, our ability to incur additional indebtedness or to sell or dispose of assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility.

In addition, if we are unable to comply with certain financial and operating restrictions in the Loan Agreement, we may be limited in our business activities and access to credit or may default under the Loan Agreement.

Provisions in the Loan Agreement impose restrictions or require prior approval on our ability, and the ability of certain of our subsidiaries to, among other things:

• sell, lease or transfer certain parts of our business or property, including equity interests of our subsidiaries;

• engage in new lines of business;

• acquire new companies and merge or consolidate;

• incur additional debt or guarantee the indebtedness of others or our subsidiaries;

• create liens or encumbrances;

• pay cash dividends and make distributions or redeem or repurchase our capital stock;

• make certain investments;

• enter into transactions with affiliates;

• terminate or, in certain cases, amend our material agreements.

The Loan Agreement also contains other customary covenants.

We may not be able to comply with these covenants in the future.

Our failure to comply with these covenants may result in the declaration of an event of default, which, if not cured or waived, may result in the acceleration of the maturity of indebtedness outstanding under the Loan Agreement and would require us to pay all amounts outstanding.

If the maturity of our indebtedness is accelerated, we may not have sufficient funds then available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us or at all.

Our failure to repay our obligations under the Loan Agreement would result in Innovatus foreclosing on all or a portion of our assets, which could force us to curtail or cease our operations.

If we engage in any acquisitions, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations.

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If we fail in our integration efforts with respect to any of our acquisitions and are unable to efficiently operate as a combined organization, our business and financial condition may be adversely affected.

Risks Related to Government Regulation and Clinical Product Development

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.

The products that we develop for our food and food ingredient customers are, and any other products that we may develop for the food and food ingredients market will likely be, subject to regulation by various government agencies, including the FDA, state and local agencies and similar agencies outside the United States, as well as religious compliance certifying organizations.

Food ingredients are regulated by the FDA either as food additives or as substances generally recognized as safe (“GRAS”).

A substance can be listed or affirmed as GRAS by the FDA or self-affirmed by its manufacturer upon determination that independent qualified experts would generally agree that the substance is GRAS for a particular use.

While we generally self-affirm GRAS status for the ingredients used in the products that we develop for the food market, our customer(s) may be required to submit a GRAS notification to FDA to establish that ingredients in a final commercial product may be considered GRAS.

There can be no assurance that our customer(s) will not receive any objections from the FDA with respect to any GRAS notification our customer(s) may submit.

If the FDA were to disagree with our customer’s determination that their commercial product and/or its ingredients are GRAS or otherwise compliant, the FDA could ask such 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 or must be the subject of an existing food additive regulation.

The food additive petition process for ingredients that are not already authorized by regulation is generally expensive and time consuming, with approval, if secured, potentially taking years.

COVID-19 has adversely affected, and any resurgence of COVID-19 pandemic or another global health epidemic may in the future, directly or indirectly, adversely affect our business, results of operations and financial condition.

COVID-19 has had a significant impact globally, prompting governments and businesses to take unprecedented measures in response.

In the United States, COVID-19 has and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

In the future, our business could be materially adversely affected, directly or indirectly, by the widespread outbreak of contagious disease, such as COVID-19 or any resurgence thereof.

If national, state and local governments in affected regions implement safety precautions, similar to those implemented in response to COVID-19, including quarantines, border closures, increased border controls, travel restrictions, governmental orders and shutdowns, business closures, cancellations of public gatherings and other measures, such precautions could, and for COVID-19 did, disrupt normal business operations both in and outside of affected areas and could have significant negative impacts on businesses and financial markets worldwide.

The impact of COVID-19 has had, and any resurgence of the COVID-19 pandemic or another pandemic or public health crisis, could in the future 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 adversely impacted regional, national and global economic activity and has continued to contribute 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.

Risks Related to Government Regulation

Our ongoing 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.

while we have entered into some license agreements for products in this market, we do not know if we can successfully compete in this new market.

We have used our CodeEvolver ® directed evolution technology platform to develop new products for customers using NGS and PCR/qPCR for in vitro molecular diagnostic applications.

While we have entered into license agreements for products in this market, we do not know if we can successfully compete in this new market.

This new market is well established and consists of numerous large, well-funded entrenched market participants who have long and established track records and customer relationships.

In December 2019, we licensed our first proprietary enzyme for this market, EvoT4™ DNA ligase, which is designed to improve library preparation for NGS users, to Roche.

This enzyme, and any products that we may develop in the future for this market, may not succeed in displacing current products.

We have also developed a newly engineered ligase designed to address sequencing challenges.

These enzymes, and any additional products that we may develop in the future for this market, may not succeed in displacing current products.

If we succeed in commercializing new products for this market, we may not generate significant revenues and cash flows from these activities.

The failure to successfully deploy products on timely basis in this space may limit our growth and have a material adverse effect on our financial condition, operating results and business prospects.

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.

We and any collaborators are not permitted to commercialize, market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA.

Foreign regulatory authorities impose similar requirements.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable, but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including substantial discretion of the regulatory authorities.

In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions.

We and any collaborators must complete additional preclinical or nonclinical studies and clinical trials to demonstrate the safety, purity and potency (or efficacy) of our product candidates in humans to the satisfaction of the regulatory authorities before we will be able to obtain these approvals.

Our product candidates could fail to receive regulatory approval for many reasons, including the following:

• the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our or our collaborators’ clinical trials;

• we or our collaborators may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

• the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

• we or our collaborators may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

• the FDA or comparable foreign regulatory authorities may disagree with our or our collaborators’ interpretation of data from preclinical studies or clinical trials;

• the data collected from clinical trials of product candidates may not be sufficient to support the submission of a BLA to obtain regulatory approval in the United States or elsewhere;

• the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we or our collaborators contract for clinical and commercial supplies;

• the FDA or comparable foreign regulatory authorities may fail to approve the companion diagnostics we contemplate developing with collaborators;

• the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our or our collaborators’ clinical data insufficient for approval.

This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our product candidates, which would significantly harm our business, results of operations and prospects.

In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may impose significant limitations in the form of narrow indications, warnings, or a REMS.

Regulatory authorities may not approve the price we or our collaborators intend to charge for products we may develop, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate.

Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

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.

Clinical testing is expensive and usually takes many years to complete, and its outcome is inherently uncertain.

Failure can occur at any time during the clinical trial process, and product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials.

We do not know whether planned clinical trials will begin on time, need to be redesigned, recruit and enroll patients on time or be completed on schedule, or at all.

Clinical trials can be delayed, suspended or terminated for a variety of reasons, including in connection with:

• the inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation of clinical trials;

• applicable regulatory authorities disagreeing as to the design or implementation of the clinical trials;

• obtaining regulatory authorization to commence a trial;

• reaching an agreement on acceptable terms with prospective contract research organizations (“CROs”), and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

• obtaining IRB approval at each site;

• developing and validating the companion diagnostic to be used in a clinical trial, if applicable;

• insufficient or inadequate supply or quality of product candidates or other materials necessary for use in clinical trials, or delays in sufficiently developing, characterizing or controlling a manufacturing process suitable for clinical trials;

• recruiting and retaining enough suitable patients to participate in a trial;

• having enough patients complete a trial or return for post-treatment follow-up;

• adding a sufficient number of clinical trial sites;

• inspections of clinical trial sites or operations by applicable regulatory authorities, or the imposition of a clinical hold;

• clinical sites deviating from trial protocol or dropping out of a trial;

• the inability to demonstrate the efficacy and benefits of a product candidate;

• discovering that product candidates have unforeseen safety issues, undesirable side effects or other unexpected characteristics;

• addressing patient safety concerns that arise during the course of a trial;

receiving untimely or unfavorable feedback from applicable regulatory authorities regarding the trial or requests from regulatory authorities to modify the design of a trial;

• non-compliance with applicable regulatory requirements by us or third parties or changes in such regulations or administrative actions;

• suspensions or terminations by IRBs of the institutions at which such trials are being conducted, by the Data Safety Monitoring Board for such trial or by the FDA or other regulatory authorities due to a number of factors, including those described above;

• third parties being unable or unwilling to satisfy their contractual obligations to us;

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

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.

Additionally, we or our collaborators may experience unforeseen events during or resulting from clinical trials that could delay or prevent receipt of marketing approval for or commercialization of product candidates.

For example, clinical trials of product candidates may produce negative, inconsistent or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon development programs.

Regulators may also revise the requirements for approving the product candidates, or such requirements may not be as we anticipate.

If we or our collaborators are required to conduct additional clinical trials or other testing of product candidates beyond those that we or our collaborators currently contemplate, if we or our collaborators are unable to successfully complete clinical trials or other testing of such product candidates, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

• incur unplanned costs;

• be delayed in obtaining or fail to obtain marketing approval for product candidates;

• obtain marketing approval in some countries and not in others;

• obtain marketing approval for indications or patient populations that are not as broad as intended or desired;

• obtain marketing approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;

• be subject to additional post-marketing testing requirements;

• be subject to changes in the way the product is administered;

• have regulatory authorities withdraw or suspend their approval of the product or impose restrictions on its distribution;

• experience damage to our reputation.

If we or our collaborators experience delays in the commencement or completion of our clinical trials, or if we or our collaborators terminate a clinical trial prior to completion, we may experience increased costs, have difficulty raising capital and/or be required to slow down the development and approval process timelines.

Furthermore, the product candidates that are the subject of such trials may never receive regulatory approval, and their commercial prospects and our ability to generate product revenues from them could be impaired or not realized at all.

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.

Preclinical and clinical drug development is expensive and can take many years to complete, and its outcome is inherently uncertain.

Failure can occur at any time during the drug development process.

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.

The results from preclinical studies or early clinical trials of a product candidate may not be predictive of the results from later preclinical studies or clinical trials, and interim results of a clinical trial are not necessarily indicative of final results.

Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed through preclinical studies and initial clinical trials.

Many companies in the biopharmaceutical and biotechnology industries have suffered significant setbacks at later stages of development after achieving positive results in early stages of development, and we may face similar setbacks.

These setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway or safety or efficacy observations made in clinical trials, including previously unreported adverse events.

Moreover, non-clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain regulatory approval.

Even if any product candidates progress to clinical trials, these product candidates may fail to show the safety and efficacy in clinical development required to obtain regulatory approval, despite the observation of positive results in animal studies.

Our or our collaborators’ failure to replicate positive results from early research programs and preclinical or greenhouse studies may prevent us from further developing and commercializing those or other product candidates, which would limit our potential to generate revenues from them and harm our business and prospects.

For the foregoing reasons, we cannot be certain that any ongoing or future preclinical studies or clinical trials will be successful.

Any safety or efficacy concerns observed in any one of our preclinical studies or clinical trials in a targeted area could limit the prospects for regulatory approval of product candidates in that and other areas, which could have a material adverse effect on our business and prospects.

We may not be able to maintain orphan drug designations for certain of our product candidates, and may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.

Regulatory authorities in some jurisdictions, including the U.S.

and Europe, may designate drugs for relatively small patient populations as orphan drugs.

Under the Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan product if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the U.S., or a patient population of greater than 200,000 individuals in the U.S., but for which there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the U.S.

The FDA has granted orphan drug designation to CDX-6512 for the treatment of HCU and to CDX-6210 for the treatment of Maple Syrup Urine Disease (MSUD).

In the U.S., orphan designation entitles a party to financial incentives such as opportunities for grant funding for clinical trial costs, tax advantages and user-fee waivers.

In addition, if a product candidate that has orphan designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a BLA, to market the same drug for the same disease or condition for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same disease condition.

Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same disease condition if such regulatory authority concludes that the later drug is clinically superior if it is shown to be safer, more effective or makes a major contribution to patient care.

Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.

We have obtained rare pediatric disease designation for CDX-6512 and CDX-6120, however, there is no guarantee that such designation will result in approval of CDX-6512 or CDX-6210, and even if we obtain approval of CDX-6512 or CDX-6210 for the indications for which we have been awarded rare pediatric disease designation, there is no guarantee that such approval will result in an aware of a rare pediatric disease priority review voucher.

In 2012, Congress authorized the FDA to award priority review vouchers to sponsors of certain rare pediatric disease product applications.

This program is designed to encourage development of new drug and biological products for the prevention and treatment of certain rare pediatric diseases.

Specifically, under this program, a sponsor who receives an approval for a drug or biologic for a “rare pediatric disease” that meets certain criteria may qualify for a voucher that can be redeemed to receive a priority review of a subsequent marketing application for a different product, even if that subsequent marketing application would not otherwise qualify for priority review on its own.

The sponsor of a rare pediatric disease product receiving a priority review voucher may transfer (including by sale) the voucher to another sponsor.

The voucher may be further transferred any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted the application.

The FDA may also revoke any priority review voucher if the rare pediatric disease drug for which the voucher was awarded is not marketed in the U.S.

within one year following the date of approval.

We have obtained rare pediatric disease designation for CDX-6512 for the treatment of HCU and for CDX-6210 for the treatment of MSUD.

Even though we have obtained rare pediatric disease designations, there is no guarantee that we will be able to obtain a priority review voucher, even if CDX-6512 and/or CDX-6210 are approved by the FDA.

Moreover, Congress included a sunset provision in the statute authorizing the rare pediatric disease priority review voucher program.

On December 27, 2020, the Rare Pediatric Disease Priority Review Voucher Program was extended, and under the current statutory sunset provisions, after September 30, 2024, FDA may only award a voucher for an approved rare pediatric disease product application if the sponsor has rare pediatric disease designation for the drug, and that designation was granted by September 30, 2024.

After September 30, 2026, FDA may not award any rare pediatric disease priority review vouchers (unless Congress amends the law to extend the program further).

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 and other government agencies 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, a government agency’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the government agency’s ability to perform routine functions.

Average review times at the FDA and other government agencies 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 drugs and biologics or modifications to approved drugs or biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years, the United States 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, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points.

Even though the FDA has since resumed standard inspection operations of domestic facilities where feasible, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic, and any resurgence of the virus or emergence of new variants may lead to further inspectional delays.

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 hinder or 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 regulatory submissions, which could have a material adverse effect on 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.

Even if products we develop alone or with collaborators receive regulatory approval, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, distribution, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information, among other things.

The failure to successfully deploy products on a timely basis in this space may limit our growth and have a material adverse effect on our financial condition, operating results and business prospects.

Even if our customers, future customers or collaborators obtain regulatory approval for any products utilizing our enzymes, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense.

Any products that receives FDA approval will remain subject to ongoing regulatory requirements for manufacturing, labeling, packaging, distribution, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-market information, among other things.

Any regulatory approvals received for such products may also be subject to limitations on the approved indicated uses for which they may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing and surveillance studies.

For example, the holder of an approved BLA in the United States is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA.

In the United States, the holder of an approved BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process.

For example, the holder of an approved NDA or BLA in the United States is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the NDA or BLA.

In the United States, the holder of an approved NDA or BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process.

Similar provisions apply in the European Union (the “EU”).

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Similarly, in the EU any promotion of medicinal products is highly regulated and, depending on the specific jurisdiction involved, may require prior vetting by the competent national regulatory authority.

In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements and adherence to commitments made in the BLA or foreign marketing application.

If we, our collaborators or a regulatory agency discovers previously unknown problems with a product such as adverse events of unanticipated severity or frequency or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of that product, a regulatory agency may impose restrictions relative to that product, the manufacturing facility or us or our collaborators, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

Moreover, if any of our product candidates are approved, our product labeling, advertising, promotion and distribution will be subject to regulatory requirements and continuing regulatory review.

The FDA strictly regulates the promotional claims that may be made about drug products.

In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling.

If we or our collaborators fail to comply with applicable regulatory requirements following approval of any potential products we may develop, authorities may:

• issue an untitled enforcement letter or a warning letter asserting a violation of the law;

• seek an injunction, impose civil and criminal penalties, and impose monetary fines, restitution or disgorgement of profits or revenues;

If our customers, future customers or our collaborators or a regulatory agency discovers previously unknown problems with a product such as adverse events of unanticipated severity or frequency or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of that product, a regulatory agency may impose restrictions relative to that product, the manufacturing facility or our customers or collaborators, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

In addition, if our customers or collaborators fail to comply with applicable regulatory requirements, the FDA and other regulatory authorities may:

• issue an untitled letter or a warning letter asserting a violation of the law;

• seek an injunction, impose civil or criminal penalties, and impose monetary fines, restitution or disgorgement of profits or revenues;

• suspend or withdraw regulatory approval;

• issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;

• mandate modification of promotional materials and labeling and issuance of corrective information;

• issue consent decrees or corporate integrity agreements, or debar or exclude from federal healthcare programs;

• suspend or terminate any ongoing clinical trials or implement requirements to conduct post-marketing studies or clinical trials;

• refuse to approve a pending BLA or comparable foreign marketing application (or any supplements thereto) submitted by us or our collaborators;

• refuse to approve a pending NDA, BLA or comparable foreign marketing application (or any supplements thereto);

• restrict the labeling, marketing, distribution, use or manufacturing of products;

• seize or detain products or otherwise require the withdrawal or recall of products from the market;

• refuse to approve pending applications or supplements to approved applications that we or our collaborators submit;

• refuse to approve pending applications or supplements to approved applications;

• refuse to permit the import or export of products;

• refuse to allow us or our collaborators to enter into government contracts.

• refuse government contracts.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.

The occurrence of any event or penalty described above may inhibit our or our collaborators’ ability to commercialize products and our ability to generate revenues.

The occurrence of any event or penalty described above may also inhibit our customers or collaborators’ ability to commercialize products and our ability to generate revenues.

In addition, the FDA’s policies, and policies of foreign regulatory agencies, may change, and additional regulations may be enacted that could prevent, limit or delay regulatory approval of product candidates.

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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.

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;

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 non-physician practitioners such as physician assistants and nurse practitioners, 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;

and 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.

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.

Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for our partners to obtain marketing approval for and commercialize product candidates developed by us.

In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system, including cost-containment measures that may reduce or limit coverage and reimbursement for newly approved drugs and affect our ability to profitably sell any product candidates for which we develop and our partners obtain marketing approval.

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 Affordable Care Act (the “ACA”) was enacted in the United States.

The ACA established an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;

extended manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

expanded eligibility criteria for Medicaid programs;

expanded the entities eligible for discounts under the 340B drug pricing program;

increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research;

and establishes a Center for Medicare & Medicaid Innovation at the Centers for Medicare & Medicaid Services to test innovative payment and service delivery models to lower Medicare and Medicaid spending.

Since its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA, and on June 17, 2021, the U.S.

Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.

Prior to the Supreme Court’s decision, President Biden had issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace.

The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

It is unclear how the healthcare reform measures will impact our business.

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

In March 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminates the statutory cap on the Medicaid drug rebate, currently set at 100% of a drug’s average manufacturer price, beginning January 1, 2024.

Further, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs.

Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient assistance programs, and reform government program reimbursement methodologies for products.

Most recently, the Inflation Reduction Act of 2022 (the “IRA”), included a number of significant drug pricing reforms, which include the establishment of a drug price negotiation program within the U.S.

Department of Health and Human Services (“HHS”) (beginning in 2026) that requires manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers under Medicare Parts B and D to penalize price increases that outpace inflation (first due in 2023), and a redesign of the Part D benefit, as part of which manufacturers are required to provide discounts on Part D drugs (beginning in 2025).

The IRA permits the HHS Secretary to implement many of these provisions through guidance, as opposed to regulation, for the initial years.

Additional drug pricing proposals could appear in future legislation.

Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or 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 any product candidate we develop, if approved, or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.

We expect that these new laws and other healthcare reform measures that may be adopted in the future may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize any product candidates we develop, if approved.

If we or our customers fail to comply with certain healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

The healthcare industry is highly regulated.

We, and our customers, are subject to various local, state, federal, national, and international laws and regulations, which include laws and regulations promulgated by the FDA, HHS, state boards of pharmacy, state health departments, and similar regulatory bodies in other countries.

Additionally, our business operations and future arrangements with investigators, healthcare professionals, and consultants, among others, may expose us and our customers to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute, the federal civil False Claims Act, the federal Civil Monetary Penalties Law, and analogous state laws.

These laws may constrain the business or financial arrangements and relationships through which we will conduct our operations.

Because of the breadth of these laws and narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be regulated by or subject to challenge under one or more of such laws.

We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts of our employees, agents, contractors, or collaborators that turn out to violate any of the laws described above.

If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results.

Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations.

In the United States, there have been, and we expect there will continue to be, a number of legislative initiatives to contain healthcare costs.

Some of these initiatives, such as ongoing healthcare reform, including with respect to reforming drug pricing, adverse changes in governmental or private funding of healthcare products and services, legislation or regulations governing patient access to care, and the delivery, coverage, pricing, and reimbursement of pharmaceuticals and healthcare services may cause our customers to change the amount of our offerings that they purchase from us or the price they are willing to pay us for these offerings.

If cost-containment efforts or other healthcare reform measures limit our customers’ profitability, they may decrease research and development spending, which could decrease the demand for our products and services and materially adversely affect our growth prospects.

Any of these factors could harm our customers’ businesses, which, in turn, could materially adversely affect our business, financial condition, results of operations, cash flows, and prospects.

We cannot predict the likelihood, nature, or extent of other health reform initiatives that may arise from future legislative, administrative, or other action.

Any substantial revision of applicable healthcare legislation could have a material adverse effect on the demand for our customers’ products, which in turn could have a negative impact on our results of operations, financial condition, or business.

Changes in the healthcare industry’s pricing, selling, inventory, distribution, or supply policies or practices, or in public or government sentiment for the industry as a whole, could also significantly reduce our revenue and results of operations.

Compliance with European Union chemical regulations could be costly and adversely affect our business and results of operations.

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In addition, if we or our contract manufacturers fail to comply with REACH, we may be subject to penalties or other enforcement actions, which could have a material adverse effect on our business and results of operations.

Risks Related to our Dependence on Third Parties

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

If these third parties do not satisfactorily carry out their contractual duties or fail to meet expected deadlines, our development programs may be delayed or subject to increased costs, each of which may have an adverse effect on our business and prospects.

We do not have the ability to conduct all aspects of our preclinical testing or clinical trials ourselves.

As a result, we are and expect to remain dependent on third parties to conduct clinical trials of our product candidates.

Specifically, we expect CROs, clinical investigators, and consultants to play a significant role in the conduct of these trials and the subsequent collection and analysis of data.

However, we will not be able to control all aspects of their activities.

Nevertheless, we are responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs and other third parties does not relieve us of our regulatory responsibilities.

We and our CROs are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for all of our product candidates in clinical development.

Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, clinical trial investigators and clinical trial sites.

If we or any of our CROs or clinical trial sites fail to comply with applicable GCP requirements, the data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications.

In addition, our clinical trials must be conducted with product produced under cGMP regulations.

Our failure to comply with these regulations may require us to stop and/or repeat clinical trials, which would delay the marketing approval process.

There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote adequate time and resources to our development activities or perform as contractually required.

If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise performs in a substandard manner, or terminates its engagement with us, the timelines for our development programs may be extended or delayed or our development activities may be suspended or terminated.

If any of our clinical trial sites terminates for any reason, we may experience the loss of follow-up information on subjects enrolled in such clinical trials unless we are able to transfer those subjects to another qualified clinical trial site, which may be difficult or impossible.

In addition, clinical trial investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services.

If these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA or comparable foreign regulatory authorities concludes that the financial relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of any marketing application we submit by the FDA or any comparable foreign regulatory authority.

Any such delay or rejection could prevent us from commercializing our product candidates.

We contract with third parties for the manufacturing and supply of product candidates for use in preclinical testing and clinical trials and related services, which supply may become limited or interrupted or may not be of satisfactory quality and quantity.

We do not have any manufacturing facilities.

We produce in our laboratory relatively small quantities of products for evaluation in our research programs.

We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our product candidates are approved.

We currently have limited manufacturing arrangements and expect that each of our product candidates will only be covered by single source suppliers for the foreseeable future.

This reliance increases the risk that we will not have sufficient quantities of our product candidates or products, if approved, or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

Furthermore, all entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing contract manufacturers for our product candidates, are subject to extensive regulation.

Components of a finished therapeutic product approved for commercial sale or used in clinical trials must be manufactured in accordance with cGMP requirements.

These regulations govern manufacturing processes and procedures, including record keeping, and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale.

Poor control of production processes can lead to the introduction of contaminants, or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing.

We or our contract manufacturers must supply all necessary documentation in support of a BLA on a timely basis and must adhere to the FDA’s cGMP regulations enforced by the FDA through its facilities inspection program.

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 candidates.

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

In the event that any of our manufacturers fails to comply with such requirements or to perform its obligations to us in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to manufacture the materials ourselves, for which we currently do not have the capabilities or resources, or enter into an agreement with another third party, which we may not be able to do on commercially reasonable terms, if at all.

In particular, any replacement of our manufacturers could require significant effort and expertise because there may be a limited number of qualified replacements.

In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty transferring such skills or technology to another third party and a feasible alternative may not exist.

In addition, certain of our product candidates and our own proprietary methods have never been produced or implemented outside of our company, and we may therefore experience delays to our development programs if and when we attempt to establish new third party manufacturing arrangements for these product candidates or methods.

These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufacture our product candidates.

If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines.

The delays associated with the verification of a new manufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget.

Our or a third party’s failure to execute on our manufacturing requirements, do so on commercially reasonable terms and comply with cGMP could adversely affect our business in a number of ways, including:

• an inability to initiate or continue clinical trials of our product candidates under development;

• delay in submitting regulatory applications, or receiving marketing approvals, for our product candidates;

• loss of the cooperation of future collaborators;

• subjecting third-party manufacturing facilities or our manufacturing facilities to additional inspections by regulatory authorities;

• requirements to cease development or to recall batches of our product candidates;

• in the event of approval to market and commercialize our product candidates, an inability to meet commercial demands for our product or any other future product candidates.

Risks Related to Intellectual Property and Information Technology

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It is also possible that we may develop proprietary technology, products or services 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 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.

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, 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 technologies, products or services that are identical or similar to ours or that compete with ours.

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

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

The laws of many countries do not protect our proprietary rights to as great of 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 the aspects of our intellectual property rights, or proprietary technology, products or 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 technology, products and services is covered by third-party patents or other intellectual property rights, we could be subject to various legal actions.

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

We cannot assure that our technology products and/or services do not infringe, violate or misappropriate any patents or other intellectual property rights owned or controlled by others or that they will not in the future.

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

As such, as of December 31, 2022, we owned or controlled approximately 2,090 issued patents and pending patent applications in the United States and in various foreign jurisdictions.

Our patents and patent applications, if issued, as of December 31, 2022, have terms that expire between 2023 and approximately 2043.

As such, as of December 31, 2023 , we owned or controlled approximately 1,990 active issued patents and pending patent applications in the United States and in various foreign jurisdictions.

As of December 31, 2023, our patents and patent applications, if issued, have terms that expire between 2024 and approximately 2044.

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 technology and to the methods and products that support our business in the biotherapeutics, pharma manufacturing, life sciences, food and other markets.

Our owned and licensed patents and patent applications include those directed to our enabling technology and to the methods and products that support our business in the pharmaceutical manufacturing, life sciences, oligonucleotide synthesis, and other markets.

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

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Additional uncertainty may result from legal precedent handed down by the United States Federal Circuit Court and Supreme Court as they determine legal issues concerning the scope and construction of patent claims and inconsistent interpretation of patent laws by the lower courts.

Accordingly, we cannot ensure that any of our pending patent applications will result in issued patents, or even if issued, predict the breadth of the claims upheld in our and other companies' patents.

Accordingly, we cannot ensure that any of our pending patent applications will result in issued patents, or even if issued, predict the breadth of the claims upheld in our, our licensors', and other companies' patents.

Given that the degree of future protection for our proprietary rights is uncertain, we cannot ensure that:

(i) we were the first to invent the inventions covered by each of our pending applications, (ii) we were the first to file patent applications for these inventions, or (iii) the proprietary technology, products or services we develop will be patentable.

(i) we or our licensors were the first to invent the inventions covered by each of our pending applications, (ii) we or our licensors were the first to file patent applications for these inventions, or (iii) the proprietary technology, products or services we develop will be patentable.

In addition, unauthorized parties may attempt to copy or otherwise obtain and use our technology, products and services.

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Changes in patent laws and regulations in other countries or jurisdictions, changes in the governmental bodies that enforce them, or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we own or may obtain in the future.

For example, in some cases, we have filed for unitary patent protection under the rules implemented on June 1, 2023, in the European Patent Office.

We will continue to assess this route of protection on a case-by-case basis, as applications are filed and patents are granted through the European Patent Office.

This may alter our ability to protect our patents in some European countries.

Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States.

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Many biotechnology companies have employed intellectual property litigation as a way to gain a competitive advantage.

Any involvement in litigation or other intellectual property proceedings inside and outside of the United States to defend against claims that we infringe, misappropriate or violate the intellectual property of the rights of others may divert our management’s time from focusing on business operations and could cause us to spend significant amounts of money.

We are aware of some patents and patent applications relating to aspects of our technologies, products or services filed by, and issued to, third parties.

We cannot assure that if such third-party patents rights are asserted against us that we would ultimately prevail.

Any involvement in litigation or other intellectual property proceedings inside and/or outside of the United States to defend against claims that we infringe, misappropriate or violate the intellectual property rights of others may divert our management’s time from focusing on business operations and could cause us to spend significant amounts of money.

Any potential intellectual property litigation also could force us to do one or more of the following:

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• obtain from the third party asserting its intellectual property rights a license to make, sell, offer for sale, import or use the relevant technology, product or service, which license may not be available on reasonable terms, or at all;

• redesign those technologies, products, services or processes that use any allegedly infringing, misappropriating or violating intellectual property rights, or relocate the operations relating to the allegedly infringing misappropriating or violating intellectual property rights to another jurisdiction, which may result in significant cost or delay to us, could be technically infeasible or could prevent us from making, selling, offering for sale, using or importing some of our technologies, products or services in the United States or other jurisdictions.

We are aware of some patents and patent applications relating to aspects of our technologies, products or services filed by, and issued to, third parties.

We cannot assure that if such third party patents rights are asserted against us that we would ultimately prevail.

• redesign those technologies, products, services or processes that use any allegedly infringing, misappropriated or violated intellectual property rights, or relocate the operations relating to the allegedly infringing, misappropriated or violated intellectual property rights to another jurisdiction, which may result in significant cost or delay to us, could be technically infeasible or could prevent us from making, selling, offering for sale, using or importing some of our technologies, products or services in the United States or other jurisdictions.

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

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However, trade secrets and confidential information are difficult to protect and we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes and we may not enter into such agreements with all employees, consultants and third parties who have been involved in the development of our intellectual property rights.

Nevertheless, without our permission or awareness, our confidential and proprietary information may be disclosed to third parties, used by the respective individuals for purposes other than for the Company’s business, or obtained through illegal means, such that third parties could reverse engineer our biocatalysts, product candidates, and processes, to attempt to develop the same technology or develop substantially equivalent technology.

Nevertheless, without our permission or awareness, our confidential and proprietary information may be disclosed to third parties, used by the respective individuals for purposes other than for the Company’s business, or obtained through illegal means, such that third parties could reverse engineer our biocatalysts, enzyme products and processes, to attempt to develop the same technology or develop substantially equivalent technology.

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

If any of our trade secrets were lawfully obtained, we may be unable to prevent them, or those to whom they communicate it, from using that technology or information to compete with us or disclosing it publicly.

Therefore, these events could have a material adverse effect ob our business, financial condition and results of operations.

Therefore, these events could have a material adverse effect on our business, financial condition and results of operations.

In particular, a failure to protect our proprietary rights may allow competitors to copy our technology, which could adversely affect our pricing and market share.

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We are subject to anti-takeover provisions in our certificate of incorporation and bylaws and under Delaware law that could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders.

Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of us.

Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of the Company.

Among other things, our amended and restated certificate of incorporation and bylaws provide for a board of directors which is divided into three classes, with staggered three-year terms and provide that all stockholder action must be effected at a duly called meeting of the stockholders and not by a consent in writing, and further provide that only our board of directors, the chairman of the board of directors, our chief executive officer or president may call a special meeting of the stockholders.

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These provisions may also frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of our management team.

Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.

Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”) which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.

Finally, our charter documents establish advanced notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings.

Although we believe these provisions together provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer to acquire our company may be considered beneficial by some stockholders.

Our bylaws designate a state or federal court located within the State of Delaware as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us our current or former directors, officers, stockholders, or other employees.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us under Delaware law, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, or other employee of the Company to us or our stockholders, (iii) any action asserting a claim against us or any of our directors, officers, or other employees arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws (as either may be amended from time to time), (iv) any action asserting a claim against us governed by the internal affairs doctrine, or (v) any other action asserting an “internal corporate claim,” as defined under Section 115 of the DGCL.

The forgoing provisions do not apply to any claims arising under the Securities Act and, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the sole and exclusive forum for resolving any action asserting a claim arising under the Securities Act.

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our current or former directors, officers, or other employees, which may discourage lawsuits with respect to such claims.

There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings.

It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find the choice of forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations or financial condition.

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

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• our ability to achieve or maintain profitability;

• our relationships with, and dependence on, collaborators in our principal markets;

• our dependence on a limited number of customers;

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• our reliance on a limited number of contract manufacturers for large scale production of substantially all of our enzyme products;

• our ability to develop and successfully commercialize new products for the markets we serve;

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

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

• potential of GSK, Merck, Novartis or any other performance enzyme customer terminating their agreements with us;

• our relationships with, and dependence on, collaborators in our principal markets;

• our ability to successfully and timely develop and commercialize new products, including our ECO Synthesis ™ manufacturing platform, for the markets we serve;

• the potential of GSK, Merck, Novartis or any other performance enzyme customer terminating their agreements with us;

• the success of our customers’ products in the market and the ability of such customers to obtain regulatory approvals for products and processes;

• 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 life science tools markets;

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

• our ability to successfully design and execute clinical testing at a reasonable cost and on an acceptable time-frame;

• our dependence on product candidates which could unexpectedly fail at any stage of preclinical or clinical development;

• our dependence on product candidates which may lack the ability to work as intended or cause undesirable side effects;

• our dependency on third parties to conduct clinical trials, research, and preclinical studies;

• our dependence on our collaborators or customers’ product candidates which could unexpectedly fail at any stage of preclinical or clinical development;

• our dependence on our collaborators or customers’ product candidates which may lack the ability to work as intended or cause undesirable side effects;

• our ability to successfully prosecute and protect our intellectual property;

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• our ability to obtain substantial additional capital that may be necessary to expand our business;

• our ability to comply with the terms of our credit facility;

• our ability to comply with the terms of our Loan Agreement;

• our ability to timely pay debt service obligations;

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Conducting business internationally exposes us to a variety of risks, including:

• changes in or interpretations of foreign regulations that may adversely affect our ability to sell our products, repatriate profits to the United States or operate our foreign-located facilities;

• changes in or interpretations of U.S.

or foreign laws or regulations that may adversely affect our ability to sell our products, repatriate profits to the United States or operate our foreign-located facilities;

• the imposition of tariffs;

• the imposition of limitations on, or increase of, withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures;

• the imposition of limitations on genetically-engineered products or processes and the production or sale of those products or processes in foreign countries;

• the imposition of limitations on genetically-engineered or other products or processes and the production or sale of those products or processes in foreign countries;

• currency exchange rate fluctuations;

• uncertainties relating to foreign laws, regulations and legal proceedings including tax, import/export, anti-corruption and exchange control laws;

• uncertainties relating to foreign laws, regulations and legal proceedings including pharmaceutical, tax, import/export, anti-corruption and exchange control laws;

• the availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us;

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Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions.

Recently, the closures of Silicon Valley Bank (“SVB”) and Signature Bank (“Signature”) and their placement into receivership with the Federal Deposit Insurance Corporation, and the government-brokered sale of the deposits and majority of assets of First Republic Bank to JPMorgan Chase, created bank-specific and broader financial institution liquidity risk and concerns.

Although government intervention ensured that depositors at these banks have access to their funds, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create additional market and economic uncertainty.

There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur, and we cannot predict the impact or follow-on effects of these insolvencies more broadly or on our business in particular.

Further, we cannot guarantee that the government will intervene to provide depositors with access to funds if similar events occur in the future.

If other banks and financial institutions enter receivership or become insolvent in the future, our ability to access our existing cash, cash equivalents, and investments may be threatened, which could have a material adverse effect on our business and financial condition.

In addition, if the market and economic conditions described above continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive.

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Earthquakes, wildfires or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.

We are also vulnerable to other types of disasters and other events that could disrupt our operations, such as riot, civil disturbances, war, terrorist acts, infections in our laboratory or production facilities or those of our customers or contract manufacturers and other events beyond our control.

We are also vulnerable to other types of disasters and other events that could disrupt our operations, such as riot, civil disturbances, war, terrorist acts, public health emergencies, domestic or foreign conflicts, infections in our laboratory or production facilities or those of our customers or contract manufacturers and other events beyond our control.

If a natural disaster or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our enterprise financial systems or manufacturing resource planning and enterprise quality systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.

The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event.

We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans.

The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event, and we may incur substantial expenses as a result of the limited nature of such plans.

We do not carry insurance for earthquakes and we may not carry sufficient business interruption insurance to compensate us for losses that may occur.

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The systems of these external vendors may contain defects in design or manufacture or other problems that could unexpectedly compromise information security of our own systems, and we are dependent on these third parties to deploy appropriate security programs to protect their systems.

If we or our third-party vendors were to experience a significant cybersecurity breach of our or their information systems or data, the costs associated with the investigation, remediation and potential notification of the breach to counter-parties and data subjects could be material.

Our remediation efforts may not be successful.

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Attacks upon information technology systems are also increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise.

As a result of the COVID-19 pandemic, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

As a result of the remote work policies we initiated in response to the COVID-19 pandemic, and our continued hybrid working environment, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

We have programs in place to detect, contain and respond to data security incidents, and we make ongoing improvements to our information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards.

However, because the techniques used to obtain unauthorized access to or sabotage systems change frequently and may be difficult to detect, we may not be able to anticipate and prevent these intrusions or mitigate them when and if they occur.

Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection and to remove or obfuscate forensic evidence.

Even if identified, we may be unable to adequately and timely investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection and to remove or obfuscate forensic evidence.

We and certain of our external vendors are from time to time subject to cyberattacks and security incidents.

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Any security compromise affecting us, our service providers, vendors, strategic partners, other contractors, consultants or our industry, whether real or perceived, could harm our reputation, erode confidence in the effectiveness of our security measures and lead to regulatory scrutiny.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate disclosure of confidential or proprietary or personal information, we could incur liability, including litigation exposure, penalties and fines, we could become the subject of regulatory action or investigation, our competitive position could be harmed and the further development of our products could be delayed.

If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our business.

Furthermore, federal, state and international laws and regulations can expose us to enforcement actions and investigations by regulatory authorities, and potentially result in regulatory penalties, fines and significant legal liability, if our information technology security efforts fail.

We may also be exposed to a risk of loss or litigation and potential liability, which could materially and adversely affect our business, results of operations and financial condition.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate disclosure of confidential or proprietary or personal information, we could incur liability, including litigation exposure, penalties and fines, which may not be covered by insurance or may be in excess of our insurance coverage.

Additionally, we could become the subject of regulatory action or investigation, our competitive position could be harmed and the further development of our products could be delayed.

If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our business and could materially and adversely affect our business, results of operations and financial condition.

Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations and financial condition.

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Any failure or perceived failure by us to comply with applicable laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.

In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information.

Certain states have also adopted comparable privacy and security laws and regulations, which govern the privacy, processing and protection of health-related and other personal information.

In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of certain individually identifiable health information.

Certain states have also adopted and continue to adopt new privacy and security laws and regulations, which govern the privacy, processing and protection of health-related and other personal information.

Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners.

For example, the California Consumer Privacy Act (“CCPA”) went into effect on January 1, 2020 , and introduces new compliance burdens on organizations doing business in California that collect personal information about California residents.

It creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.

The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

Further, the California Consumer Privacy Act (“CCPA”) recently passed in California.

The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data and opt outs for certain uses of sensitive data.

It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

The majority of the provisions went into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.

Similar laws have passed in Virginia, Colorado, Connecticut and Utah and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

For example, the California Consumer Privacy Act (“CCPA”) went into effect on January 1, 2020.

The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.

The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches (which has increased the likelihood of, and risks associated with, data breach litigation).

Further, the California Privacy Rights Act (“CPRA”) significantly amended the CCPA, which went into effect in January 2023.

It imposes additional data privacy obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data and opt outs for certain uses of sensitive data.

It also created a new California privacy protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

Additional compliance investment and potential business process changes may also be required.

Similar laws regulating personal information generally or health information in particular have passed in more than a dozen states and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

These developments increase our compliance burden and our risk, including risks of regulatory fines, litigation and associated reputational harm.

Any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

Furthermore, the Federal Trade Commission (“FTC”) and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive.

Furthermore, the Federal Trade Commission (“FTC”) and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for the collection, use, sharing and security of personal information that appear to be unfair or deceptive.

For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act.

The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

In Europe, the General Data Protection Regulation (“GDPR”) went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the European Economic Area (“EEA”).

The GDPR imposes stringent requirements for controllers and processors of personal data and increases 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 with third-party processors in connection with the processing of personal data.

The GDPR provides that EEA member states may make their own additional 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.

Failure to comply with the requirements of the GDPR can result in fines of up to the greater of €20 million and 4% of the total worldwide annual turnover of the preceding financial year and other administrative penalties.

If we are required to comply with the new data protection rules imposed by GDPR, such compliance may be onerous and adversely affect our business, financial condition, and results of operations.

Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EU and the United States remains uncertain.

For example, in July 2020, the Court of Justice of the EU (“CJEU”) limited how organizations could lawfully transfer personal data from the EU/EEA to the United States by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“SCCs”).

In March 2022, the United States and EU announced a new regulatory regime intended to replace the invalidated regulations;

however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed by President Biden on October 7, 2022 on Enhancing Safeguards for United States Signals Intelligence Activities.

The European Commission issued revised SCCs on June 4, 2021 to account for the decision of the CJEU and recommendations made by the European Data Protection Board.

The revised SCCs must be used for relevant new data transfers from September 27, 2021;

existing standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022.

The new SCCs apply only to the transfer of personal data outside of the EEA and not the United Kingdom;

the United Kingdom’s Information Commissioner’s Office launched a public consultation on its draft revised data transfers mechanisms in August 2021.

There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to non-EEA entities subject to the GDPR.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

Further, from January 1, 2021, companies have had to comply with the GDPR and also the United Kingdom GDPR (“UK GDPR”), which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law.

The UK GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (or up to £17.5 million for UK) or 4% of global turnover.

The relationship between the United Kingdom and the EU in relation to certain aspects of data protection law remains unclear, and it is unclear how United Kingdom data protection laws and regulations will develop in the medium to longer term.

The European Commission has adopted an adequacy decision in favor of the United Kingdom, enabling data transfers from EU member states to the United Kingdom without additional safeguards.

However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews or extends that decision.

In September 2021, the United Kingdom government launched a consultation on its proposals for wide-ranging reform of United Kingdom data protection laws following Brexit and the response to this consultation was published in June 2022.

There is a risk that any material changes which are made to the United Kingdom data protection regime could result in the European Commission reviewing the United Kingdom adequacy decision, and the UK United Kingdom losing its adequacy decision if the European Commission deems the United Kingdom to no longer provide adequate protection for personal data.

In the European Union (“EU”), the EU General Data Protection Regulation (“EU GDPR”) governs the processing of personal data.

The UK has implemented the EU GDPR as the UK GDPR which sits alongside the UK Data Protection Act 2018 (the “UK GDPR”, and together with the EU GDPR, the “GDPR”).

The GDPR imposes requirements for controllers, including (among others) specific requirements for obtaining valid consent where consent is the legal basis for processing, requirements around accountability and transparency, the obligation to consider data protection when any new products or services are developed, the obligation to comply with individuals’ data protection rights, and the obligation to notify relevant data supervisory authorities of notifiable personal data breaches without undue delay (and no later than 72 hours) after becoming aware of the personal data breach (and affected data subjects where the personal data breach is likely to result in a high risk to their rights and freedoms).

The EU GDPR provides that EU member states may enact their own additional national laws and regulations regarding the processing of genetic, biometric or health data, which could affect our ability to use and share personal data or could cause our costs to increase and potentially harm our business and financial condition.

Failure to comply with the requirements of the GDPR can result in (among other things) fines of up to the greater of €20 million (under the EU GDPR) or £17.5 million (under the UK GDPR) or 4% of an organization’s total worldwide annual turnover of the preceding financial year and other administrative penalties.

To the extent that we are subject to the GDPR, compliance with the GDPR may require substantial amendments to our procedures and policies and these changes could adversely impact our business by increasing operational and compliance costs or impact business practices.

Further, there is a risk that the amended policies and procedures will not be implemented correctly or that individuals within the business will not be fully compliant with the new procedures.

There is a risk that we could be impacted by a cybersecurity incident that results in loss or unauthorized disclosure of personal data, potentially resulting in us facing harms similar to those described above.

Among other requirements, the EU GDPR prohibits the international transfer of personal data subject to the GDPR from the European Economic Area (“EEA”) to third countries that the European Commission does not recognize as having an ‘adequate’ level of data protection, unless a data transfer mechanism has been put in place or a derogation under the EU GDPR can be relied on.

In July 2020, the Court of Justice of the EU in its Schrems II judgement limited how organizations could lawfully transfer personal data from the EEA to the United States by invalidating the EU-U.S.

Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“EU SCCs”), including a requirement for companies to carry out a transfer privacy impact assessment (“TIA”).

A TIA, among other things, assesses laws governing access to personal data in the recipient country and considers whether supplementary measures that provide privacy protections additional to those provided under the EU SCCs will need to be implemented to ensure an ‘essentially equivalent’ level of data protection to that afforded in the EEA.

On October 7, 2022, U.S.

President Biden introduced an Executive Order to facilitate a new Trans-Atlantic Data Privacy Framework (“DPF”) and in July 2023, the European Commission adopted its Final Implementing Decision granting the United States adequacy (“Adequacy Decision”) for EU-U.S.

transfers of personal data for entities self-certified to the DPF.

Entities relying on EU SCCs for transfers to the United States are also able to rely on the analysis in the Adequacy Decision as support for their TIA regarding the equivalence of U.S.

national security safeguards and redress.

The UK GDPR also imposes similar restrictions on transfers of personal data from the UK to jurisdictions that the UK Government does not consider adequate, including the United States.

The UK Government has published its own form of the EU SCCs, known as the International Data Transfer Agreement and an International Data Transfer Addendum to the new EU SCCs.

The UK Information Commissioner’s Office has also published its own version of the TIA and guidance on international transfers, although entities may choose to adopt either the EU or UK-style TIA.

Further, on September 21, 2023, the UK Secretary of State for Science, Innovation and Technology established a UK-U.S.

data bridge (i.e., a UK equivalent of the Adequacy Decision) and adopted UK regulations to implement the UK-U.S.

data bridge (“UK Adequacy Regulations”).

Personal data may now be transferred from the UK under the UK-U.S.

data bridge through the UK extension to the DPF to organizations self-certified under the UK extension to DPF.

As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.

Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply.

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Investors, stockholders, customers, suppliers and other third parties are increasingly focusing on ESG and corporate social responsibility endeavors and reporting.

Companies that do not adapt to or comply with the evolving investor or stakeholder expectations and standards, or which are perceived to have not responded appropriately, may suffer from reputational damage and result in the business, financial condition and/or stock price of a company being materially and adversely affected.

Further, this increased focus on ESG issues may result in new regulations and/or third-party requirements that could adversely impact our business, or certain shareholders reducing or eliminating their holdings of our stock.

Additionally, an allegation or perception that we have not taken sufficient action in these areas could negatively harm our reputation.

UNRESOLVED STAFF COMMENTS

Not applicable.

Companies that do not adapt to or comply with the evolving investor or stakeholder expectations and standards, or that are perceived to have not responded appropriately, may suffer from reputational damage, which could result in the business, financial condition and/or stock price of a company being materially and adversely affected.

For example, certain customers have inquired about our ESG practices and may impose ESG guidelines, procurement policies, sustainability standards, mandates or reporting requirements for, and may scrutinize relationships more closely with, their suppliers, including us, which may lengthen sales cycles, increase our costs or impair our ability to attract and retain customers.

Further, this increased focus on ESG issues may result in new regulations, international accords and/or third-party requirements that could adversely impact our business, or certain shareholders reducing or eliminating their holdings of our stock.

An allegation or perception that we have not taken sufficient action in these areas could negatively harm our reputation.

Additionally, the subjective nature and wide variety of methods and processes used by various stakeholders, including investors, to assess environmental, social, and governance criteria could result in a negative perception or misrepresentation of the company's sustainability policies and practices.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors