What changed in this filing

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Item 1A. Risk Factors

2024-10-31 compared with 2024-08-08 · 28 added, 29 removed, 704 unchanged (7% of the section changed)

14 unchanged sentences

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

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

• We have invested significant resources to enable 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.

23 unchanged sentences

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 $76.2 million, $33.6 million, and $21.3 million for the years ended December 31, 2023, 2022, and 2021, respectively, and $34.3 million and $34.1 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024 and December 31, 2023, we had an accumulated deficit of $531.8 million and $497.5 million, respectively.

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, and $54.9 million and $69.0 million for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024 and December 31, 2023, we had an accumulated deficit of $552.4 million and $497.5 million, respectively.

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, Roche and Crosswalk Therapeutics 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.

In addition, some of our agreements, including the agreements with GSK, Merck, Novartis, Nestlé Health Science, Aldevro n, Roche, Crosswalk Therapeutics and Alphazyme 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.

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

For the six months ended June 30, 2024 and 2023, customers that each individually contributed 10% or more of our total revenue accounted for 40% and 49% of our total revenues, respectively.

For the nine months ended September 30, 2024 and 2023, customers that each individually contributed 10% or more of our total revenue accounted for 43% and 35% 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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Any such expiration, termination or reduction could materially adversely affect our revenues, financial condition and results of operations.

For the six months ended June 30, 2024, we derived a majority of our product revenue from these product supply agreements.

For the nine months ended September 30, 2024, we derived a majority of our product revenue from these product supply agreements.

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

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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 five locations:

our in-house facility in Redwood City, California, and at four third-party contract manufacturing organizations, Lactosan in Kapfenberg, Austria, ACSD in Anagni, Italy, Alphazyme in Jupiter, Florida, and Sekisui in Maidstone, United Kingdom.

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 in Kapfenberg, Austria, ACSD in Anagni, Italy, and Sekisui in Maidstone, United Kingdom.

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

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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.

We currently have supply agreements in place with Lactosan, ACSD, Alphazyme and Sekisui.

As Alphazyme’s services relate primarily to non-core assets following our strategic shift of focus, that agreement will terminate as of May 2025.

However, in the absence of a supply agreement, a contract manufacturer will be under no obligation to manufacture our enzymes and could elect to discontinue their manufacture at any time.

We currently have supply agreements in place with Lactosan, ACSD and Sekisui.

In the absence of a supply agreement, a contract manufacturer will be under no obligation to manufacture our enzymes and could elect to discontinue their manufacture at any time.

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.

5 unchanged sentences

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.

For example, we have ongoing collaborations and agreements with GSK, Merck, Novartis, Roche, Aldevron and Alphazyme that are important to our business and financial results.

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

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• 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.

We have invested significant resources to enable 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 and other RNA-based 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.

While we believe 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 development and 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 at GMP scale and partner with customers on manufacturing and utilizing the technology.

Other challenges with a new technology such as our ECO Synthesis™ manufacturing platform include having an unknown and unproven development and 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 secure supply of necessary materials or to manufacture at GMP scale and partner with customers on manufacturing and utilizing the technology.

We may also be unable to achieve the expected benefits of the ECO Synthesis™ manufacturing platform in a timely manner or at all.

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

As of June 30, 2024, 7.3% of our consolidated assets consisted of investment securities, which are illiquid investments.

As of September 30, 2024, 3.9% of our consolidated assets consisted of investment securities, which are illiquid investments.

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

4 unchanged sentences

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

Because over 5% of our total assets consisted of non-marketable investment securities, any future impairment charges from the write down in value of these securities could have a material adverse effect on our financial condition or results of operations.

Future impairment charges from the write down in value of these securities could have a material adverse effect on our financial condition or results of operations.

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.

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In addition, as a public company we are required to document and test our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal controls over financial reporting.

Likewise, our independent registered public accounting firm is required to provide an attestation report on the effectiveness of our internal controls over financial reporting in our Annual Reports on Form 10-K.

Likewise, while we currently qualify as a “smaller reporting company” under the SEC rules, for any fiscal years in which we are not considered a smaller reporting company, our independent registered public accounting firm is required to provide an attestation report on the effectiveness of our internal controls over financial reporting in our Annual Reports on Form 10-K.

If our management is unable to certify the effectiveness of our internal controls or if our independent registered public accounting firm cannot deliver a report attesting to the effectiveness of our internal controls over financial reporting, or if we identify or fail to remediate material weaknesses in our internal controls, we could be subject to regulatory scrutiny and a loss of public confidence, which could seriously harm our reputation and the market price of our common stock.

6 unchanged sentences

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 and a GMP manufacturing facility , 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, the Cantor Sales Agreement, debt financings, credit facilities and/or strategic collaborations.

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

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

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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 June 30, 2024, 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 June 30, 2024, our patents and patent applications, if issued, have terms that expire between 2024 and approximately 2045.

As such, as of September 30, 2024, we owned or controlled approximately 1,740 active issued patents and pending patent applications in the United States and in various foreign jurisdictions.

As of September 30, 2024, our patents and patent applications, if issued, have terms that expire between 2024 and approximately 2045.

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

105 unchanged sentences

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.

In addition, our amended and restated certificate of incorporation allows our board of directors, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof.

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.

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, the chairman of our Board, our chief executive officer or president may call a special meeting of the stockholders.

In addition, our amended and restated certificate of incorporation allows our Board, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof.

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, 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 (“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.

Finally, our charter documents establish advanced notice requirements for nominations for election to our Board 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, 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.

54 unchanged sentences

We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not intend to pay cash dividends in the foreseeable future.

Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our board of directors deems relevant.

Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our Board deems relevant.

General Risk Factors

37 unchanged sentences

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.

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, including due to impacts on our collaborators, suppliers or other third parties on which we rely, 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, and we may incur substantial expenses as a result of the limited nature of such plans.

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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 certain individually identifiable health information.

In the United States, Health Insurance Portability and Accountability Act (“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.

56 unchanged sentences

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-Q

Item 1A. Risk Factors