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Item 1A. Risk Factors

2025-05-14 compared with 2024-10-31 · 167 added, 144 removed, 588 unchanged (35% of the section changed)

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

• Biotherapeutic programs are highly regulated and expensive.

• Therapeutics development 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 and other RNA-based therapeutics, to advance product candidates utilizing our products to clinical trials and to ultimately receive regulatory approvals is highly uncertain.

• We believe that our products are exempt from Food, Drug, and Cosmetic Act (“FDCA”) requirements, but FDA or other regulators may disagree and find that our products are subject to such requirements.

• 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.

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

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

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

• A reduction or delay in government funding of research and development for our customers may adversely affect our business.

• With respect to customers purchasing our products for the manufacture of 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 services and offerings we provide are highly complex, and if we encounter problems providing the services or support required, our business could suffer.

• Any productivity issues or higher-than-expected costs at our facilities could result in material and adverse impacts on our financial condition and results of operations.

• We are dependent on a limited number of third-party 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.

• 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.

• 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™ 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.

• As a result of our strategic shift and our refined focus on the revenue-generating pharma biocatalysis business and the ECO Synthesis 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 change in strategic direction, we may receive limited revenue or no future value from certain of our existing license agreements.

• The timing of customer orders and related product revenue recognition is unpredictable and may cause our operating results to vary significantly from quarter to quarter, which could adversely affect our stock price.

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

• 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.

• 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 Loan Agreement with Innovatus .

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

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

• 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.

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

• Our ability to compete may decline if we do not adequately prosecute, maintain, protect and/or defend our proprietary technology, products or services or our intellectual property rights.

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

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

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

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

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• 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.

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

• International trade policies, including tariffs, sanctions and trade barriers, may adversely affect our business.

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

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 $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, 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 have incurred net losses since our inception, including losses of $65.3 million, $76.2 million, and $33.6 million for the years ended December 31, 2024, 2023, and 2022, respectively, and $20.7 million and $11.5 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025 and December 31, 2024, we had an accumulated deficit of $583.5 million and $562.8 million, respectively.

If we are unable to continue to successfully develop and commercialize products in our pharma biocatalysis business, increase sales of existing products and services, develop and commercialize our ECO Synthesis manufacturing platform, 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 GlaxoSmithKline plc (“GSK”), Merck Sharp & Dohme (“Merck”), Novartis Pharma AG (“Novartis”), Nestlé Health Science (“Nestlé”), Aldevro n LLC, Roche Sequencing Solutions, Inc., Crosswalk Therapeutics and Alphazyme LLC, 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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Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

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

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

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• 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;

• 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 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;

• performance of adequate and well-controlled human clinical studies 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 an NDA or BLA after completion of all clinical studies;

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

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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.

We believe that our products are exempt from FDCA requirements, but FDA or other regulators may disagree and find that our products are subject to such requirements.

We believe our enzyme products are exempt from compliance with the FDCA and the implementing GMP 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 currently manufactured following the voluntary quality standards of ISO 9001:2015, and we anticipate signing and announcing a partnership with a CDMO to provide enzymatically synthesized, GMP-grade siRNA to customers in the near term.

Our planned collaboration with a CDMO may not come to fruition and, even if it does, may not scale up as anticipated.

Even if the scale up plans succeed, we or the CDMO may incur delays in production or have insufficient product for consumers.

And, in the event we, or our suppliers, produce products that fail to comply with voluntary quality standards or GMP standards imposed by customers, we may incur delays in fulfilling orders, write-downs or other losses, 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.

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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 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.

For the three months ended March 31, 2025 and 2024, customers that each individually contributed 10% or more of our total revenue accounted for 66% and 60% 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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The loss or reduction of business from one or a combination of our significant customers could materially adversely affect our revenues, financial condition and results of operations.

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

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

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

Additionally, some customers order our products on a quote and purchase order basis under standard terms and conditions, with no guarantee of future orders.

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.

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

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

For the three months ended March 31, 2025, 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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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.

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 such as our ECO Synthesis manufacturing platform.

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

• customers in these markets may be reluctant to adopt new manufacturing processes that use our enzymes;

• we may be unable to successfully develop the enzymes or manufacturing processes for our products in a timely and cost-effective manner, if at all;

• 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;

• customers may not be willing to purchase these products for these markets from us on favorable terms, if at all;

• we may face product liability litigation, unexpected safety or efficacy concerns and product recalls or withdrawals;

• our customers’ products may experience adverse events or face competition from new products, which would reduce demand for our products;

• we may face pressure from existing or new competitive products;

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

A reduction or delay in government funding of research and development for our customers may adversely affect our business.

A portion of our revenue is derived from customers whose funding is partially dependent on both the level and timing of funding from government sources, which funding can be difficult to forecast.

Government funding of research and development is subject to the political process, which is inherently fluid and unpredictable.

Our revenue may be adversely affected if our customers delay or limit purchases as a result of uncertainties surrounding the approval of government budget proposals, including reduced allocations to government agencies that fund research and development activities.

If government proposals to reduce or eliminate budgetary deficits result in reduced allocations to government agencies that fund research and development activities, 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.

With respect to customers purchasing our products for the manufacture of API, or to 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.

The services and offerings we provide are highly complex, and if we encounter problems providing the services or support required, our business could suffer.

The offerings we provide are highly complex, due in part to strict regulatory requirements and the inherent nature of services we provide, including exacting manufacturing processes.

A failure of our quality control systems in our facilities could cause problems in connection with facility operations for a variety of reasons, including equipment malfunction, viral contamination, failure to follow specific manufacturing instructions, protocols and standard operating procedures, problems with raw materials or environmental factors.

In addition, any failure to meet required quality standards may result in our failure to timely deliver products to our customers which, in turn, could damage our reputation for quality and service.

Any such incident could, among other things, lead to increased costs, lost revenue, reimbursement to customers for lost drug substances, damage to and possibly termination of customer relationships, time and expense spent investigating and remediating the cause and, depending on the cause, similar losses with respect to other manufacturing runs.

In addition, such issues could subject us to litigation, the cost of which could be significant.

These risks will be intensified in connection with the build-out of our Innovation Lab, through which we expect to continue scaling specific manufacturing processes of our customers’ specific therapeutic assets and, eventually, expect to manufacture GLP-grade RNAi therapeutic material in sufficient quantities to support customers’ preclinical development.

Any productivity issues or higher-than-expected costs at our facilities could result in material and adverse impacts on our financial condition and results of operations.

As we continue to scale up our manufacturing processes in connection with the completed build-out of our Innovation Lab and our anticipated partnership with a CDMO to provide enzymatically synthesized, GMP-grade siRNA to customers, we may face manufacturing capacity constraints or higher-than-expected costs at our facilities, including our Innovation Lab.

There can be no assurance that revenue lost due to productivity issues or capacity constraints will be recovered on expected timeframes or at all.

If we are unsuccessful in remedying any productivity issues at our facilities or those of our CDMO, if we are unable to recover revenue from unproduced batches when expected or at all, or if costs at our facilities are higher than expected, we may experience material and adverse impacts on our financial condition and results of operations.

We are dependent on a limited number of third-party 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 in Kapfenberg, Austria, ACSD in Anagni, Italy, and Sekisui in Maidstone, United Kingdom.

We manufacture our enzymes primarily in four locations:

our in-house facility in Redwood City, California, and at three third-party contract manufacturing organizations (“CMOs”):

Lactosan in Kapfenberg, Austria, ACS Dobfar S.p.A.

(“ACSD”) (formerly known as DPhar S.p.A) in Anagni, Italy, and Sekisui Diagnostics 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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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.

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, 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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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 or our collaborators 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;

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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.

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 such as our ECO Synthesis™ manufacturing platform.