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Item 1A. Risk Factors

2022-11-03 compared with 2022-08-08 · 63 added, 70 removed, 1349 unchanged (9% of the section changed)

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Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and the market price of our common stock.

The risk factors set forth below are substantially the same as the risk factors included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2022.

Risk Factor Summary

The summary of risks below provides an overview of the principal risks we are exposed to.

These risks are described more fully in the section entitled “Risk Factors” in this Form 10-Q.

These risks are described more fully in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q.

Risks Related to Our Business, Financial Condition and Capital Requirements

• We are in the early stages of clinical drug development and have a very limited operating history and no products approved for commercial sale.

• We are in the clinical stages of drug development and have a limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.

• We have incurred significant net losses since our inception and anticipate that we will continue to incur net losses for the foreseeable future.

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Risks Related to the Discovery, Development, and Commercialization of Our Product Candidates

• We are heavily dependent on the successful development of our blood-brain barrier ("BBB") technology and the programs currently in our pipeline, which are in the early stages of development.

There’s no assurance that any of our product candidates will receive regulatory approval.

• We are heavily dependent on the successful development of our blood-brain barrier ("BBB") technology and the programs currently in our pipeline, which are in the preclinical and clinical development stages.

• We may not be successful in our efforts to continue to create a pipeline of product candidates or to develop commercially successful products.

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• We may encounter difficulties enrolling and/or retaining patients in our clinical trials, and our clinical development activities could thereby be delayed or otherwise adversely affected.

• Our clinical trials may fail to demonstrate evidence of the safety and efficacy of our product candidates, which would delay or limit the scope of regulatory approval and commercialization.

• Our clinical trials may reveal significant adverse events, toxicities, or other side effects and may fail to demonstrate substantial evidence of the safety and efficacy or potency of our product candidates, which would prevent, delay or limit the scope of regulatory approval and commercialization.

• We face significant competition and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies that are safer or more effective than ours.

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If we are ultimately unable to obtain regulatory approval for our product candidates, we will be unable to generate product revenue.

• We may in the future conduct clinical trials outside the United States, and the FDA, EMA and applicable foreign regulatory authorities may not accept data from such trials.

• We currently conduct clinical trials outside the United States, and the FDA, EMA and applicable foreign regulatory authorities may not accept data from such trials.

• Healthcare legislative measures aimed at reducing healthcare costs may have a material adverse effect on our business and results of operations.

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Risks Related to Our Reliance on Third Parties

• We depend on collaborations with third parties for the research, development and commercialization of certain product candidates.

• We depend on collaborations with third parties for the research, development and commercialization of certain product candidates we may develop.

If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates.

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This reliance on third parties may increase the risk that we will not have sufficient quantities of such materials or product candidates.

• We depend on third-party suppliers for key raw materials used in our manufacturing, and the loss of these suppliers or their inability to supply us with adequate materials could harm our business.

• We depend on third-party suppliers for key raw materials used in our manufacturing, and the loss of these suppliers or their inability to supply us with adequate raw materials could harm our business.

Risks Related to Our Intellectual Property

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• If any of our owned or in-licensed patent applications do not issue as patents in any jurisdiction, we may not be able to compete effectively.

• Our rights to develop and commercialize our BBB technology and product candidates are subject to the terms of licenses granted to us by others or licenses granted by us to others.

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

• Our rights to develop and commercialize our BBB technology and product candidates are subject, in part, to the terms of licenses granted to us by others or licenses granted by us to others.

• We may not be able to protect our intellectual property and proprietary rights throughout the world.

• Changes in U.S.

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• We have engaged in and may in the future engage in acquisitions or strategic partnerships, which may increase our capital requirements, dilute our stockholders, or cause us to incur debt or assume contingent liabilities.

• Our internal computer systems, or those used by our collaborators, CROs or other contractors, may fail or suffer security breaches or incidents that could compromise the confidentiality, integrity, and availability of such systems and data and expose us to liability.

• Our business is subject to risks associated with international operations.

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Risks Related to Our Business, Financial Condition and Capital Requirements

We are in the early stages of clinical drug development and have a very limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.

We are an early clinical-stage biopharmaceutical company with a very limited operating history, focused on developing therapeutics for neurodegenerative diseases, including Alzheimer’s disease, Parkinson’s disease and ALS.

We are in the clinical stages of drug development and have a limited operating history and no products approved for commercial sale, which may make it difficult to evaluate our current business and predict our future success and viability.

We are a clinical-stage biopharmaceutical company with a limited operating history, focused on developing therapeutics for neurodegenerative diseases, including Alzheimer’s disease, Parkinson’s disease and ALS.

We commenced operations in May 2015 , have no products approved for commercial sale and have not generated any revenue from product sales.

Drug development is a highly uncertain undertaking and involves a substantial degree of risk.

We are in Phase 1, 1b, 1/2, 2, and 2b clinical trials for our LRRK2, ETV:IDS, eIF2B, RIPK1 and PTV:PGRN programs and have not initiated clinical trials for any of our other current product candidates.

To date, we have not initiated or completed a pivotal clinical trial, obtained marketing approval for any product candidat es, manufactured a commercial scale product or arranged for a third party to do so on our behalf, or conducted sales and marketing activities necessary for successful product commercialization.

Our short operating history as a company makes any assessment of our future success and viability subject to significant uncertainty.

We will encounter risks and difficulties frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields, and we have not yet demonstrated an ability to successfully overcome such risks and difficulties.

Our clinical stage programs, ATV:TREM2, PTV:PGRN, eIF2B, RIPK1, ETV:IDS and LRRK2, are in various phases ranging from Phase 1 through Phase 3.

We have not initiated clinical trials for any of our other current product candidates.

To date, we have not completed a pivotal clinical trial, obtained marketing approval for any product candidat es, manufactured a commercial scale product or arranged for a third party to do so on our behalf, or conducted sales and marketing activities necessary for successful product commercialization.

Our limited operating history as a company makes any assessment of our future success and viability subject to significant uncertainty.

We will encounter risks and difficulties frequently experienced by clinical-stage biopharmaceutical companies in rapidly evolving fields, and we have not yet demonstrated an ability to successfully overcome such risks and difficulties.

If we do not address these risks and difficulties successfully, our business will suffer.

We have incurred significant net losses since our inception and anticipate that we will continue to incur net losses for the foreseeable future.

We have incurred significant net losses since our inception, including net losses of $58.8 million and $124.0 million for the three and six months ended June 30, 2022, respectively, and $60.7 million and $130.7 million for the three and six months ended June 30, 2021, respectively .

As of June 30, 2022, we had an accumulated deficit of $769.0 million .

We have incurred significant net losses since our inception, including net losses of $103.3 million and $227.3 million for the three and nine months ended September 30, 2022, respectively, and $84.6 million and $215.3 million for the three and nine months ended September 30, 2021, respectively .

As of September 30, 2022, we had an accumulated deficit of $872.3 million .

We have invested significant financial resources in research and development activities, including for our preclinical and clinical product candidates and our TV platform.

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• defend against any product liability claims or other lawsuits related to our products;

• build clinical manufacturing capabilities and capacity.

Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

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Our operations have required substantial amounts of cash since inception.

We currently fund our operations primarily with the proceeds from our follow-on offering completed in January 2020, and payments received from our Takeda Collaboration Agreement, Sanofi Collaboration Agreement and Biogen Collaboration Agreement.

We currently have seven clinical-stage programs, BIIB122/DNL151, DNL310, DNL343, SAR443820/DNL788, SAR443122/DNL758, TAK-594/DNL593 and TAK-920/DNL919 and have several other product candidates in preclinical development, as well as early-stage research projects.

We currently fund our operations primarily with the proceeds from our follow-on offering completed in January 2020, and payments received from our collaboration agreements with Biogen, Sanofi and Takeda.

We have a diversified portfolio with numerous programs at various stages of research, discovery, preclinical and clinical development .

Developing our product candidates is expensive, and we expect to continue to spend substa ntial amounts as we fund our early-stage research projects, and continue to advance our programs through preclinical and clinical development.

Even if we are successful in developing our product candidates, obtaining regulatory approvals and launching and commercializing any product candidate will require substantial additional funding.

As of June 30, 2022, we had $1.16 billion in cash, cash equivalents and marketable securities.

As of September 30, 2022, we had $1.11 billion in cash, cash equivalents and marketable securities.

We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our projected operations through at least the next 12 months.

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Moreover, we may expend our limited resources on programs that do not yield a successful product candidate and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

We have a diversified portfolio with more than fifteen programs.

We have a diversified portfolio with numerous programs at various stages of research, discovery, preclinical and clinical development.

These programs require significant capital investment.

Our programs are at various stages of research, discovery, preclinical and early clinical development.

We seek to maintain a process of prioritization and resource allocation to maintain an optimal balance between aggressively advancing lead programs and ensuring replenishment of our portfolio.

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Business disruptions could include disruptions or restrictions on our ability to travel, as well as temporary closures of our facilities and the facilities of our partners, clinical trial sites, service providers, suppliers or contract manufacturers.

For example, the COVID-19 pandemic caused a temporary disruption in our ability to recruit participants for our clinical trials in the calendar year 2020 and the first quarter of 2021, though recruitment has now returned to pre-pandemic levels.

For example, the COVID-19 pandemic caused a temporary disruption in our ability to recruit participants for our clinical trials in the calendar year 2020 and the first quarter of 2021.

While it is not possible at this time to predict whether another pandemic, epidemic or infectious disease outbreak similar to COVID-19 will materialize, any measures taken by the governments of countries and local authorities in response to such future health crises have the potential to disrupt and delay the initiation of new clinical trials, the progress of our ongoing clinical trials, and could disrupt and delay our preclinical activities, and potentially the manufacture or shipment of both drug substance and finished drug product of our product candidates for preclinical testing and clinical trials and adversely impact our business, financial condition or operating results.

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Our priority is to protect the health and safety of our employees, community, partners and clinical trial participants, while working to ensure the sustainability of our business operations.

Although restrictions related to the COVID-19 pandemic were lifted in many of our locations for a period of time, new resurgences could occur at any time, which may cause disruptions to our business going forward.

Although we have largely lifted restrictions related to the COVID-19 pandemic, new resurgences could occur at any time, which may cause disruptions to our business going forward.

Examples of disruptions to our business from COVID-19 have included:

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Our primary operations are located in South San Francisco and many of our employees have chosen to telecommute.

Due to telecommuting patterns, modified schedules and work protocols to enable adequate physical distancing, our laboratory operations have operated with decreased efficiency, which may impact certain of our operations over the near term and long term.

Due to telecommuting patterns, modified schedules and work protocols to enable adequate physical distancing, our laboratory operations have at times and may again operate with decreased efficiency, which may impact certain of our operations over the near term and long term.

Should these developments continue or worsen, our operations and program timelines may be negatively impacted and could result in the incurrence of additional costs.

We have clinical trial sites for our clinical studies in the United States and Europe, any of which may be affected by subsequent variants of the coronavirus, and the availability of vaccines at the clinical trial site locations.

If healthcare facilities and offices are required to focus limited resources on non-clinical trial matters such as treatment of COVID-19 patients, patient screening, new patient enrollment, and monitoring and data collection could be affected.

If healthcare facilities and offices are required to focus limited resources on non-clinical trial matters such as treatment of COVID-19 patients, then patient screening, new patient enrollment, and monitoring and data collection could be affected.

For example, in 2020, we experienced a pause in enrollment in our BIIB122/DNL151 Phase 1 and Phase 1b trials, our DNL343 Phase 1 trial, and our ETV:IDS program observational biomarker study.

In all cases, recruitment resumed within several months;

however, further pauses or delays could occur in our clinical trials, including as a result of social or economic unrest caused by the ongoing COVID-19 pandemic.

however, we have subsequently experienced certain delays in patient enrollment, and further pauses or delays could occur in our clinical trials, including as a result of social or economic unrest caused by the ongoing COVID-19 pandemic.

In March 2020, the FDA issued guidance, which the FDA subsequently updated, on conducting clinical trials during the pandemic, which describes a number of considerations for sponsors of clinical trials impacted by the pandemic, including the requirement to include in the clinical trial report contingency measures implemented to manage the trial and any disruption of the trial as a result of the COVID-19 pandemic, among others.

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Further, we may be required to develop and implement additional clinical trial policies and procedures designed to help protect subjects from the COVID-19 virus, and any variants of the coronavirus that may emerge in the future.

The extent to which the COVID-19 pandemic impacts our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with certainty.

The extent to which the COVID-19 pandemic impacts our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted.

To the extent the COVID-19 pandemic continues to adversely affect our business, operations and financial condition, it may also have the effect of heightening many of the risks described in this “Risk Factors” section.

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Research and development of biopharmaceutical products is inherently risky.

We are heavily dependent on the successful development of our BBB platform technology and the programs currently in our pipeline, which are in the early stages of preclinical and clinical development.

We are heavily dependent on the successful development of our BBB platform technology and the programs currently in our pipeline, which are in the preclinical and clinical development stages.

We cannot give any assurance that any of our product candidates will receive regulatory, including marketing, approval, which is necessary before they can be commercialized.

We are at an early stage of development of the product candidates currently in our programs and are further developing our BBB platform technology.

To date, we have invested substantially all of our efforts and financial resources to identify, acquire intellectual property for, and develop our BBB platform technology and our programs, including conducting preclinical studies and early-stage clinical trials, and providing general and administrative support for these operations.

We are at an early stage of development of many of the product candidates currently in our programs and are further developing our BBB platform technology.

To date, we have invested substantially all of our efforts and financial resources to identify, acquire intellectual property for, and develop our BBB platform technology and our programs, including conducting preclinical studies and clinical trials, and providing general and administrative support for these operations.

Our future success is dependent on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize our product candidates, and we may fail to do so for many reasons, including the following:

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We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates.

Each of our product candidates is in the early stages of development and will require significant additional clinical development, management of preclinical, clinical, and manufacturing activities, regulatory approval, adequate manufacturing supply, a commercial organization, and significant marketing efforts before we generate any revenue from product sales, if at all.

Our product candidates are in the early stages of development and will require significant additional clinical development, management of preclinical, clinical, and manufacturing activities, regulatory approval, adequate manufacturing supply, a commercial organization, and significant marketing efforts before we generate any revenue from product sales, if at all.

We have never completed a clinical development program.

We have previously discontinued the development of certain molecules prior to completion of preclinical development because we did not believe they met our criteria for potential clinical success.

None of our product candidates have advanced into late-stage development or a pivotal clinical trial and it may be years before any such trial is initiated, if at all.

Further, we canno t be certain that any of our product candidates will be successful in clinical trials.

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Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA, EMA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

For example, on January 13, 2022, we announced that the TAK-920/DNL919 (ATV:TREM2) IND application had been placed on clinical hold by the FDA.

We continue to engage with the FDA and European regulatory authorities to define the path forward for the TAK-920/DNL919 clinical program.

DNL201, a former LRRK2 inhibitor product candidate, completed a Phase 1b clinical trial in Parkinson's disease patients with and without the genetic LRRK2 mutation.

This program was previously subject to a partial clinical hold due to preclinical toxicity data.

The partial clinical hold was removed in December 2017 based on additional clinical and preclinical data provided to the FDA.

For example, in January 2022, we announced that the TAK-920/DNL919 (ATV:TREM2) IND application had been placed on clinical hold by the FDA.

While we initiated a Phase 1 study in the Netherlands, we plan to continue to engage with the FDA and European regulatory authorities to define the path forward for the TAK-920/DNL919 clinical program.

Refer to “Item 1.

Business—Our Programs” for a more detailed discussion of adverse effects ("AEs") and significant adverse effects ("SAEs") observed in our reported clinical trials for BIIB122/DNL151 and DNL310.

We cannot assure you that the IND clinical hold on TAK-920/DNL919 will be lifted, or that BIIB122/DNL151, DNL310, DNL343, SAR443820/DNL788, SAR443122/DNL758, and TAK-594/DNL593 or our other product candidates will not be subject to new, partial or full clinical holds in the future.

Business—Our Programs” in our Annual Report on Form 10-K for the year ended December 31, 2021 for a more detailed discussion of adverse effects ("AEs") and significant adverse effects ("SAEs") observed in our reported clinical trials for BIIB122/DNL151 and DNL310.

We may in the future advance product candidates into clinical trials and terminate such trials prior to their completion, which could adversely affect our business.

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Adverse events or other undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, EMA or other comparable foreign regulatory authorities.

Our most advanced product candidates, BIIB122/DNL151, DNL310, DNL343, SAR443820/DNL788, SAR443122/DNL758, TAK-594/DNL593 and TAK-920/ DNL919 are currently our only clinical stage product candidates.

Our most advanced product candidates, BIIB122/DNL151, DNL310, SAR443820/DNL788, SAR443122/DNL758, DNL343, TAK-594/DNL593 and TAK-920/ DNL919 are currently our only clinical stage product candidates.

In our completed Phase 1b clinical trial of former product candidate DNL201 in patients with Parkinson’s disease, there was one SAE considered unrelated to the drug, and at the high dose, there was one severe AE (headache) leading to dose reduction and one study withdrawal (headache and nausea).

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In response to this executive order, the Department of Health and Human Services ("HHS") has released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and potential legislative policies that Congress could pursue to advance these principles.

In addition, Congress is considering legislation that, if passed, could have significant impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases, which may adversely affect our profitability.

In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs, with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, among other changes.

At the state level, a number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws once we begin commercialization after obtaining regulatory approval for any of our products.

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A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.

This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in 2013, and will remain in effect through 2031, with the exception of a temporary suspension implemented under various COVID-19 relief legislation from May 1, 2020 through June 30, 2022, unless additional Congressional action is taken.

This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in 2013, and will remain in effect through 2031, with the exception of a temporary suspension implemented under various COVID-19 relief legislation from May 1, 2020 through September 30, 2022, unless additional Congressional action is taken.

Under the current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester.

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GDPR regulations may impose additional responsibility and liability in relation to the personal data that we process and we may be required to put in place additional mechanisms to ensure compliance with the new data protection rules.

Additionally, the UK has implemented legislation that substantially implements the GDPR, with penalties for noncompliance of up to the greater of £17.5 million or four percent of worldwide revenues.

Additionally, the UK has implemented legislation that substantially implements the GDPR ("UK GDPR"), with penalties for noncompliance of up to the greater of £17.5 million or four percent of worldwide revenues.

Aspects of UK data protection laws and regulations remain unclear.

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Some uncertainty remains, however, as this adequacy determination must be renewed after four years and may be modified or revoked in the interim.

We cannot fully predict how UK data protection laws or regulations may develop in the medium to longer term nor the effects of divergent laws and guidance regarding how data transfer to and from the UK will be regulated.

We may incur liabilities, expenses, costs, and other operational losses under the GDPR as well as privacy and data protection laws of Switzerland, the United Kingdom, and applicable EU Member States.

We cannot fully predict how UK GDPR and data protection laws or regulations may develop in the medium-to-long term nor the effects of divergent laws and guidance regarding how data transfer to and from the UK will be regulated.

We may incur liabilities, expenses, costs, and other operational losses under the GDPR and the UK GDPR as well as privacy and data protection laws of Switzerland, the United Kingdom, and applicable EU Member States.

We may find it necessary or appropriate to make additional changes to the ways we or our service providers collect, disclose, transfer, and otherwise process data within the EEA, Switzerland and the UK.

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In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused.

For example, California has enacted legislation, the California Consumer Privacy Act ("CCPA"), that, among other things, requires covered companies to provide new disclosures to California consumers, and afford such consumers new abilities to opt-out of certain sales of personal information.

For example, California has enacted legislation, the California Consumer Privacy Act ("CCPA"), that, among other things, requires covered companies to provide new disclosures to California consumers, and affords such consumers new abilities to opt-out of certain sales of personal information.

The CCPA became effective on January 1, 2020.

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The CCPA, as amended and expanded by the California Privacy Rights Act ("CPRA"), requires covered companies to provide new disclosures to individuals and consumers in California, and afford such individuals and consumers new data protection rights, including the ability to opt-out of certain sales of personal information.

The GDPR, CCPA, CPRA and many other federal, state, and foreign laws and regulations relating to privacy and data protection are still being tested in courts, and they are subject to new and differing interpretations by courts and regulatory officials.

The GDPR, UK GDPR, CCPA, CPRA and many other federal, state, and foreign laws and regulations relating to privacy and data protection are still being tested in courts, and they are subject to new and differing interpretations by courts and regulatory officials.

federal government is also contemplating federal privacy legislation.

Additionally, the interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and data we receive, use and share, potentially exposing us to additional expense, adverse publicity and liability.

We are working to comply with the GDPR, CCPA and other privacy and data protection laws and regulations that apply to us, and we anticipate needing to devote significant additional resources to complying with these laws and regulations.

We are working to comply with the GDPR, UK GDPR, CCPA, CPRA and other privacy and data protection laws and regulations that apply to us, and we anticipate needing to devote significant additional resources to complying with these laws and regulations.

These and future laws and regulations may increase our compliance costs and potential liability.

It is possible that the GDPR, CCPA or other laws and regulations relating to privacy and data protection may be interpreted and applied in a manner that is inconsistent from jurisdiction to jurisdiction or inconsistent with our current policies and practices and compliance with such laws and regulations could require us to change our business practices and compliance procedures in a manner adverse to our business.

It is possible that the GDPR, UK GDPR, CCPA, CPRA or other laws and regulations relating to privacy and data protection may be interpreted and applied in a manner that is inconsistent from jurisdiction to jurisdiction or inconsistent with our current policies and practices and compliance with such laws and regulations could require us to change our business practices and compliance procedures in a manner adverse to our business.

We cannot guarantee that we are in compliance with all such applicable data protection laws and regulations and we cannot be sure how these regulations will be interpreted, enforced or applied to our operations.

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In 2020 and 2021, a number of companies announced receipt of complete response letters due to the FDA's inability to complete required inspections for their applications.

As of May 2021, the FDA noted it was continuing to ensure timely reviews of applications for medical products during the ongoing COVID-19 pandemic in line with its user fee performance goals and conducting mission critical domestic and foreign inspections to ensure compliance of manufacturing facilities with Good Manufacturing Practices.

However, the FDA may not be able to continue its current inspection pace, and review timelines could be extended, including where a pre-approval inspection or an inspection of clinical sites is required and due to the ongoing COVID-19 pandemic and travel restrictions, the FDA may not be able to complete such required inspections during the review period.

Regulatory authorities outside the U.S.

may adopt similar restrictions or other policy measures in response to the ongoing COVID-19 pandemic and may experience delays in their regulatory activities.

If a prolonged government shutdown or other disruption occurs, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, or to provide feedback on our clinical development plans, which could have a material adverse effect on our business.

While the FDA has largely caught up with domestic preapproval inspections, it continues to work through its backlog of foreign inspections.

However, if a prolonged government shutdown or other disruption occurs, including due to travel restrictions, foreign COVID-19 related policies, staffing shortages, or public health reasons it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, or to provide feedback on our clinical development plans, which could have a material adverse effect on our business.

Further, in our operations as a public company, future government shutdowns or other disruptions to normal operations could impact our ability to access the public markets and obtain the funding necessary to properly capitalize and continue our operations.

Risks Related to Our Reliance on Third Parties

We expect to depend on collaborations with third parties for the research, development and commercialization of certain of the product candidates we may develop.

We depend on collaborations with third parties for the research, development and commercialization of certain of the product candidates we may develop.

If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates.

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Many of the risks relating to product development, regulatory approval, and commercialization described in this “Risk Factors” section also apply to the activities of our collaborators and any negative impact on our collaborators may adversely affect us.

We expect to rely on third parties to conduct our clinical trials and some aspects of our research and preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research, or testing.

We rely on third parties to conduct our clinical trials and some aspects of our research and preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research, or testing.

We currently rely and expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions, and clinical investigators, to conduct some aspects of our research and preclinical testing and our clinical trials.

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The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally.

In Europe, no earlier than October 1, 2022, European applications will soon have the option, upon grant of a patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court ("UPC").

European applications will soon have the option, upon grant of a patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court ("UPC").

This will be a significant change in European patent practice.

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If such an event were to occur, it could have a material adverse effect on our business.

In addition, a decree was adopted by the Russian government in March 2022, allowing Russian companies and individuals to exploit inventions owned by patentees that have citizenship or nationality in, are registered in, or have predominately primary place of business or profit-making activities in the United States and other countries that Russia has deemed unfriendly without consent or compensation.

In addition, a decree was adopted by the Russian government in March 2022, allowing Russian companies and individuals to exploit inventions owned by patentees that have citizenship or nationality in, are registered in, or predominately have primary place of business or profit-making activities in the United States and other countries that Russia has deemed unfriendly without consent or compensation.

Consequently, we may be unable to prevent third parties from practicing our inventions in Russia or from selling or importing products made using our inventions in and into Russia.

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We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.

As of June 30, 2022, we had approximately 395 emplo yees, all of whom were full-time.

As of September 30, 2022, we had approximately 413 emplo yees, all of whom were full-time.

As our development plans and strategies develop, we must add a significant number of additional managerial, operational, financial, and other personnel.

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The costs related to significant security breaches, incidents or disruptions could be material and exceed the limits of any insurance coverage we may have.

To the extent that any disruption or security breach or incident were to result in a loss of, or damage to, our data or systems, or inappropriate disclosure, use, acquisition, or other processing of confidential or proprietary information, including data related to our personnel, we could incur liability and the further development and commercialization of our product candidates could be delayed and our business and operations could be adversely affected and/or could result in the loss or disclosure or other unauthorized processing of critical or sensitive data, any of which could result in financial, legal, business or reputational harm to us.

To the extent that any disruption or security breach or incident were to result in a loss of, or damage to, our data or systems, or inappropriate disclosure, use, acquisition, transfer, or other processing of confidential or proprietary information, including data related to our personnel, we could incur liability and the further development and commercialization of our product candidates could be delayed and our business and operations could be adversely affected and/or could result in the loss or disclosure or other unauthorized processing of critical or sensitive data, any of which could result in financial, legal, business or reputational harm to us.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

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Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption.

All of our operations including our corporate headquarters are located in a single facility in South San Francisco, California.

The majority of our operations including our corporate headquarters are located in a single facility in South San Francisco, California.

Damage or extended periods of interruption to our corporate, development or research facilities due to fire, natural disaster, power loss, communications failure, unauthorized entry or other events could cause us to cease or delay development of some or all of our product candidates.

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Under Sections 382 and 383 of the United States Internal Revenue Code of 1986, as amended, (the "Code"), if a corporation undergoes an “ownership change” (generally defined as a greater than 50-percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited.

As a result of our IPO in December 2017, our follow-on offering in January 2020, and private placements and other transactions that have occurred since our incorporation, we may have experienced such an ownership change.

We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which are outside our control.

We have experienced ownership changes in the past, and we may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership, including in connection with our October 2022 offering, some of which are outside our control.

As a result, our ability to use our pre-change net operating loss carryforwards and other pre-change tax attributes to offset post-change taxable income or taxes may be subject to limitation.

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In recent years, many such changes have been made and changes are likely to continue to occur in the future.

For example, in December 2017, Congress passed the Tax Cuts and Jobs Act, which made broad and complex changes to the tax laws.

For example, in August 2022, the United States enacted the Inflation Reduction Act, which implemented a 15% minimum tax on book income for certain companies and introduced a 1% excise tax on stock buybacks.

In addition, the current tax administration has proposed changes to the orphan drug tax credit.

We cannot predict whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided, which could result in an increase in our, or our stockholders’, tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability.

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If any of our stockholders were to bring a lawsuit against us, the defense and disposition of any such lawsuits could be costly and divert the time and attention of our management and harm our operating results, regardless of the merits of such a claim.

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock and trading volume could decline.

If securities analysts publish negative evaluations of our stock, or if they do not publish research or reports about our business, the price of our stock and trading volume could decline.

The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or our business.

If one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline.

If one or more of the analysts covering our business downgrade their evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock could decline.

If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price or trading volume to decline.

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and units representing two or more of the foregoing securities.

In October 2022, we sold 11.9 million shares of common stock in an underwritten public offering pursuant to this second shelf registration statement.

Our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, and therefore we cannot predict or estimate the amount, timing, or nature of any future offerings.

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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