HCW Biologics Inc. 10-K

Item 1. Business. Overview HCW Biologics Inc. ("HCW Biologics", "HCW", the "Company, or "we") is a biopharmaceutical company focused on discovering and developing novel immunotherapies to lengthen health span by disrupting the link between chronic, low-grade inflammation and age-related diseases. We believe age-related, chronic, low-grade inflammation, or “inflammaging,” is a significant contributing factor to several diseases and conditions, such as cancer, cardiovascular disease, diabetes, neurodegenerative diseases, and autoimmune diseases. The induction and retention of low-grade inflammation in an aging human body is mainly the result of the accumulation of non-proliferative senescent cells and persistent activation of protein complexes, known as inflammasomes, in innate immune cells. These two elements share common mechanisms in promoting secretion of proinflammatory proteins and in many cases interact to drive inflammaging. Our novel approach is to treat both of these elements. We believe our approach has the potential to fundamentally change the treatment of age-related diseases. We have combined our deep understanding of disease-related immunology with our expertise in advanced protein engineering to develop our TOBI TM (Tissue factOr-Based fusIon) discovery platform for the design of category-defining immunotherapeutic drugs. This modular and tunable technology has allowed us to generate a novel pipeline of internally-developed product candidates capable of activating and targeting desired immune responses and blocking unwanted immunosuppressive activities. Using our TOBI TM platform, we have successfully developed over 30 molecules that can be administered by subcutaneous injection as well as used in adoptive cell therapy approaches. Our focus is to develop immunotherapeutic therapies administered by subcutaneous injection, and we intend to out-license cell therapy based approaches. We have selected two molecules as our lead product candidates: HCW9218 and HCW9302. We have chosen these product candidates because we believe they have the potential to become transformative immunotherapeutics for the treatment of a broad range of age-related diseases, and both can be administered to patients by subcutaneous injection. In response to physiological or environmental stress, normal tissue cells enter a senescent state of irreversible growth arrest accompanied by the release of Senescence-Associated Secretory Phenotype (“SASP”) factors. SASP factors, including proinflammatory cytokines, chemokines, and proteinases, drive the inflammation cycle, including activation of inflammasomes. As our body ages, senescent cells accumulate and increase the release of SASP factors leading to chronic, low-grade inflammation, and organ/tissue damage. Studies have shown that strategies to reduce or eliminate senescent cells can delay, prevent, and improve age-related dysfunctions, including cancer. The bifunctionality of HCW9218 allows it to function as both a senolytic and senomorphic immunotherapeutic. HCW9218 is designed to treat the impact of accumulated senescent cells and the SASP factors which they secrete by eliminating senescent cells (i.e., senolytic effect) and reducing SASP factors (i.e., senomorphic effect). This molecule is a heterodimeric, bifunctional fusion protein complex comprising extracellular domains of the human transforming growth factor-β (“TGF-β”) receptor II, as a TGF-β trap for TGF-β neutralization, and a human interleukin (“IL”)-15/IL-15 receptor α complex for immune cell stimulation. Together, the activities of these domains drive senescent cell clearance and SASP factor neutralization. The Company published a paper authored by our scientific research team in the peer-reviewed journal, Molecular Therapy, entitled, “Bifunctional TGF-β trap/IL-15 Protein Complex Elicits Potent NK Cell and CD8 + T Cell Immunity Against Solid Tumors.” The paper highlights preclinical data from in vivo studies demonstrating the potential of HCW9218 as a novel immunostimulant with the ability to simultaneously lessen immunosuppression in patients with cancer. As the first line of defense to infections or tissue injuries, the innate immune system activates inflammasomes to initiate protective immune responses. Similar to senescent cells, activated inflammasomes promote the release of proinflammatory factors. Unresolved activation of inflammasomes due to chronic infection or persistent tissue injury leads to chronic low-grade inflammation which perpetuates this cycle. HCW9302 is designed to activate and expand regulatory T (“T reg ”) cells to suppress the activity of inflammasome-bearing cells and the inflammatory factors which they secrete. This molecule is a single-chain, IL-2-based fusion protein. Inflammasomes are expressed in innate immune cells. When these cells are stimulated by various signals, the inflammasomes become active and the cells release inflammatory factors. In certain conditions, these signaling pathways persist leading to chronic inflammatory responses and associated tissue destruction. Preclinical studies in mouse models have demonstrated the ability of HCW9302 to activate T reg cells and reduce inflammation-related diseases, supporting the potential of HCW9302 to treat a wide variety of autoimmune and age-related diseases. 4 To date, there has been limited clinical success in targeting senescent cell accumulation or aberrant inflammasome activity using small molecule-based approaches. Studies have found the immune cell activity in young individuals is capable of limiting these processes, which we believe indicates that immunotherapeutic approaches that combine relevant stimulatory and inhibitory components may provide a means of treating age-related diseases by addressing chronic inflammation. HCW9218: Novel Senolytic and Senomorphic Immunotherapeutic We have selected cancer as the initial indication for our clinical development. In cancer patients, chemotherapy treatments cause therapy-induced senescence, or TIS, which drives tumor cells to senescence, resulting in increased drug-resistance, immune evasion, disease relapse, and tumor metastasis. We believe the bifunctionality of HCW9218 will allow it to be effective against solid tumor cancers because it simultaneously provides immunostimulation of natural killer (“NK”) cells and effector T cells to enhance the cytotoxicity of immune cells against tumor targets, while reducing immunosuppression associated with solid tumors by capturing and neutralizing TGF-β. Chemotherapy is the current standard of care for treating most forms of cancer. However, these treatments inevitably result in toxicity and unwanted side effects. Multiple studies have revealed that increased normal tissue cellular senescence can promote tumor progression, creating a link between aging and cancer. The persistence of viable and metabolically active senescent tumor cells after chemotherapy has been attributed to worse overall survival in patients. Tumor cells can undergo senescence and secrete proinflammatory factors, or SASP factors, in response to chemotherapy. SASP factors promote TIS cancer cells to re-enter the growth cycle with stem-like characteristics which can result in disease relapse and metastasis. One of the key SASP factors is TGF-ß, well known for its immunosuppressive role in cancer progression. In healthy tissue, TGF-ß is transiently activated in response to tissue injury, resulting in collagen production and, ultimately, healing of the tissue. However, when TFG-ß becomes continuously active, studies have shown that it induces pathological effects associated with inflammation. The U.S. Food and Drug Administration (“FDA”) has permitted two clinical trials to proceed to evaluate HCW9218 in difficult-to-treat cancer indications. A Company-sponsored clinical trial will evaluate HCW9218 in advanced pancreatic cancer, and an Investigator-sponsored trial with the Masonic Cancer Center at University of Minnesota as the sponsor will evaluate HCW9218 in other solid tumors. Company-sponsored clinical trial. In October 2021, the FDA permitted a Company-sponsored first-in-human Phase 1b clinical trial to proceed with a multi-site trial to evaluate our lead drug candidate, HCW9218, in patients with advanced pancreatic cancer. The Company has identified several potential clinical sites that are National Cancer Institute (“NCI”) designated Comprehensive Cancer Centers. These Comprehensive Cancer Centers are completing their internal review processes for study start-up. We expect to initiate this trial in the first half of 2022. The Phase 1b portion is planned to be a dose escalation study of HCW9218 as a monotherapy in refractory patients with advanced pancreatic cancer. If the initial phase of the trial is completed successfully, the Company plans to have the primary aim of the later phases of the study to evaluate HCW9218 as an adjunct therapy to chemotherapy. We expect that the Phase 2 portion of this pancreatic trial will include a cohort of patients receiving HCW9218 as monotherapy and a cohort of patients receiving HCW9218 as an adjunct to chemotherapy. Investigator-sponsored clinical trial. In January 2022, the FDA permitted the Masonic Cancer Center at University of Minnesota to proceed with a Phase 1 clinical trial, which is a single-center, Investigator-sponsored clinical trial to evaluate HCW9218 in patients with advanced solid tumors with progressive disease after prior chemotherapies. We expect to initiate this trial in the first half of 2022. The Masonic Cancer Center is the Twin Cities’ only NCI-designated Comprehensive Cancer Center, and they are designated ‘Outstanding’ by the National Cancer Institute. This trial is planned to be a dose-escalation study and is designed as a “basket trial” and may include patients with breast, ovarian, prostate, and colorectal cancers. The Principal Investigator of the clinical trial is Melissa A. Geller, M.D., M.S., Professor and Division Director of Gynecologic Oncology in the Department of Obstetrics, Gynecology and Women’s Health at the University of Minnesota. The Co-Principal Investigator is Jeffrey A. Miller, M.D., Deputy Director of the Masonic Cancer Center. If the initial phase of the trial is completed successfully, the Principal Investigators may design later phases of clinical trials in solid tumors with the end goal of estimating the response in select solid tumors in combination with disease-appropriate anti-cancer treatment. The timing of the initiation of the Company-sponsored clinical trial depends upon completion of an internal review and approval process required for each site in order to participate in a clinical study. If any of the clinical sites we have selected does not receive approval to participate, then we will need to identify other potential clinical sites which may cause a delay. The duration of both the Company-sponsored trial and the Investigator-sponsored trial is expected to be approximately 12 months once patient enrollment begins; however, the timing depends on site preparation, how quickly patients can be enrolled in the studies, and the number of dose escalations that will be required to meet the primary objective of the studies. If all of the currently available lot of HCW9218 is used in the initial phase of the trial, continuing to the next phase of clinical trials is contingent upon obtaining FDA 5 approval of additional lots of cGMP material. Since we plan to have product release of additional cGMP material that meets FDA requirements by the end of 2022, we do not anticipate any delay in advancing our clinical trial to the next phase due to supply issues. However, we cannot assure you that supply will be available if and when it is needed owing to, among other things, the ongoing macro supply chain issues arising from the impact of the COVID-19 pandemic, which are beyond our control. See “Risk Factors -- Supply sources could be interrupted from time to time and, if interrupted, there is no guarantee that supplies could be resumed within a reasonable time frame and at an acceptable cost or at all.” We have selected difficult-to-treat, chemo-resistant cancer indications for our initial clinical trials. We believe a well- designed clinical trial in such challenging indications will demonstrate that HCW9218 can improve the efficacy of chemotherapy and minimize its side effects by eliminating TIS, that is chemotherapy-induced senescent cells in tumors and normal tissues. We are leveraging the extensive clinical expertise of our team to structure clinical trials with clear, objective, and measurable endpoints. We intend to manage initial clinical trials internally and will not use a clinical research organization to assist us. HCW9302: Novel Immunotherapeutic for T reg Expansion Our internally developed, lead product candidate, HCW9302, is an IL-2-based fusion molecule that expands T reg cells in vivo and ex vivo as an injectable or cell-based strategy to reduce inflammation through deactivation of inflammasomes. Preclinical studies have demonstrated the ability of HCW9302 to reduce inflammation, allowing for the potential to treat a wide variety of autoimmune and age-related diseases. We expect to complete activities required for submission of an Investigational New Drug Application (“IND”) to evaluate HCW9302 in an autoimmune disorder by the end of 2022. Upon completion of IND-enabling activities, we intend to submit an IND for a Phase 1b clinical trial to evaluate HCW9302 in alopecia areata. We have not submitted the IND for the planned trial, and we cannot provide any assurance that the FDA will allow us to initiate our planned clinical trials on a timely basis, or at all. In the event that the FDA does not accept our IND, we may also be required to seek feedback, and the feedback may be unfavorable. In the event we do not receive feedback on a timely basis, or we are required to change the design of our clinical protocol or address other feedback, clinical development of our products would be delayed and our costs may increase. Moreover, if the FDA does not allow our initial clinical trial to proceed, we may be required to conduct additional preclinical testing or other IND-enabling activities, which would result in further delay and additional costs. If we successfully complete a Phase 1b study, we plan to build on the safety data established with alopecia areata and expand indications in Phase 2 clinical trials to evaluate HCW9302 in other autoimmune indications or pro-inflammatory diseases, such as atherosclerosis. Out-Licensing: Strategy for Monetizing Non-Core Assets We have internally-developed over 30 molecules using our TOBI TM platform. In preclinlical studies, several of these molecules show pharmacological activity when administered as an injectable as well as a cell-based therapy. Our core focus will be the development of our lead product candidates, HCW9218 and HCW9302, as transformative immunotherapeutics, administered by subcutaneous injection. We intend to out-license certain rights for other internally-developed molecules with commercial potential that are outside of our focus area. We signed our first out-license agreement at the end of 2020, when we entered into an exclusive worldwide license with Wugen, Inc. (“Wugen”), a company that specializes in cell-based therapies for cancer. Wugen licensed limited rights to develop, manufacture, and commercialize cell therapy treatments for cancer based on two of our internally-developed multi-cytokine fusion protein molecules. Our clinical-stage molecule, HCW9201, is currently being evaluated for generation of memory-like NK (“ML-NK”) cell products in two Phase 2 studies with patients with relapsed/refractory Acute Myeloid Leukemia ("r/r AML"). The studies were initiated by the School of Medicine at Washington University in St. Louis and are supported financially by Wugen. HCW Biologics is currently assessing opportunities to out-license rights to HCW9302, our molecule for T reg activation and expansion, under terms that may include an upfront licensing fee, milestone payments based on performance, and a royalty based on sales of commercial products. 6 Our Approach We believe we have an innovative strategy to treat age-related diseases. Our unique approach is to utilize our internally-developed TOBI TM platform to create novel multi-functional immunotherapeutics to rejuvenate our immune system. With our platform technology, we have generated product candidates that are designed to direct the immune system against solid tumors, therapy-induced senescence and the adverse side effects triggered by existing standard-of-care treatments for cancer, and hematological cancers. We have also developed product candidates that are designed to direct the immune system against inflammation allowing for the potential to treat a wide variety of autoimmune and proinflammatory diseases. Our approach is to develop immunotherapies that eliminate the main drivers of chronic inflammation by addressing the underlying development and sustainment of these factors, as depicted in the image below: The Science of Chronic Inflammation While inflammation is part of the normal repair response for healing, when it becomes prolonged and persists, it is damaging and destructive. Several common molecular pathways have been identified that are associated with both aging and low-grade inflammation. Our view is that there are two primary underlying processes that drive chronic inflammation: Accumulation of senescent cells and SASP factors, and activation of inflammasomes. Senescence is a form of irreversible cell growth arrest accompanied by phenotypic changes, resistance to apoptosis, and activation of damage-sensing signaling pathways. Senescence is considered a stress response that can be induced by a wide range of intrinsic and extrinsic insults, including oxidative and genotoxic stress, DNA damage, telomere attrition, oncogenic activation, mitochondrial dysfunction, or chemotherapeutic agents. 7 Senescent cells remain metabolically active and can influence tissue hemostasis, disease, and aging through their SASP factors. Senescence is considered to be a physiologic process and is important in promoting wound healing, tissue homeostasis, regeneration, and regulation of fibrosis. Senescence also plays a role in tumor suppression. The accumulation of senescent cells, due to the aging of our immune cells, also drives aging and age-related diseases and conditions. The SASP factors can trigger chronic inflammatory responses and consequently augment chronic inflammatory conditions to promote tumor growth. The connection between senescence and aging was initially based on the observation that senescent cells accumulate in aged tissue. The use of transgenic models has enabled the detection of senescent cells systematically in many age-related disorders. Studies have demonstrated that senescent cells play an adverse role in age-related disorders. An increasing body of evidence has shown that chemotherapy and radiation, standard-of-care anti-cancer regimens, cause the accumulation of senescent cells both in tumor and normal tissue. Paradoxically, cellular senescence protects non-dividing cancer cells by limiting the effect of chemotherapeutic drugs and radiation and contributes to chemoresistance, radiation resistance, disease relapse, and systemic side effects. Cancer chemotherapy efficacy is based on the assumption that treatment-induced apoptosis or necrosis of tumor cells results in prolonged patient survival. However, in addition to cytotoxic activity, chemotherapy also can cause tumor cells to enter a TIS state with SASP characteristics. The persistence of viable and metabolically active senescent tumor cells after chemotherapy has been attributed to worsen overall survival in patients. Chemotherapy targets rapidly proliferating cancer cells, exposes a stressor to normal cells which drive them into senescence, paracrine effects of inflammatory factors, or SASP factors, secreted by these senescent cells, and epigenetic changes induce these cells to more aggressive cancer stemness. Systemic chemotherapy has also been found to elevate normal tissue senescence. Multiple studies have revealed that increased normal tissue senescent cells can promote tumor progression, creating a link between aging and cancer. Breast cancer survivors who received chemotherapy as a part of treatment have been found to have accelerated aging and increased incidence of cancer recurrence. Survivors from childhood cancers post-chemotherapy treatment also have been found to have high rates of developing secondary cancer, spinal disorders, and pulmonary diseases in adulthood. Furthermore, it is well established that clinical use of chemotherapies is associated with long-term damage to normal tissues and organs resulting from accumulation of TIS cells and proinflammatory SASP factors. Therefore, we believe that therapeutic approaches that alleviate chemotherapy-induced senescent cells and SASP factors in normal tissue may lead to a better quality of life for cancer patients. SASP Factors Secreted by Senescent Cells Trigger Chronic Inflammatory Responses 8 Inflammasomes are large, multimeric protein complexes that are another contributing factor to chronic inflammation. Their assembly in innate immune cells and other cells is triggered by a variety of stimuli and culminates in the activation of Caspase-1 which then cleaves pro-interleukin (“IL”)-1ß to IL-1ß. To date, diverse inflammasomes have been discovered. Among the various inflammasomes identified, the nucleotide-binding oligomerization domain, leucine-rich repeat-containing receptor (“NLR”) family pyrin domain-containing three NLR (“NLRP3”) inflammasome is best characterized. The NLRs are recognized as the key sensors of pathogens and danger signals known as PAMPs and DAMPs. The NLRP3 inflammasome has a two-step activation mechanism: “priming”, which entails induction of pro-IL-1ß and NLRP3, and “activation”, wherein a functional inflammasome complex is assembled following uptake of PAMPs or DAMPs. The pathology of various diseases, including Alzheimer’s disease, Parkinson’s disease, and atherosclerosis has been linked to hyperactivation of the NLRP3 inflammasome. Inflammatory Factors Secreted by Activated Inflammasomes Trigger Chronic Inflammatory Responses Our Approach for the Treatment of Inflammaging We have identified two lead product candidates that are immunotherapeutics designed to rejuvenate the immune system in order to neutralize or reverse the two primary pathways of inflammaging. Without addressing both processes, a chronic, low-grade inflammatory environment will persist, resulting in a diverse range of pathological manifestations including cancer, atherosclerosis, diabetes, and neurodegeneration. Senolytic for Senescence Cell Clearance and Senomorphic for SASP Neutralization Senescent cells are caused when a normal cell is exposed to various stress factors, many of which are simply a part of living and aging. Other stressors are brought about by medical treatments, such as radiation and chemotherapy, resulting in TIS. The damaging part of senescent cells is that they secrete so-called SASP factors. SASP factors come in many different types, depending on the stressor and the cell type exposed to that stressor, but one thing they have in common is that they drive chronic, low-grade inflammation. For example, TGF-ß is considered one of the key SASP factors that induces or accelerates, and maintains a senescent phenotype in various cell types including fibroblasts, bronchial epithelial cells, and cancers in an autocrine/paracrine manner. Thus, to neutralize these pathways, a drug must be a senolytic agent that reduces senescent cells, as well as a senomorphic agent that eliminates SASP factors. Current clinical efforts to counteract TIS and age-related senescent cell activity have focused on senolytic chemical drugs that selectively induce senescent cell death and senomorphic chemical drugs that reduce the secretion of SASP factors. Despite the promise of senolytics and senomorphics, their efficacy in early phase clinical studies reported to date has been limited. Further, the specificity, toxicity, and optimal treatment schedule of these pharmaceutical agents in the cancer setting have yet to be determined. We have developed an alternative approach to eliminate senescent cells using well-characterized protein immunotherapeutics including those that stimulate effector immune cells and reduce TGF-β activity. This approach is supported by our findings that TIS tumor cells upregulate NKG2D and other ligands on their surface for efficient recognition and killing by effector NK cells and CD8 + T cells. Additionally, suppression of TGF-β activity enhances the anti-tumor/anti-senescent responses of these immune cells. HCW9218 is a unique combination of a TGF-β receptor, that neutralizes TGF-β secreted by tumors, combined with IL-15, a potent cytokine that stimulates the NK and CD8 + T cell cytotoxicity. In our scientific publications, we reported that HCW9218 can activate immune cells to infiltrate into tumors to directly eliminate TIS cancer cells. This activity leads to robust anti-tumor activity of HCW9218 following docetaxel chemotherapy (“DTX”) as measured by reduced melanoma tumor growth in mouse models. Therefore, TGF-β neutralization combined with activation of effector immune cells should be considered as a part of the strategy for 9 senescent cell removal and reduction of SASP factors. For a more detailed discussion, see the Company’s pivotal scientific paper entitled, “Immunotherapeutic HCW9218 Augments Anti-Tumor Activity of Chemotherapy via NK Cell-Mediated Reduction of Therapy-Induced Senescent Cells,” published in Molecular Therapy . Deactivation of Inflammasomes by Activating T reg Cells To date, therapeutic approaches to reduce aberrant inflammasome activity have focused on inhibitors of various inflammasome components (i.e., NLRP3 and other NLRs, ASC, Caspase-1) and downstream mediators of inflammation (i.e., IL-1ß, IL-18, gasdermin D, etc.). This approach is validated based on the regulatory approval of three biologics that inhibit IL-1ß activity (anakinra, a recombinant form of the naturally occurring IL-1Ra; rilonacept, a soluble chimeric Fc fusion protein of IL-1R1 and IL-1R3; and canakinumab, a humanized monoclonal antibody specific for neutralizing IL-1ß). Together, these molecules are approved for treatment of cryopyrin-associated periodic syndrome, a multisystemic IL-1ß–mediated disease due to a gain of function in NLRP3; rheumatoid arthritis; systemic juvenile idiopathic arthritis and other auto-inflammatory diseases. We believe there is considerable interest in therapeutics that specifically block inflammasome activity upstream. However, these product candidates are still in early phase clinical testing and their bioavailability, off- and on-target toxicity, and utility profiles are still being evaluated. Our approach is to deactivate inflammasome pathways in monocytes and macrophages through the immunosuppressive activities of T reg cells induced by our immunomodulator molecules. This approach does not rely on inhibiting specific inflammasome components but rather utilizes natural processes of the immune system to attenuate and rebalance chronic self-perpetuating proinflammatory responses. In relevant animal models, we have observed encouraging results using HCW9302 to activate and expand T reg cells for treatment of atherosclerosis and diabetes. HCW9302 Reduces Atherosclerosis Plaques Induced by High Fat Diet in ApoE -/- Mice Our Strategy Our goal is to develop transformative immunotherapies to lengthen health span by disrupting the link between cellular senescence, chronic inflammation, and age-related diseases. Our strategy for efficiently validating our approach includes the following key components: Focus resources on internally-developed intellectual property, including molecules, TOBI TM platform, and manufacturing processes, without relying on third-party licensing for key intellectual property. • Our TOBI TM platform is a new approach to construct multi-functional fusion proteins and fusion protein complexes, using a novel TF-based scaffold platform. Multiple protein targets (e.g. cytokine, scFvs, ligands, etc.) can be packaged as a single molecule to engage immuno-stimulatory functions and address many signaling pathways simultaneously. Fusion protein complexes have ex vivo and in vivo applications for stimulating NK and T cells. • Over 30 molecules have been created and characterized internally for ex vivo (i.e., to support cell therapies) and in vivo (i.e., as injectables) activation and expansion of NK, CD8 + T, Tscm, and T reg cells. • Fusion protein complexes are readily purified using internally-developed affinity chromatography. Purified fusion protein complexes are highly stable immunotherapeutics. Large-scale cGMP manufacturing runs have been demonstrated. 10 Focus our resources on the development of two primary internally-developed molecules for which we can establish strong IP protection, best activity in animal models, and a well-tolerated safety profile when administered by subcutaneous injection. • The activity of HCW9218 has been established in multiple in vivo animal studies, including reduction of cellular senescence and SASP factors in naturally-aged mice and elimination of cancer senescent cells caused by therapy-induced senescence to enhance efficacies of chemotherapies and remove the off-target effects caused by chemotherapy. • We have completed in vivo animal studies demonstrating the activity of HCW9218 in reversing Type 2 Diabetes and as an anti-fibrotic agent. • We have demonstrated the activity of HCW9302 to treat autoimmune and age-related diseases in relevant animal models. Focus on cancer indications in initial clinical development of our lead product candidate, HCW9218, in indications with high unmet medical need or where side effects of standard-of-care therapy diminishes health span. • Cancer is our gateway indication. We received FDA clearance to proceed with a Company-sponsored Phase 1b clinical trial to evaluate HCW9218 in refractory pancreatic cancer. The Masonic Cancer Center at University of Minnesota received FDA clearance to proceed with an Investigator-sponsored Phase 1 clinical trial to evaluate HCW9218 in patients with solid tumors, such as breast, ovarian, colorectal and prostate cancers. We expect to initiate both of these trials in the first half of 2022, but we cannot provide any assurance that the clinical sites will be ready to initiate the planned clinical trials on a timely basis, or at all. • Clinical trials will allow us to evaluate the development of our novel immunotherapeutics as we attempt to augment the efficacy of chemotherapy against cancer while minimizing its side effects. Our clinical trial design will be designed to have clear, objective endpoints against which we can measure the success of our cancer treatment. • Because of our highly efficient design for neutralizing TGF-ß, we have targeted cancer indications with TGF-ß mediated immunosuppression and a fibrotic tumor microenvironment (i.e., pancreatic, breast cancer). • We plan to advance well-characterized immunotherapeutics with multiple mechanisms of action: effector immune cell activation, suppression of TGF-ß, reduction of senescent cells (i.e., senolytics), and reduction of SASP (i.e., senomorphics). Focus on autoimmune indications with high unmet medical need in initial clinical development of our lead product candidate, HCW9302. • IND-enabling activities and toxicology studies required for submission of an IND to evaluate HCW9302 in an autoimmune indication are expected to be completed in the second half of 2022, followed soon thereafter with an IND submission to evaluate HCW9302 in an autoimmune indication. We have not yet submitted the IND, nor can we guarantee when the IND will be submitted. Leverage established clinical trial network. • Our management team has extensive experience managing clinical trials, enabling us to reduce dependency on a contract research organization for our trials. Our founder and clinical development team have a track record of success in developing immuno-oncology therapeutics from bench to bedside. • We have selected leading NCI-designated Comprehensive Cancer Centers as potential clinical sites for our multi-center, Company-sponsored trial. We are working with these institutions and Principal Investigators from these institutions to complete the required internal review processes for study start-up. Because the discussions with these clinical sites and Principal Investigators are not finalized, we are not certain we will be successful in reaching an agreement with any or all of these institutions. The course of these discussions and whether we might need to identify alternative clinical sites could impact the start date for our clinical trials. Any delays in our clinical trials could increase our costs and slow down the development and approval process, which could harm our commercial prospects. 11 Expand clinical evaluation of senolytic/senomorphic product candidates to other age-related indications following establishment of a safe treatment regimen in cancer patients for HCW9218. We may need pre-IND meetings for other cancer and non-cancer indications to determine if additional nonclinical toxicology studies are required. • We are conducting preclinical research studies to evaluate HCW9218 in liver cancer and NAFLD that we believe may support a future clinical study. • We are conducting preclinical research studies to evaluate HCW9218 in metabolic disease indications, specifically Type 2 Diabetes, leveraging our ability to reduce senescent cells and reduce SASP factors. Out-license limited rights for certain HCW molecules outside of primary focus. • We intend to continue to seek partners for out-licenses for our internally-developed molecules with strong clinical potential that are part of our clinical development focus (i.e., adoptive cell therapies). We consider this an attractive source of nondilutive financing. Explore co-development or regional deals with big pharma for lead molecules. • We are actively seeking co-development deals for the further advancement of our lead molecules, including clinical development, and commercialization. • We are actively assessing whether it is advantageous for the Company to out-license rights to certain regional markets. Our primary goal is to enter a co-development deal on the best terms possible, so we will not enter such a transaction if we conclude it is optimal for the Company to enter a big pharma co-development deal for worldwide rights. Our Programs Our Internally-Developed TOBI TM Platform TOBI TM (Tissue factOr-Based fusIon) platform is a new approach to construct multi-functional fusion proteins and fusion protein complexes using a novel TF protein scaffold. The extracellular domain of human TF was selected as it has a rigid elongated structure comprised mainly of ß-sheets with its N- and C-termini located at distal ends of the polypeptide, permitting genetic fusions of other protein domains without anticipated steric interference. This TF domain does not interact with the cell membrane phospholipid bilayer and, as a result, does not exhibit procoagulant activity. This TF domain is expressed at high levels by most cell types and is not expected to be immunogenic in humans. Consistent with these properties, we found that genetic fusion to the TF domain promoted increased production of difficult-to-express proteins, such as IL-15. Additionally, the TF fusion proteins could be readily purified by affinity chromatography using an anti-TF antibody and low pH elution conditions, like those used in Protein A-based affinity purification of therapeutic antibodies. To generate multichain protein complexes, we also incorporated genetic fusions to the human IL-15 and IL-15Rα domains as shown in the figure below. When co-expressed in CHO cells, the fusion proteins form a soluble stable heterodimeric complex through high-affinity interactions between IL-15 and IL-15Rα domains. This approach offers an alternative to immunoglobulin (Fc) and other 12 engineered protein scaffolds, which typically require introduction of multiple mutations or other non-human sequences or complicated in vitro assembly/purification methods to generate bi- or multi-specific complexes. Using the TOBI TM platform, we have constructed more than 30 fusion complexes comprising various cytokines, ligands, receptors, and single-chain antibodies, including disease-targeting antibodies and immune checkpoint inhibitors. The modular fusion components are carefully selected to stimulate, inhibit, and/or target specific immune responses using a knowledge-based disease-relevant strategy and in many cases, are designed to provide synergistic and balanced activities for optimal therapeutic benefit. The resulting fusion proteins are rigorously tested in state-of-the-art cell culture systems and disease-specific animal models to verify their utility for the intended clinical use and targeted indications. TOBI TM also provides a scalable approach for generating large-scale cGMP-grade heteromeric fusion protein complexes to support clinical applications. Our internally-developed TOBI TM discovery platform was featured in an article authored by the Company and published in the peer-reviewed journal Cancer Immunology Research . Pipeline and Overview of TOBI TM Product Candidates Our focus for clinical development is our two lead product candidates, HCW9218 and HCW9302. The initial clinical trials to evaluate HCW9218 are in several cancer indications. The FDA has permitted our Company-sponsored, first-in-human Phase 1b clinical trial to proceed to evaluate HCW9218 in patients with advanced pancreatic cancer. In addition, the Masonic Cancer Center at University of Minnesota received FDA clearance to proceed with a Phase 1 Investigator-sponsored clinical trial to evaluate HCW9218 in patients with other types of advanced solid tumors with progressive disease after prior chemotherapy. We expect to initiate both of these trials in the first half of 2022. For HCW9302, we expect to complete IND-enabling activities in the second half of 2022. Upon the completion of IND-enabling activities, we intend to submit an IND to evaluate HCW9302 in the autoimmune indication, alopecia areata. For our lead molecules, once the safe dose level and regimen are defined in initial clinical trials, we intend to expand into clinical trials to evaluate our lead molecules in other age-related pathologies. For HCW9218, these include fibrotic diseases (e.g., non-alcoholic fatty liver disease, or NAFLD), liver cancer, and dysfunctional metabolic disorders (e.g., Type 2 diabetes); and for HCW9302, these include autoimmune diseases and other proinflammatory diseases, such as coronary artery disease. We have out-licensed limited rights for our molecules, HCW9201 and HCW9206, to develop cell-based therapy treatments. Our clinical-stage molecule, HCW9201, is currently being evaluated in a pair of Phase 2 clinical trials for a cell-based therapy treatment for r/r AML by our licensee. The School of Medicine at Washington University in St. Louis is the sponsor for both trials. 13 The pipeline for our lead immunotherapeutic programs is summarized below: (1) This is an Investigator-Sponsored clinical trial with the Masonic Cancer Center at University of Minnesota. The solid tumor clinical trial is a “basket trial” that will include patients with breast, ovarian, prostate, and colorectal cancers. (2) Available for license from HCW Biologics for ex vivo T reg cells expansion. (3) Wugen licensed HCW9201, a clinical-stage molecule, from HCW Biologics for limited rights to develop cell-based therapy treatments. HCW Biologics has retained all other rights to HCW9201. HCW9218 Advances in immuno-stimulatory and anti-immunosuppressive therapeutics have revolutionized cancer treatment. However, novel immunotherapeutics with these dual functions are not frequently constructed. We have used our TOBI TM platform to construct a heterodimeric bifunctional fusion molecule, HCW9218, capable of immuno-stimulatory as well as anti-immunosuppressive activity. HCW9218 is comprised of extracellular domains of the human TGF-ß receptor II and a human IL-15/IL-15 receptor α complex. HCW9218 potently activates NK cells and CD8+ T cells in vitro and in vivo to promote their proliferative and metabolic activities and enhances their cytotoxicity against tumor targets. This fusion complex also exhibited TGF-ß neutralizing activity in vitro and sequestered plasma TGF-ß in mice. In animal models, HCW9218 displayed strong anti-tumor activity mediated by NK cells and CD8 + T cells, and increased infiltration of NK cells and CD8 + T cells into tumors. HCW9218 was well tolerated in preclinical studies, with a half-life sufficient to provide long lasting biological activity. HCW9218 may serve as a novel therapeutic to simultaneously provide immunostimulation and lessen immunosuppression associated with tumors and other age-related diseases. The figures below show that HCW9218 has the potential to augment the efficacy of chemotherapy (doxetaxel, DTX) in the presence and absence of therapeutic antibodies (TA99) in mice bearing melanoma tumors (upper left panel). These results correlated with the ability of HCW9218 to eliminate TIS cancer cells induced by DTX (upper center and right panels). Additionally, HCW9218 reduced TIS and SASP factors in normal tissues related to therapy induced adverse effects (lower panels), indicating that HCW9218 acts as a senolytic and senomorphic agent. 14 Preclinical Studies in Animal Models HCW9218 Enhances Anti-Tumor Activity of Chemotherapy and Therapeutic Antibodies and Reduces TIS Senescent Cells and SASP Factors in Tumors and Normal Tissues In our published scientific reports, we also observed in preclinical studies that HCW9218 could enhance the anti-tumor efficacy of immune checkpoint blockade (anti-PD-L1 antibody, α-PD-L1) via T-cell infiltration into the tumor avoiding immunosuppressive factors in the tumor microenvironment, or TME. HCW9218 Enhances Anti-Tumor Activity of Immune Checkpoint Blockade 15 Moreover, HCW9218 enhanced the anti- tumor efficacy of chemotherapy against human pancreatic tumors in a xenograft model. Induction of senescence tumor cells in human SW1990 pancreatic cancer cells was observed following treatment with nab-paclitaxel and gemcitabine (A+G), standard-of-care chemotherapies (left panel). Further, HCW9218 treatment significantly enhanced A+G chemotherapy activity by controlling tumor growth and prolonging survival of SW1990 tumor-bearing mice (Center and right panels). The results of these studies support clinical development of HCW9218 in combination with chemotherapies and other immune therapies in patients with solid tumors, including pancreatic cancer. HCW9218 Enhances Anti-Tumor Activity of Chemotherapy in Mice Bearing Human SW1990 Pancreatic Tumor Xenografts Cancer Two clinical trials of HCW9218 have been permitted to proceed by the FDA. The first is a Company-sponsored, multi-center Phase 1b clinical trial for a dose escalation study of HCW9218 as monotherapy in refractory patients with advanced pancreatic cancer. We plan to enroll up to 24 patients in five NCI-designated centers, with the primary objectives of the study being to determine safety, maximum tolerated dose, and the recommended Phase 2 dose (“RP2D”). After determining the RP2D, we expect the Phase 2 portion of this clinical trial to include a cohort of patients receiving HCW9218 as monotherapy and a cohort of patients receiving HCW9218 as an adjunct to chemotherapy. The Phase 2 dose expansion portion aims to enroll up to 42 patients at the RP2D with primary objectives to determine the 6-month progression free survival rate and safety. The secondary objectives of this study are objective response rate, overall survival, time to progression, and duration of response. We have identified several NCI-designated Comprehensive Cancer Centers as potential clinical sites, all of which are progressing through their internal process for review. We will not be able to finalize our selection of a particular clinical site until the internal review is complete and approval is granted to participate in the clinical study. If any of the sites we have selected declines to participate in the study, we will need to identify alternative sites, which may delay the initiation of the trial. Once we do proceed, the time required to complete the study will depend on the number of cohorts required to determine RP2D and the time that is required to enroll patients to participate in the study. The second clinical trial of HCW9218 in a cancer indication is an Investigator-sponsored trial for the Phase 1 portion of a clinical trial for dose escalation study of HCW9218 as a monotherapy in solid tumors, such as breast, ovarian, prostate and colorectal cancers. The sponsor is the Masonic Cancer Center at the University of Minnesota, a leading NCI-designated cancer center. The trial is designed as a dose escalation study of HCW9218 to identify the maximum tolerated dose for future evaluation. Depending on the toxicities observed in the treated patients, between 12 and 24 patients may be enrolled. There has not yet been a decision on the design of later phases of this clinical trial, if Phase 1 is successfully completed. 16 We believe, based on the results of our animal studies that HCW9218 has the potential to be an effective immunotherapy against pancreatic cancer, a very aggressive malignancy which is refractory to other immunotherapies including immune checkpoint blockade. TGF-ß has been shown to play a major role in promoting immunosuppression responses and fibrosis in the TME as well as inducing epithelial–mesenchymal transition (“EMT”) of pancreatic tumor cells, which facilitates their migratory and invasive capabilities. As a result, elevated serum TGF-ß levels have been shown to correlate with a poor prognosis in patients with pancreatic cancer. Early phase clinical studies have provided evidence that strategies to decrease TGF-ß levels or signaling can provide clinical benefit, including objective responses and prolonged survival, in certain patients with advanced/metastatic pancreatic cancer. Studies in pancreatic tumor mouse models, including research performed in our laboratories, support evaluation of combination therapies including chemotherapy to enhance antigen presentation by tumors, TGF-ß antagonist to reduce TME immunosuppression and immuno-stimulatory agents to augment anti-tumor T cell and NK cell responses. We have targeted advanced, chemo-resistant solid tumors in our clinical programs in cancer, all of which are difficult-to-treat and have large, unmet medical needs: • Pancreatic Cancer is the 11th most commonly diagnosed cancer in the U.S., but it is the 3rd leading cause of cancer-related deaths. It has a 10.8% five-year survival rate. Long-term prognosis for pancreatic cancer depends on the size and type of the tumor, lymph node involvement and degree of metastasis at the time of diagnosis. Unfortunately, pancreatic cancer usually shows little or no symptoms until it has advanced and spread. Therefore, most cases are diagnosed at later, more difficult-to-treat stages. In the U.S. in 2021, there were 60,430 new cases and 48,220 deaths from pancreatic cancer. The average age at the time of diagnosis is 70 years of age. • Solid tumors represent approximatively 90% of adult human cancers. In 2022, in the U.S. alone, it is believed there will be an estimated 1.9 million new cancer cases diagnosed and more than 600,000 cancer deaths, which are increasing with an aging population. The Investigator-sponsored trial being conducted by the Masonic Cancer Center at University of Minnesota to evaluate HCW9218 is focused on the treatment of advanced solid tumor cancer after failure of initial treatments. Various studies have revealed that 95% of cancer drugs for solid tumors fail. This research highlights the high unmet medical need for novel therapies to treat advanced solid tumors. Age-Related Diseases Driven by Senescence We are conducting extensive preclinical research on HCW9218 for senescent cell removal (senolytic) and SASP factor reduction (senomorphic) in various relevant animal models, including those for solid tumors, metabolic dysfunction, and chronological aging. Our initial data suggest that HCW9218 functions as a potent senolytic and senomorphic agent. We plan to determine the dose level and regimen from our cancer trials and then we intend to apply the dose level and treatment regimens to evaluate HCW9218 for age-related diseases, such as NAFLD and diabetes. Type 2 Diabetes affects approximately 30.8 million Americans, and another 88 million American adults have pre-diabetes. Our ultimate goal is to use HCW9218 in combination with HCW9302 to address neurodegenerative diseases, such as Alzheimer’s Disease, Parkinson’s Disease, and age-related Macular Degeneration. HCW9302 T reg cells are essential mediators of peripheral tolerance and the global immunoregulatory potential in hosts to self and non-self-antigens. T reg cells achieve this immunoregulatory control through multiple suppressive mechanisms. Alternations in T reg cell development, homeostasis or function can predispose these cells to affect a variety of disease conditions including allergy, autoimmunity, graft rejection, cancer, and response to immunotherapies. Current research is focused on developing novel therapies to enhance T reg cell functions in vivo through use of cytokines and small molecule drugs to support endogenous T reg cell proliferation or activation, ex vivo manipulated T reg cells in autologous adoptive cell therapy to promote immunoregulation in settings of autoimmunity, or antigen-specific T reg cells, including chimeric antigen receptor T reg (“CAR-T reg ”) cells, to strengthen tolerance in allergies. We have employed our TOBI TM platform to create HCW9302, an IL-2-based fusion molecule, to expand T reg cells in vivo and ex vivo as an injectable or cell-based strategy to reduce inflammation and to treat a wide variety of autoimmune and age-related diseases. In relevant animal models, we have also observed encouraging results using HCW9302 to activate and expand T reg cells for treatment of atherosclerosis and diabetes. We are currently conducting IND-enabling activities required to prepare for submission of an IND for a Phase 1b clinical trial to evaluate HCW9302, administered by subcutaneous injection. The timing for this submission will depend on the completion of nonclinical toxicology studies and availability of research material, as well as finalizing the clinical protocol. The nonclinical toxicology studies are expected to be completed by the end of 2022, which we intend to follow with the submission of an IND for a Phase 1B clinical trial to evaluate HCW9302 in an autoimmune indication in the first half of 2023. 17 However, we have not submitted the IND for the planned trial, and we cannot provide any assurance that the FDA will authorize us to initiate our planned clinical trials on a timely basis, or at all. In the event we do not receive feedback on a timely basis, or we are required to change the design of our clinical protocol or address other feedback, clinical development of our products would be delayed and our costs may increase. Moreover, if the FDA does not allow our initial clinical trial to proceed, we may be required to conduct additional preclinical testing or other IND-enabling activities, which would result in further delay and additional costs. HCW9302 exhibits increased biological activity with an extended half-life, compared to IL-2. The three graphs below illustrate the results of characterization studies: • Left panel: IL-2 activity of HCW9302 was compared with Proleukin, the currently approved IL-2 drug, using a standard CTLL-2 cell proliferation assay. • Center panel: HCW9302 was found to have >5-fold higher IL-2 activity than Proleukin. • Right panel: We observed the half-life of HCW9302 was 6.2 hours in mice following subcutaneous administration (3 mg/kg) versus 20 minutes for Proleukin. HCW9302 Exhibits Increased Biological Activity with an Extended Half-Life Compared to IL-2 HCW9302 Half-Life is 6.2 Hours versus IL-2 Half-Life of 20 minutes Autoimmune and proinflammatory diseases We have conducted extensive preclinical research on HCW9302 for deactivation of inflammasomes to temper the pro-inflammatory environment it creates in relevant animal models, including those for atherosclerosis. Our data suggest that HCW9302 functions as a potent agent to stimulate T reg cells that suppress the activity of inflammasome-bearing cells and inflammatory factors. We intend to determine the dose level and regimen from our initial clinical trial in an autoimmune indication, which we have primarily determined will be alopecia areata, and then we intend to apply the dose level and treatment regimens established in initial clinical studies to evaluate HCW9302 for other autoimmune and proinflammatory diseases, such as atherosclerosis. HCW9201 We believe NK cells are a promising cellular therapy for cancer, with challenges in the field including effector cell persistence, functional activity, and tumor recognition. Recent research has shown that priming blood NK cells with a cytokine cocktail of IL-12, IL-15, and IL-18 (“12/15/18”) results in ML-NK cell differentiation and enhanced responses against cancer. However, the lack of available, scalable cGMP-grade reagents has limited the advancement of this approach beyond early phase clinical trials. To address this challenge, we employed our TOBI TM platform to combine IL-12, IL-15, and IL-18 receptor engagement in a single protein complex (“HCW9201”). Further, we have developed cGMP-compliant production cell lines and scalable production processes to allow the generation of large amounts of HCW9201 that meets product quality characteristics for clinical use. 18 HCW9201 has been extensively evaluated for its capacity to stimulate activation and proliferation signals in human NK cells. RNA-seq and multidimensional mass cytometry studies have revealed strong parallels between the activities of HCW9201 and IL-12/15/18 in generated ML-NK cells. Moreover, HCW9201 stimulation improved NK cell metabolic fitness, and resulted in the DNA methylation remodeling characteristic of memory-like differentiation. NK cells primed with HCW9201 and the 12/15/18 cocktail had similar increases in ML-NK cell cytotoxicity and IFN-g production against leukemia targets. HCW9201- and 12/15/18-primed NK cells also equivalently controlled leukemia in vivo in NSG mice. Thus, HCW9201 represents a protein engineering approach that solves many problems associated with multi-signal receptor engagement on immune cells, and HCW9201-primed NK cells will be advanced as an ideal approach for clinical cGMP-grade ML-NK cell production for cancer therapy. The figures below show that NK cells primed with HCW9201 and 12/15/18 cocktail killed leukemia cells (left) and controlled leukemia tumors in mice (right) better than NK cells primed with IL-15 alone. HCW9206 We have used our TOBI TM platform to combine cytokine IL-7, IL-15, and IL-21 receptor engagement into a single protein complex: HCW9206. Although ML-NK cells have been demonstrated to be beneficial in clinical trials, the initially evaluated NK cell products were derived from fresh prepared apheresis lymphocytes from individual matched donors. Thus, this approach has limitations in the availability of donors and the reproducibility, scalability, and costs of generating clinical-grade ML-NK cells for adoptive cell therapy. To translate this exciting therapy to many patients, we have developed methods to expand the numbers of NK cells to support a multiple dosing regimen and for multiple patients. We have extensively tested HCW9206 and demonstrated that this complex can expand ML-NK cells without the use of feeder cells, which is the current process for producing NK cells using a cancer cell line that must be removed from the final drug product. Out-License Programs We have internally developed over 30 immunotherapeutic molecules and plan to develop additional molecules through our TOBI TM platform. Our strategy is to focus on the clinical development of our lead product candidates, HCW9218 and HCW9302, as immunotherapeutics for the treatment of age-related diseases, administered by subcutaneous injection. Our strategy is to out-license molecules and product rights not in our focus area, in particular ex vivo applications. We expect out-licensing to provide non-dilutive financing to bolster resources available to fund our core programs and possibly commercialize molecules with the potential to be developed successfully by our licensees for disease indications with large, unmet medical needs. We established our first out-license arrangement in December 2020, when we entered into an exclusive worldwide license agreement with Wugen (the “Wugen License”) for limited rights to develop cell therapy-based treatments using two HCW internally-developed fusion protein molecules and improvements thereto, including a clinical-stage and preclinical stage fusion molecule. We believe these molecules are capable of generating highly activated ML-NK cells in a short time frame and large-scale NK cell expansion without relying on feeder cells. Two Phase 2 clinical trials were initiated in January 2021 by the School of Medicine at Washington University in St. Louis with support from Wugen, in which certain of these licensed molecules were used. One trial is using ex vivo ML-NK cells, induced by the licensed molecule, against r/r AML with donor leukocyte infusion (“DLI”) after haploidentical stem cell transplantation. The second Phase 2 clinical trial is also using ex vivo induced ML-NK cells against r/r AML. As licensor, we have limited information rights to clinical data which we are required to treat as nonpublic confidential information. As licensee, Wugen determines when and if clinical data read outs are disclosed to the public. 19 We retained manufacturing rights and other rights, including regulatory T cell-based cellular therapy and injectable rights, for licensed molecules under the terms of the Wugen License. We intend to enter into supply agreements with Wugen to provide cGMP and non-cGMP grade licensed molecules based on industry-standard terms, one agreement for development supply and one agreement for commercial supply. According to the terms of the Wugen license, Wugen will fund all future clinical development and commercialization activities for any indications utilizing the licensed molecules for cell therapy as covered by the license. We have the opportunity to receive additional payments for development and commercialization milestones as well as single-digit royalties. Other TOBI TM Discovery Programs Our discovery efforts for new product candidates are focused on characterizing and expanding our library of fusion molecules with cytokines, chemokines, ligands, receptors, and internally-developed single-chain antibodies, including fusion domains with increased or decreased biological activity, for cancer and other age-related diseases with an emphasis on neurodegenerative, fibrotic, and autoimmune diseases. Other TOBI TM discovery programs are summarized in the table below. Name Fusion Domains Activity Indications HCW9206 IL-7, IL-15, IL-21 NK cell and CD8 + T cell stimulation Injectable for cancer HCW9207 IL-18, IL-15, IL-12, anti-CD16 scFv NK cell stimulation Cancer HCW9212 IL-7, IL-15, IL-21, CD137L NK cell and CD8 + T cell stimulation Cancer HCW9213 Anti-CD3, anti-CD28 scFvs T cell/T reg stimulation Cancer, inflammatory diseases HCW9228 TGRßRII dimer TGF-ß antagonist Cancer, fibrotic diseases Antibodies HCW9106 Anti-CD26 scFv Senescent cell inhibition and targeting Inflammatory and age-related disease HCW9107 Undisclosed target Senescent cell inhibition and targeting Inflammatory and age-related disease HCW9108 Undisclosed target T reg binding, activation, inhibition, and targeting Inflammatory and age-related disease Manufacturing Our product candidates include molecules that are multi-specific fusion protein complexes, such as HCW9201, HCW9206, and HCW9218; bispecific fusion protein complexes, such as HCW9302; and an internally-developed affinity ligand used in our manufacturing processes, HCW9101. We have established internally-developed manufacturing processes for producing these fusion molecules from Chinese hamster ovary (“CHO”) cells at large scale in a cGMP-compliant setting. On March 14, 2019, we entered into a manufacturing agreement with EirGenix, Inc. (“EirGenix”), a third-party global contract development and cGMP manufacturer of biologics, for the manufacture of the Company’s internally-developed molecules. By the end of 2019, we successfully launched cGMP production with manufacturing runs adequate to support clinical trials. During the year ended December 31, 2020, various testing and quality control procedures were conducted on the materials manufactured in 2019-2020 to ensure materials met all expected quality requirements. During the year ended December 31, 2021, we successfully completed production of four molecules, HCW9101, HCW9201, HCW9218, and HCW9302. This includes clinical grade materials we need to initiate clinical trials and toxicology studies we have planned for 2022. Manufacturing, quality control procedures, and vialing will continue for several molecules in 2022, including additional clinical and research grade materials for our licensee. We currently rely on EirGenix and other third-party manufacturers for the cGMP production of larger quantities of our drug product candidates for our clinical trials. Our management team and other internal personnel have extensive cGMP manufacturing experience in order to ensure seamless technology transfer and to manage the manufacturing and development processes conducted by third-party manufacturers. Our agreements with third-party manufacturers include confidentiality and intellectual property provisions as well as routine quality audits. In some instances, we have reserved resources from third-party manufacturers for the development and manufacture of our product candidates for near-term clinical programs. However, we currently obtain our products from these manufactures on a per project basis and do not have long-term supply arrangements in place. Should any of these manufacturers become unavailable to us for any reason, we believe that there are a number of potential replacements available to us on commercially reasonable terms to meet our future production requirements, although we may incur some delay and cost in qualifying and re-establishing the manufacturing processes at the replacements. We mitigate this risk by maintaining an inventory of clinical material for clinical trials we expect to initiate in the next 12-24 months. 20 We do not own or operate facilities for clinical drug manufacturing, storage, distribution, or quality testing. Currently, all of our clinical manufacturing is outsourced to third-party manufacturers. We plan to use some of the net proceeds of the IPO to establish our own manufacturing facilities in the US. We have expertise in building and running cGMP manufacturing facilities for immunotherapeutics. In addition, our manufacturing process is wholly-owned and developed by us, so we will not rely on a third-party for manufacturing expertise or processes. Intellectual Property Overview We strive to protect and enhance internally-developed technology, inventions, and improvements that are commercially important to the development of our business, including seeking, maintaining, and defending patent rights, for our internally-developed molecules and manufacturing processes. We also rely on trade secrets relating to our technology platform and on know-how, continuing technological innovation to develop, strengthen, and maintain our proprietary position in the field of inflammaging and the diseases it promotes that may be important for the development of our business. As with other biotechnology and pharmaceutical companies, our ability to secure and maintain intellectual property protection for our product candidates, future products, and other internally-developed technologies will depend on our success in obtaining effective patent coverage and enforcing those patents if granted. However, we cannot guarantee that our pending patent applications, and any patent applications that we may in the future file, will result in the issuance of patents, or that any issued patents we may obtain will provide sufficient proprietary protection from competitors. Any issued patents that we obtain may be challenged, invalidated, or circumvented by third parties. In addition to patents, we also rely on trade secrets, know-how and continuing technological innovation to develop and maintain our competitive position. We seek to protect our internally-developed technology, in part, through confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and potential collaboratorWe also rely on trade secrets relating to our manufacturing process and on know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the field of inflammaging that may be important for the development of our business. We additionally may rely on regulatory protection afforded through data exclusivity, market exclusivity, and patent term extensions, where available. Internally-Developed Intellectual Property As of December 31, 2021, we own 61 pending patent applications worldwide, including 11 pending U.S. utility patent applications, one pending provisional U.S. patent application, six pending PCT applications, four Hong Kong applications, and 39 pending non-U.S. national phase patent applications. Our policy is to file patent applications to protect technology, inventions and improvements to inventions that are commercially important to the development of our business. We seek United States and foreign patent protection for a variety of technologies, including: our internally-developed platform, specific chimeric polypeptides developed using our platform, methods of using the chimeric polypeptides both in vivo and in cellular therapy to treat various conditions, methods for treating diseases of interest, and methods for manufacturing our products. We also intend to seek patent protection or rely upon trade secret rights to protect other technologies that may be used in combination with our products in the development of novel products or methods of use. We seek protection, in part, through confidentiality and proprietary information agreements. Our intellectual property portfolio is in its early stages and is continually evolving during prosecution of our applications. We own multiple families of patent applications that are directed to our TOBI TM platform technology and our single-chain and multi-chain chimeric polypeptides and methods of use of these polypeptides alone and in combination. Single-Chain Chimeric Polypeptides Patent Family This family includes patent applications with claims directed to compositions of various single-chain chimeric polypeptides created using the TOBI TM platform. These applications also include methods of use and manufacture thereof and methods of promoting the activation and proliferation of a NK cell or a T cell using our single-chain chimeric polypeptides. As of December 2021, this family, which includes HCW9302, includes one pending U.S. utility patent application, and 11 pending patent applications filed in Europe, Australia, Canada, Israel, Japan, New Zealand, Korea, China, Singapore, Hong Kong and Taiwan. The earliest predicted expiration date of any patent issuing from a patent application in this family is 2039. 21 Multi-Chain Chimeric Polypeptides Patent Family This family includes patent applications with claims directed to compositions of various multi-chain chimeric polypeptides created using the TOBI TM platform. These applications also include methods of use and manufacture thereof and methods of promoting the activation and proliferation of a NK cell or a T cell using our multi-chain chimeric polypeptides. As of December 2021, this family, which includes claims encompassing HCW9218, HCW9201, HCW9206, HCW9228, HCW9207, and HCW9212, includes three pending U.S. utility patent applications, and 11 pending patent applications filed in Europe, Australia, Canada, Israel, Japan, New Zealand, Korea, China, Singapore, Hong Kong and Taiwan. The earliest predicted expiration date of any patent issuing from a patent application in this family is 2039. With respect to HCW9218, the composition is claimed in one pending U.S. utility patent application and 11 pending patent applications filed in Europe, Australia, Canada, Israel, Japan, New Zealand, Korea, China, Singapore, Hong Kong and Taiwan. With respect to HCW9201, the composition is claimed in one pending U.S. utility patent application and 11 pending patent applications filed in Europe, Australia, Canada, Israel, Japan, New Zealand, Korea, China, Singapore, Hong Kong and Taiwan. Wugen has obtained an exclusive license to these patent applications limited to use of the licensed chimeric polypeptides in manufacturing of certain cellular therapy products. With respect to HCW 9206, the composition is claimed in one pending U.S. utility patent application and 11 pending patent applications filed in Europe, Australia, Canada, Israel, Japan, New Zealand, Korea, China, Singapore, Hong Kong and Taiwan. Wugen has obtained an exclusive license to these patent applications limited to use of the licensed polypeptides in manufacturing of certain cellular therapy products. Methods of Culturing and Methods of Expansion and Proliferation These two families include patent applications with claims directed to methods of promoting the activation and proliferation of NK cells through the use of our single-chain or multi-chain chimeric polypeptides for ex vivo cell therapy use. As of December 2021, these two families, which include methods of using HCW9201 and HCW9206, includes two pending U.S. utility patent applications and 14 pending patent applications filed in Europe, Australia, Canada, Israel, Japan, South Korea, Singapore, Hong Kong and China. The earliest predicted expiration date of any patent issuing from a patent application in the first of these two families is 2039. The earliest predicted expiration date of any patent issuing from a patent application in the second of these two families is 2040. Wugen has obtained an exclusive license to these two patent families limited to use in manufacturing of certain cellular therapy products. Treating Age Related Disorders These four families include patent applications with claims directed to methods of killing or reducing the number of senescent cells in a subject using our single-chain or multi-chain chimeric polypeptides. As of December 2021, these four families, which include methods of using HCW9218, HCW9228 and HCW9302, include three pending U.S. utility patent applications, one pending provisional U.S. patent application, three pending PCT applications, and six pending patent applications filed in Europe, Australia, Canada, Israel, Japan, Hong Kong and China. The earliest predicted expiration date of any patent issuing from a patent application in the first of these three families is 2039. The earliest predicted expiration date of any patent issuing from a patent application in the second of these families is 2041. The earliest predicted expiration date of any patent issuing from a patent application in the third of these families is 2040. The earliest predicted expiration date of any patent issuing from a patent application in the fourth of these families is 2042. Methods of Activating Regulatory T cells This family includes patent applications with claims directed to methods of promoting the activation and proliferation of Regulatory T cells through the use of our single-chain or multi-chain chimeric polypeptides for ex vivo cell therapy use. As of December 2021, this family, which includes methods of using HCW9213 and HCW9302, includes one pending U.S. utility patent application and one pending PCT application. The earliest predicted expiration date of any patent issuing from a patent application in this family of applications is 2041. 22 Antibodies This family includes patent applications with claims directed to anti-CD26 scFv antibodies. As of December 2021, this family, which includes composition claims for HCW9106, includes one pending PCT application. The earliest predicted expiration date of any patent issuing from a patent application in this family of applications is 2041. The various methods of use of our chimeric polypeptides covered in our portfolio broadly include: ex vivo cellular therapy use; in vivo or injectable use; methods of inducing differentiation of an immune cell into a memory or memory-like immune cell ( in vitro or in vivo ); methods of stimulating an immune cell ( in vitro or i n vivo ); and methods of inducing or increasing proliferation of an immune cell ( in vitro or in vivo ). Indications covered in the portfolio broadly include cancers, including solid and hematological cancers; age-related diseases; and infectious diseases. We are also pursuing innovative combinations of use with our chimeric polypeptides and antibodies, which include both known and internally-developed antibodies. Patents that may issue from these HCW Biologics, Inc. owned applications are generally expected to expire between the years 2039 to 2041, subject to possible patent term adjustment and/or extension. The term of individual future patents may vary based on the countries in which they are obtained. Generally, patents issued from applications filed in the United States are effective for 20 years from the earliest effective non-provisional filing date. In certain cases, a patent term can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory review period. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of a U.S. patent, though the total patent term, including any extension, must not exceed 14 years following FDA approval. A U.S. patent can only be extended once, such that, if a single patent is applicable to multiple products, it can only be extended based on one product. The term of patents outside of the United States varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective national filing date. Similar patent term extension provisions are available in Europe and other foreign jurisdictions to extend the term of a patent covering an approved drug. When possible, we expect to apply for patent term extensions for future patents covering our product candidates and their methods of use. Trademarks We have filed five U.S. trademark applications for our corporate name, corporate logo, and the TOBI TM platform. In the future, we intend to file applications for trademark registrations in connection with our Company, our product candidates, and other technologies in various jurisdictions, including the United States as the products are further developed. Trade Secret Protection Finally, we may rely, in some circumstances, on trade secrets to protect our technology. We seek to protect our internally-developed technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. In addition to the above, we have established expertise and development capabilities focused in the areas of preclinical research and development, manufacturing and manufacturing process development, quality control, quality assurance, regulatory affairs, and clinical trial design and implementation. We believe that our focus and expertise will help us develop products based on our internally-developed intellectual property. Contracts and Agreements Wugen Exclusive License Agreement In December 2020, we entered into an exclusive worldwide license agreement with Wugen (the “Wugen License”), for rights to use certain HCW fusion protein molecules to develop, manufacture, and commercialize their cellular therapy products. The term of the agreement will expire on a product-by-product and country-by-country basis, upon the later of (i) the expiration of the last-to-expire valid patent claim or (ii) ten (10) years from the first commercial sale of such product. 23 As consideration for the Wugen License, HCW received shares of Wugen’s common stock equivalent to a 10% ownership interest in Wugen as of the effective date of the Wugen License. The upfront payment for the license fee consisted of common stock of Wugen that had a fair value of $1.6 million on the effective date of the Wugen License. We also agreed to sell Wugen non-financial assets for $2.5 million, including cGMP-grade clinical materials needed in order to begin Phase 2 clinical trials in January 2021. We may receive additional payments in the future, based upon the occurrence of certain development milestones with a value of over $200 million. We will be eligible to receive additional payments for commercialization milestones as well as single-digit royalties for commercial sales once product sales commence. We retained all other rights and use of the licensed molecules outside of Wugen’s right to use the molecules to develop, manufacture, and commercialize cellular therapy products. Wugen’s rights are limited to use of the licensed molecules in cellular therapy products, which products are a pharmaceutical or biological product, process or therapy that contains or comprises cells (including without limitation, CIML NK cells or T cells) that have been engineered, modified, or otherwise manipulated ex vivo , but excludes regulatory T cell-based cellular therapy products. Our retained rights include use of the molecules for injectable therapy product, regulatory T cell-based cellular therapy products, and manufacturing rights to the licensed molecules. We oversee manufacturing and supply of these licensed molecules to Wugen, utilizing our internally-developed manufacturing process, under supply agreements with Wugen that have industry-standard terms. Wugen funds all future clinical development and commercialization activities for the cellular therapy treatments developed by Wugen using the licensed molecules. Contract Research Agreements We have certain contract research agreements with contractors that were entered into the two years ended December 31, 2021 for the (i) screening and identification of specific human antibodies to three particular proteins that influence the cellular-senescence process, (ii) hybridoma development, (iii) cell line improvement, and (iv) research to support pre-clinical studies. We own all rights to the resulting intellectual property, including the antibodies, sequences, and data. To date, we have received several sequences and hybridomas from the contractors. For certain contractors, we are obligated to pay one (1) future milestone payment upon filing and acceptance of an IND for each respective human antibody or protein from cell line, however no additional future development or financial obligations are due under these contractor research agreements. Competition The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on internally-developed products. We believe that our immunotherapeutic approach, internally-developed technology, expertise, scientific knowledge, track record in successfully developing drugs from bench to commercialization and intellectual property provide us with competitive advantages. We face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, governmental agencies, and public and private research institutions. Any product candidates that we successfully develop and commercialize may compete with existing therapies and new therapies that may become available in the future. Many of the companies which we are competing against, or which we may compete against in the future, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. In addition, we face a constantly changing competitive landscape because of numerous mergers and acquisitions in the pharmaceutical and biotechnology industry, which will concentrate resources among a smaller number of large pharmaceutical companies. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements and co-development deals with large and established companies. These competitors also compete with us in establishing clinical trial sites and patient registration for clinical trials necessary to advance the clinical development of our product candidates. Although our novel approach is unique from most other existing or investigational therapies across the disease areas where we are focusing our development, we will need to compete with currently approved therapies, and potentially those currently in development if they are approved. We are aware of several marketed and investigational products in our leading disease areas, including but not limited to the products and competitors discussed below. 24 We compete in the segments of the pharmaceutical, biotechnology, and other related markets that develop cancer therapies. There are many other companies that have commercialized or are developing cancer therapies, including large pharmaceutical and biotechnology companies, such as AstraZeneca/MedImmune, Bristol Myers Squibb, Merck, Novartis, Pfizer, and Roche/Genentech. We face significant competition from pharmaceutical and biotechnology companies that target specific tumor-associated antigens using immune cells or other cytotoxic modalities. These generally include immune cell redirecting therapeutics (e.g., T cell engagers), adoptive cellular therapies (e.g., CAR-Ts), antibody drug conjugates, targeted radiopharmaceuticals, targeted immunotoxin, and targeted cancer vaccines. As we expand to other indications, we will focus on the treatment of fibrotic diseases, including NAFLD, or non-alcoholic fatty liver disease. N AFLD is an umbrella term that encompasses the entire spectrum of fatty liver disease, from isolated steatosis to NASH, or non-alcoholic s teatohepatitis. There are currently no FDA approved therapies for the treatment of NAFLD. Instead, doctors will treat the underlying condition, such as obesity. Most of the drugs currently in development for NAFLD are focused on decreasing liver fat or improving liver inflammation as opposed to direct liver anti-fibrotic approaches. There are a number of companies developing product candidates for NAFLD including Pliant Therapeutics, Intercept, Pfizer Inc., Gilead, AbbVie, Novartis, AstraZeneca plc, Eli Lilly & Company, GlaxoSmithKline plc, Amgen, Inc., BMS, Johnson & Johnson, Merck & Co., Inc., Roche, Sanofi S.A., Takeda Pharmaceuticals, Novo Nordisk, Genfit SA, Madrigal Pharmaceuticals, Inc., Viking Therapeutics, Inc., Cirius Therapeutics, Inc., NGM Biopharmaceuticals, Akero Therapeutics, Inc. and Metacrine, Inc. With respect to our lead internally-developed product candidate, HCW9218, we are not aware of any other competing clinical-stage companies with a first-in-class immunotherapeutic that utilizes multiple mechanisms of action, including the cytokine-based activation of immune cells and neutralization of TGF-ß immunosuppression. With respect to our second lead product candidate, HCW9302, there is a growing momentum behind modulating T reg cells as a potential treatment for autoimmune diseases. We are not aware of other competing clinical-stage companies with a first-in-class immunotherapeutic for deactivation of inflammasomes and reduction of inflammatory cytokines they release through the activation of T reg cells. We are aware of several other companies developing programs that utilize IL-2 for the selective expansion of T reg cells, including Amgen Inc., Nektar Therapeutics (in partnership with Eli Lilly & Company), Roche, Merck & Co., Bristol Myers Squibb, and Celgene Corporation (“Celgene”). We are also aware of other companies with research or preclinical-stage programs in this area, including Synthorx, Inc., Moderna, Inc., and Xencor, Inc. We are also aware of other companies with PD-1 agonist programs for the treatment of autoimmune diseases, including AnaptysBio, Inc., Celgene, and Eli Lilly & Company. We could see a reduction or elimination of our commercial opportunity if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we or our collaborators may develop. Our competitors also may obtain FDA or foreign regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we or our collaborators are able to enter the market. Key product features that would affect our ability to effectively compete with other therapeutics include the efficacy, safety, and convenience of our therapeutics, the ease of use and effectiveness of any complementary diagnostics and/or companion diagnostics, and price and levels of reimbursement. Government Regulation Government authorities in the United States, at the federal, state, and local level, and in other countries and jurisdictions, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources. 25 FDA Approval Process In the United States, biological products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act (the “FDC Act”), and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Biological products used for the prevention, treatment, or cure of a disease or condition of a human being are subject to regulation under the FDC Act, with the exception that the section of the FDC Act which governs the approval of drugs via New Drug Applications (“NDAs”), does not apply to the approval of biologics. In contrast, biologics are approved for marketing under provisions of the Public Health Service Act (“PHSA”), via a Biologics License Application (“BLA”). However, the application process and requirements for approval of BLAs are very similar to those for NDAs. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending BLAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution. Biological product development for a new product in the United States typically involves preclinical laboratory and animal tests, the submission to the FDA of an IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug or biologic for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease. Preclinical tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including Good Laboratory Practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long-term preclinical tests, such as tests of reproductive toxicity and carcinogenicity in animals, may continue after the IND is submitted. A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither commented on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin. Clinical trials involve the administration of the investigational drug or biologic to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with Good Clinical Practice (“GCP”), an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors; as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND. The FDA may order the temporary or permanent discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA regulations or presents an unacceptable risk to the clinical trial patients. Imposition of a clinical hold may be full or partial. The study protocol and informed consent information for patients in clinical trials must also be submitted to an institutional review board (“IRB”), for approval. The IRB will also monitor the clinical trial until completed. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated checkpoints based on access to certain data from the trial. Clinical trials to support BLAs for marketing approval are typically conducted in three sequential phases. In Phase 1, the initial introduction of the drug or biologic into patients, the product is tested to assess safety, dosage tolerance, metabolism, pharmacokinetics, pharmacological actions, side effects associated with drug or biologic exposure, and to obtain early evidence of a treatment effect if possible. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the biologic for a particular indication, determine optimal dose and regimen, and to identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain additional information about clinical effects and confirm efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the biologic and to provide adequate information for the labeling of the product. 26 In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the safety and efficacy of the biologic. In rare instances, a single Phase 3 trial may be sufficient when either (1) the trial is a large, multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible or (2) the single trial is supported by other confirmatory evidence. Approval on the basis of a single trial may be subject to a requirement for additional post-approval studies. These phases may overlap or be combined. For example, a Phase 1/2 clinical trial may contain both a dose-escalation stage and a dose-expansion stage, the latter of which may confirm tolerability at the recommended dose for expansion in future clinical trials (as in traditional Phase 1 clinical trials) and provide insight into the anti-tumor effects of the investigational therapy in selected subpopulation(s). Typically, during the development of oncology therapies, all subjects enrolled in Phase 1 clinical trials are disease-affected patients and, as a result, considerably more information on clinical activity may be collected during such trials than during Phase 1 clinical trials for non-oncology therapies. In addition, the manufacturer of an investigational biologic in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanding access to such investigational drug or biologic. After completion of the required clinical testing, a Biologics License Application (“BLA”) is prepared and submitted to the FDA. FDA approval of the BLA is required before marketing and distribution of the product may begin in the United States. The BLA must include the results of all preclinical, clinical, and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting a BLA is substantial. The submission of most BLAs is additionally subject to a substantial application user fee. Under an approved BLA, the applicant is also subject to an annual program fee. These fees typically increase annually. A BLA for a biologic that has been designated as an orphan drug is not subject to an application fee, unless the BLA includes an indication for other than a rare disease or condition. The FDA has 60 days from its receipt of a BLA to determine whether the application will be filed based on the FDA’s determination that it is adequately organized and sufficiently complete to permit substantive review. Once the submission is filed, the FDA begins an in-depth review. The FDA has agreed to certain performance goals to complete the review of BLAs. Most applications are classified as Standard Review products that are reviewed within ten months of the date the FDA files the BLA; applications classified as Priority Review are reviewed within six months of the date the FDA files the BLA. A BLA can be classified for Priority Review when the FDA determines the biologic has the potential to treat a serious or life-threatening condition and, if approved, would be a significant improvement in safety or effectiveness compared to available therapies. The review process for both standard and priority reviews may be extended by the FDA for three or more additional months to consider certain late-submitted information, or information intended to clarify information already provided in the BLA submission. The FDA may also refer applications for novel biologic products, as well as biologic products that present difficult questions of safety or efficacy, to be reviewed by an advisory committee—typically a panel that includes clinicians, statisticians and other experts—for review, evaluation, and a recommendation as to whether the BLA should be approved. The FDA is not bound by the recommendation of an advisory committee, but generally follows such recommendations. Before approving a BLA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the biologic product is manufactured. The FDA will not approve the product unless compliance with cGMP is satisfactory and the BLA contains data that provide substantial evidence that the drug is safe and effective, or the biologic is safe, pure, potent, and effective, in the respective claimed indication. After the FDA evaluates the BLA and completes any clinical and manufacturing site inspections, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the BLA submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application for approval. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the BLA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. An approval letter authorizes commercial marketing and distribution of the biologic with specific prescribing information for specific indications. As a condition of BLA approval, the FDA may require a risk evaluation and mitigation strategy (“REMS”), to help ensure that the benefits of the biologic outweigh the potential risks to patients. A REMS can include medication guides, communication plans for healthcare professionals, and elements to assure a product’s safe use (“ETASU”). An ETASU can include, but is not limited to, special training or certification for prescribing or dispensing the product, dispensing the product only under certain circumstances, special monitoring, and the use of patient-specific registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, the FDA may require substantial post-approval testing and surveillance to monitor the product’s safety or efficacy. 27 Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Changes to some of the conditions established in an approved BLA, including changes in indications, product labeling, manufacturing processes or facilities, require submission and FDA approval of a new BLA, or supplement to an approved BLA, before the change can be implemented. A BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing BLA supplements as it does in reviewing original BLAs. Disclosure of Clinical Trial Information Sponsors of clinical trials of FDA regulated products, including biologics, are required to register and disclose certain clinical trial information on the website www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs. Expedited Development and Review Programs Fast Track Designation and Priority Review Fast track designation may be granted for a product that is intended to treat a serious or life-threatening disease or condition for which there is no effective treatment and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. The sponsor of an investigational biological product may request that FDA designate the product candidate for a specific indication as a fast track product concurrent with, or after, the submission of the IND for the product candidate. FDA must determine if the product candidate qualifies for fast track designation within 60 days of receipt of the sponsor’s request. For fast track products, sponsors may have more frequent interactions with the FDA and the FDA may initiate review of sections of a fast track product’s BLA before the application is complete. This “rolling review” is available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. Fast track designation may be withdrawn if FDA believes that the designation is no longer supported by data emerging in the clinical trial process. Priority review may be granted for products that are intended to treat a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. FDA determines at the time of the filing the BLA whether the proposed product would be a significant improvement and therefore receive a priority review designation. FDA will attempt to direct additional resources to the evaluation of an application designated for priority review in an effort to facilitate the review. Breakthrough Therapy Designation FDA is also required to expedite the development and review of applications for approval of biologics that are intended to treat a serious or life-threatening disease or condition where preliminary clinical evidence indicates that the biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Under the breakthrough therapy program, the sponsor of a new product candidate may request that FDA designate the product candidate for a specific indication as a breakthrough therapy concurrent with, or after, the filing of the IND for the product candidate. FDA must determine if the product candidate qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor’s request. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process, providing timely advice to the product sponsor regarding development and approval, involving more senior staff in the review process, assigning a cross-disciplinary project lead for the review team and taking other steps to design the clinical studies in an efficient manner. 28 Accelerated Approval Accelerated approval may be granted for a product that is intended to treat a serious or life-threatening condition and that generally provides a meaningful therapeutic advantage to patients over existing treatments. A product eligible for accelerated approval may be approved on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. The accelerated approval pathway is most often used in settings in which the course of a disease is long, and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large studies to demonstrate a clinical or survival benefit. The accelerated approval pathway is contingent on a sponsor’s agreement to conduct additional post-approval confirmatory studies to verify and describe the product’s clinical benefit. These confirmatory trials must be completed with due diligence and, in some cases, the FDA may require that the trial be designed, initiated, and/or fully enrolled prior to approval. Failure to conduct required post-approval studies, or to confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the product from the market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA. Regenerative Medicine Advanced Therapy Designation The Regenerative Medicine Advanced Therapy (“RMAT”) designation is an expedited program for the advancement and approval of regenerative medicine products that are intended to treat, modify, reverse, or cure a serious condition and where preliminary clinical evidence indicates the potential to address unmet medical needs for life-threatening diseases or conditions. Similar to Breakthrough Therapy designation, the RMAT allows companies developing regenerative medicine therapies to work earlier, more closely, and frequently with the FDA, and RMAT-designated products may be eligible for priority review and accelerated approval. Regenerative medicine therapies include cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products, except for those regulated solely under section 361 of the PHSA and Title 21 of the Code of Federal Regulations Part 1271. For product candidates that have received a RMAT designation, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Pediatric Information Under the Pediatric Research Equity Act (“PREA”), BLAs or supplements to BLAs must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the biological product is safe and effective. FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any biological product for an indication for which orphan designation has been granted except that PREA will apply to an original BLA for a new active ingredient that is orphan-designated if the drug is a molecularly targeted cancer product intended for the treatment of an adult cancer and is directed at a molecular target that FDA determines to be substantially relevant to the growth or progression of a pediatric cancer. Additional Controls for Biologics To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely defined. The PHSA also provides authority to the FDA to immediately suspend biologics licenses in situations where there exists a danger to public health, to prepare or procure products in the event of shortages and critical public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction or spread of communicable diseases within the United States. 29 After a BLA is approved, the product may also be subject to official lot release as a condition of approval. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the lot manufacturing history and the results of all of the manufacturer’s tests performed on the lot. The FDA may also perform certain confirmatory tests on lots of some products, such as viral vaccines, before allowing the manufacturer to release the lots for distribution. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products. After approval of a BLA, biologics manufacturers must address any safety issues that arise, are subject to recalls or a halt in manufacturing, and are subject to periodic inspection after approval. Post-Approval Requirements Once a BLA is approved, a product will be subject to certain post-approval requirements. For instance, FDA closely regulates the post-approval marketing and promotion of biologics, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities, and promotional activities involving the internet. Biologics may be marketed only for the approved indications and in a manner consistent with the approved labeling. Adverse event reporting and submission of periodic reports are required following FDA approval of a BLA. FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, biological product manufacture, packaging, and labeling procedures must continue to conform to cGMP after approval. Biologics manufacturers and certain of their subcontractors are required to register their establishments with FDA and certain state agencies. Registration with FDA subjects entities to periodic unannounced inspections by FDA, during which the Agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered. Biosimilars The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) creates an abbreviated approval pathway for biological products shown to be highly similar to or interchangeable with an FDA-licensed reference biological product. Biosimilarity sufficient to reference a prior FDA-approved product requires that there be no differences in conditions of use, route of administration, dosage form, and strength, and no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency. Biosimilarity must be shown through analytical trials, animal trials, and a clinical trial or trials, unless the Secretary of Health and Human Services waives a required element. A biosimilar product may be deemed interchangeable with a previously approved product if it meets the higher hurdle of demonstrating that it can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. The first biosimilar was approved in 2015, and the first interchangeable product was approved July 28, 2021. Complexities associated with the larger, and often more complex, structures of biological products, as well as the process by which such products are manufactured, pose significant hurdles to biosimilar product implementation, which is still being evaluated by the FDA. A reference biologic is granted 12 years of exclusivity from the time of first licensure, or BLA approval, of the reference product, and no application for a biosimilar can be submitted for four years from the date of licensure of the reference product. The first biologic product submitted under the biosimilar abbreviated approval pathway that is determined to be interchangeable with the reference product has exclusivity against a finding of interchangeability for other biologics for the same condition of use for the lesser of (i) one year after first commercial marketing of the first interchangeable biosimilar, (ii) 18 months after the first interchangeable biosimilar is approved if there is no patent challenge, (iii) eighteen months after resolution of a lawsuit over the patents of the reference biologic in favor of the first interchangeable biosimilar applicant, or (iv) 42 months after the first interchangeable biosimilar’s application has been approved if a patent lawsuit is ongoing within the 42-month period. Other Healthcare Laws In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain general business and marketing practices in the pharmaceutical industry. These laws include anti-kickback, false claims, transparency and health information privacy laws, and other healthcare laws and regulations. 30 The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare programs. The Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act, collectively, the ACA, amended the intent element of the federal Anti-Kickback Statute so that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to commit a violation. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers, among others, on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Additionally, the ACA amended the federal Anti-Kickback Statute such that a violation of that statute can serve as a basis for liability under the federal civil False Claims Act. Federal civil and criminal false claims laws, including the federal civil False Claims Act, prohibit any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. This includes claims made to programs where the federal government reimburses, such as Medicare and Medicaid, as well as programs where the federal government is a direct purchaser, such as when it purchases off the Federal Supply Schedule. Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly inflating drug prices they report to pricing services, which in turn are used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. Most states also have statutes or regulations similar to the federal Anti-Kickback Statute and civil False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Other federal statutes pertaining to healthcare fraud and abuse include the civil monetary penalties statute, which prohibits, among other things, the offer or payment of remuneration to a Medicaid or Medicare beneficiary that the offeror or payor knows or should know is likely to influence the beneficiary to order or receive a reimbursable item or service from a particular supplier, and the additional federal criminal statutes created by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which prohibit, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or obtain by means of false or fraudulent pretenses, representations or promises any money or property owned by or under the control of any healthcare benefit program in connection with the delivery of or payment for healthcare benefits, items or services. In addition, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, including the Final Omnibus Rule published on January 25, 2013, impose obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates and their subcontractors that perform certain services involving the storage, use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information. HITECH increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, many state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, and often are not preempted by HIPAA. Further, pursuant to the ACA, the Centers for Medicare & Medicaid Services (“CMS”), issued a final rule that requires certain manufacturers of prescription drugs to collect and annually report information on certain payments or transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), physician assistants, certain types of advance practice nurses and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. The reported data is made available in searchable form on a public website on an annual basis. Failure to submit required information may result in civil monetary penalties. 31 We may also be subject to analogous state and foreign anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or that apply regardless of payor. In addition, several states now require prescription drug companies to report certain expenses relating to the marketing and promotion of drug products and to report gifts and payments to individual healthcare practitioners in these states. Other states prohibit various marketing-related activities, such as the provision of certain kinds of gifts or meals. Further, certain states require the posting of information relating to clinical studies and their outcomes. Some states require the reporting of certain drug pricing information, including information pertaining to and justifying price increases. In addition, certain states require pharmaceutical companies to implement compliance programs and/or marketing codes. Several additional states are considering similar proposals. Certain states and local jurisdictions also require the registration of pharmaceutical sales representatives. Additionally, we may also be subject to state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Efforts to ensure that business arrangements with third parties comply with applicable state, federal, and foreign healthcare laws and regulations involve substantial costs. If a drug company’s operations are found to be in violation of any such requirements, it may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, the curtailment or restructuring of its operations, loss of eligibility to obtain approvals from the FDA, exclusion from participation in government contracting, healthcare reimbursement or other federal or state government healthcare programs, including Medicare and Medicaid, integrity oversight and reporting obligations, imprisonment, and reputational harm. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action for an alleged or suspected violation can cause a drug company to incur significant legal expenses and divert management’s attention from the operation of the business, even if such action is successfully defended. Data Privacy and Security Numerous state, federal and foreign laws, govern the collection, dissemination, use, access to, confidentiality, and security of personal information, including health-related information. In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws and regulations, govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our partners. For example, HIPAA, as amended by HITECH, and their respective implementing regulations, imposes privacy, security and breach notification obligations on certain health care providers, health plans, and health care clearinghouses, known as covered entities, as well as their business associates that perform certain services that involve creating, receiving, maintaining or transmitting individually identifiable health information for or on behalf of such covered entities. Entities that are found to be in violation of HIPAA may be subject to significant civil, criminal and administrative fines and penalties, and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance. Further, entities that knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA covered entity in a manner that is not authorized or permitted by HIPAA may be subject to criminal penalties. Even when HIPAA does not apply, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. In addition, certain state and non-U.S. laws, such as the GDPR govern the privacy and security of personal information, including health-related information, in certain circumstances. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation. For example, the CCPA, which went into effect on January 1, 2020, creates new data privacy obligations for covered companies and provides new privacy rights to California residents. In Europe, the GDPR went into effect in May 2018 and introduces strict requirements for processing the personal data of individuals within the EEA. Further, recent legal developments in Europe have created complexity and compliance uncertainty regarding certain transfers of personal data from the EEA. For example, on July 16, 2020, the CJEU invalidated the Privacy Shield under which personal data could be transferred from the EEA to United States entities who had self-certified under the Privacy Shield scheme. Moreover, it is uncertain whether the standard contractual clauses will also be invalidated by the European courts or legislature. 32 Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. Additionally, following the United Kingdom’s withdrawal from the European Union and the EEA, companies have to comply with the GDPR and the GDPR as incorporated into United Kingdom national law, the latter regime having the ability to separately fine up to the greater of £17.5 million or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, for example around how data can lawfully be transferred between each jurisdiction, which exposes us to further compliance risk. Coverage and Reimbursement Significant uncertainty exists as to the coverage and reimbursement status of any pharmaceutical or biological product for which we obtain regulatory approval. Sales of any product, if approved, depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance, and managed healthcare organizations, and the level of reimbursement, if any, for such product by third-party payors. Decisions regarding whether to cover any of our product candidates, if approved, the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. Further, no uniform policy for coverage and reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to payor. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement rates, but also have their own methods and approval process apart from Medicare determinations. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the product itself or the treatment or procedure in which the product is used may not be available, which may impact physician utilization. In addition, companion diagnostic tests require coverage and reimbursement separate and apart from the coverage and reimbursement for their companion pharmaceutical or biological products. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical or biological products, will apply to companion diagnostics. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement, and requirements for substitution of generic products. Third-party payors are increasingly challenging the prices charged for medical products and services, examining the medical necessity and reviewing the cost effectiveness of pharmaceutical or biological products, medical devices, and medical services, in addition to questioning safety and efficacy. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product that receives approval. Decreases in third-party reimbursement for any product or a decision by a third-party not to cover a product could reduce physician usage and patient demand for the product. U.S. Healthcare Reform Healthcare reforms that have been adopted, and that may be adopted in the future, could result in further reductions in coverage and levels of reimbursement for pharmaceutical products, increases in rebates payable under U.S. government rebate programs and additional downward pressure on pharmaceutical product prices. On September 9, 2021, the Biden administration published a wide-ranging list of policy proposals, most of which would need to be carried out by Congress, to reduce drug prices and drug payment. The Depart of Health and Human Services, or HHS, plan includes, among other reform measures, proposals to lower prescription drug prices, including by allowing Medicare to negotiate prices and disincentivizing price increases, and to support market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase price transparency. Many similar proposals, including the plans to give Medicare Part D authority to negotiate drug prices, require drug manufacturers to pay rebates on drugs whose prices increase greater than the rate of inflation, and cap out-of-pocket costs, have already been included in policy statements and legislation currently being considered by Congress. It is unclear to what extent these and other statutory, regulatory, and administrative initiatives will be enacted and implemented. 33 Other Government Regulation Outside of the United States In addition to regulations in the United States, we are subject to a variety of regulations in other jurisdictions governing, among other things, research and development, clinical trials, testing, manufacturing, safety, efficacy, quality control, labeling, packaging, storage, record keeping, distribution, reporting, export and import, advertising, marketing, and other promotional practices involving biological products as well as authorization, approval as well as post-approval monitoring and reporting of our products. Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries. Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application (a “CTA”), much like the IND prior to the commencement of human clinical trials. The requirements and process governing the conduct of clinical trials, including requirements to conduct additional clinical trials, product licensing, safety reporting, post-authorization requirements, marketing and promotion, interactions with healthcare professionals, pricing, and reimbursement may vary widely from country to country. No action can be taken to market any product in a country until an appropriate approval application has been approved by the regulatory authorities in that country. The current approval process varies from country to country, and the time spent in gaining approval varies from that required for FDA approval. In certain countries, the sales price of a product must also be approved. The pricing review period often begins after market approval is granted. Even if a product is approved by a regulatory authority, satisfactory prices may not be approved for such product, which would make launch of such products commercially unfeasible in such countries. Regulation in the European Union Drug and Biologic Development Process The conduct of clinical trials is currently governed by the EU Clinical Trials Directive 2001/20/EC (“Clinical Trials Directive”), and will be replaced by the EU Clinical Trials Regulation (EU) No. 536/2014 (“Clinical Trials Regulation”), once the latter comes into effect. The Clinical Trials Regulation introduces a complete overhaul of the existing regulation of clinical trials for medicinal products in the EU. Currently it is not expected to come into force before December 2021. Under the current regime, before a clinical trial can be initiated, it must be approved in each EU Member State where there is a site at which the trial is to be conducted. The approval must be obtained from two separate entities: the National Competent Authority (“NCA”), and one or more Ethics Committees. The NCA of the EU Member States in which the clinical trial will be conducted must authorize the conduct of the trial, and the independent Ethics Committee must grant a positive opinion in relation to the conduct of the clinical trial in the relevant EU Member State before the commencement of the trial. Any substantial changes to the trial protocol or other information submitted with the clinical trial applications must be submitted to or approved by the relevant NCA and Ethics Committees. Under the current regime all suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical trial must be reported to the NCA and to the Ethics Committees of the EU Member State where they occur. A more unified procedure will apply under the new Clinical Trials Regulation. A sponsor will be able to submit a single application for approval of a clinical trial through a centralized EU clinical trials portal. One national regulatory authority (the reporting EU Member State proposed by the applicant) will take the lead in validating and evaluating the application and the other regulatory authorities will have limited involvement. If an application is rejected, it may be amended and resubmitted through the EU clinical trials portal. If an approval is issued, the sponsor may start the clinical trial in all concerned Member States. However, a concerned EU Member State may in limited circumstances declare an “opt-out” from an approval and prevent the clinical trial form being conducted in such Member State. The Clinical Trials Regulation also aims to streamline and simplify the rules on safety reporting, and introduces enhanced transparency requirements such as mandatory submission of a summary of the clinical trial results to the EU Database. Under both the current regime and the new Clinical Trials Regulation, national laws, regulations, and the applicable Good Clinical Practice and Good Laboratory Practice standards must also be respected during the conduct of the trials, including the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use (“ICH”), guidelines on Good Clinical Practice (“GCP”), and the ethical principles that have their origin in the Declaration of Helsinki. 34 During the development of a medicinal product, the European Medicines Agency (“EMA”), and national regulators within the EU provide the opportunity for dialogue and guidance on the development program, usually in the form of scientific advice. A fee is incurred with each scientific advice procedure. Advice from the EMA is typically provided based on questions concerning, for example, quality (chemistry, manufacturing, and controls testing), nonclinical testing and clinical studies, and pharmacovigilance plans and risk-management programs. Drug Marketing Authorization In the European Union, medicinal products, including advanced therapy medicinal products (“ATMPs”), are subject to extensive pre- and post-market regulation by regulatory authorities at both the European Union and national levels. ATMPs comprise gene therapy products, somatic cell therapy products, and tissue engineered products, which are genes, cells, or tissues that have undergone substantial manipulation and that are administered to human beings in order to cure, diagnose or prevent diseases or regenerate, repair or replace a human tissue. Pursuant to the ATMP Regulation, the Committee on Advanced Therapies (“CAT”), is responsible in conjunction with the CHMP for the evaluation of ATMPs. The CHMP and CAT are also responsible for providing guidelines on ATMPs. These guidelines provide additional guidance on the factors that the EMA will consider in relation to the development and evaluation of ATMPs and include, among other things, the preclinical studies required to characterize ATMPs; the manufacturing and control information that should be submitted in a marketing authorization application; and post-approval measures required to monitor patients and evaluate the long term efficacy and potential adverse reactions of ATMPs. Although such guidelines are not legally binding, compliance with them is often necessary to gain and maintain approval for product candidates. In the European Union and in Iceland, Norway, and Liechtenstein (together the European Economic Area, or EEA), after completion of all required clinical testing, medicinal products may only be placed on the market after a related Marketing Authorization (“MA”), has been granted. MAs can be obtained through, amongst others, a centralized procedure, which is compulsory for certain medicinal products such as ATMPs. The centralized procedure provides for the grant of a single MA by the European Commission (“EC”), that is valid for all 27 EU Member States and, after respective national implementing decisions, in the three additional EEA Member States (Iceland, Norway, and Liechtenstein). The centralized procedure is compulsory for certain medicinal products, including medicinal products derived from biotechnological processes, orphan medicinal products, ATMPs, and products with a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune diseases, and viral diseases. It is optional for medicinal products containing a new active substance not yet authorized in the EEA before May 20, 2004, that constitute significant therapeutic, scientific or technical innovations, or for which the grant of a MA through the centralized procedure would be in the interest of public health at EU level. The timeframe for the evaluation of an application under the centralized procedure is 210 days, excluding clock stops. Typically, the overall process takes a year or more unless the application is eligible for an accelerated assessment. All new marketing authorization applications must include a Risk Management Plan (“RMP”), describing the risk management system that the company will put in place and documenting measures to prevent or minimize the risks associated with the product. The regulatory authorities may also impose specific obligations as a condition of the MA. RMPs and Periodic Safety Update Reports (“PSURs”), are routinely available to third parties requesting access, subject to limited redactions. Additionally, the holder of a marketing authorization for an ATMP must put in place and maintain a system to ensure that each individual product and its starting and raw materials, including all substances coming into contact with the cells or tissues it may contain, can be traced through the sourcing, manufacturing, packaging, storage, transport, and delivery to the relevant healthcare institution where the product is used. MAs have an initial duration of five years. The authorization may subsequently be renewed for an unlimited period unless the EC or the national competent authority grants only a five-year renewal. Data and Market Exclusivity As in the United States, the European Union also provides opportunities for market and/or data exclusivity. For example, new Chemical Entities (“NCE”), approved in the European Union generally qualify for eight years of data exclusivity and ten years of market exclusivity. Data exclusivity is the period during which another applicant cannot rely on the MA holder’s pharmacological, toxicological, and clinical data in support of another MA for the purposes of submitting an application, obtaining marketing authorization or placing the product on the market. But after eight years, a generic or biosimilar product application may be submitted and generic companies may rely on the MA holder’s data. 35 However, even if a generic or biosimilar product is authorized it cannot be placed on the market in the European Union until the expiration of the 10-year market exclusivity period. An additional non-cumulative one-year period of marketing exclusivity is possible if during the data exclusivity period (the first eight years of the 10‑year marketing exclusivity period), the MA holder obtains an authorization for one or more new therapeutic indications that are deemed to bring a significant clinical benefit compared to existing therapies. Products may not be granted data exclusivity since there is no guarantee that a product will be considered by the European Union’s regulatory authorities to include a NCE. Even if a compound is considered to be a NCE and the MA applicant is able to gain the prescribed period of data exclusivity, another company nevertheless could also market another version of the medicinal product if such company can complete a full marketing authorization application with their own complete database of pharmaceutical tests, preclinical studies, and clinical trials and obtain MA of its product. Post-Approval Regulation Similar to the United States, both MA holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA, the European Commission, and/or the competent regulatory authorities of the EU Member States. This oversight applies both before and after grant of manufacturing licenses and marketing authorizations. It includes control of compliance with EU good manufacturing practices rules, manufacturing authorizations, pharmacovigilance rules, and requirements governing advertising, promotion, sale, and distribution, recordkeeping, importing, and exporting of medicinal products. Failure by us or by any of our third-party partners, including suppliers, manufacturers, and distributors to comply with EU laws and the related national laws of individual EU Member States governing the conduct of clinical trials, manufacturing approval, marketing authorization of medicinal products, and marketing of such products, both before and after grant of marketing authorization, statutory health insurance, bribery and anti-corruption, or other applicable regulatory requirements may result in administrative, civil, or criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials or to grant marketing authorization, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines, and criminal penalties. The holder of a marketing authorization for a medicinal product must also comply with EU pharmacovigilance legislation and its related regulations and guidelines, which entail many requirements for conducting pharmacovigilance, or the assessment and monitoring of the safety of medicinal products. These pharmacovigilance rules can impose on holders of MAs the obligation to conduct a labor intensive collection of data regarding the risks and benefits of marketed medicinal products and to engage in ongoing assessments of those risks and benefits, including the possible requirement to conduct additional clinical studies or post-authorization safety studies to obtain further information on a medicine’s safety, or to measure the effectiveness of risk-management measures, which may be time consuming and expensive and could impact our profitability. MA holders must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance, who is responsible for oversight of that system. Key obligations include expedited reporting of suspected serious adverse reactions and submission of PSURs in relation to medicinal products for which they hold MAs. The EMA reviews PSURs for medicinal products authorized through the centralized procedure. If the EMA has concerns that the risk benefit profile of a product has varied, it can adopt an opinion advising that the existing MA for the product be suspended, withdrawn or varied. The agency can advise that the MA holder be obliged to conduct post-authorization Phase IV safety studies. If the EC agrees with the opinion, it can adopt a decision varying the existing MA. Failure by the marketing authorization holder to fulfill the obligations for which the EC’s decision provides can undermine the ongoing validity of the MA. More generally, non-compliance with pharmacovigilance obligations can lead to the variation, suspension or withdrawal of the MA for the product or imposition of financial penalties or other enforcement measures. Sales and Marketing Regulations The advertising and promotion of our products is also subject to EU laws concerning promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices. In addition, other national legislation of individual EU Member States may apply to the advertising and promotion of medicinal products and may differ from one country to another. These laws require that promotional materials and advertising in relation to medicinal products comply with the product’s SmPC as approved by the competent regulatory authorities. 36 The SmPC is the document that provides information to physicians concerning the safe and effective use of the medicinal product. It forms an intrinsic and integral part of the marketing authorization granted for the medicinal product. Promotion of a medicinal product that does not comply with the SmPC is considered to constitute off-label promotion. All advertising and promotional activities for the product must be consistent with the approved SmPC and therefore all off-label promotion is prohibited. Direct-to-consumer advertising of prescription-only medicines is also prohibited in the European Union. Violations of the rules governing the promotion of medicinal products in the European Union could be penalized by administrative measures, fines, and imprisonment. These laws may further limit or restrict the advertising and promotion of our products to the general public and may also impose limitations on its promotional activities with healthcare professionals. Anti-Corruption Legislation In the EU, interactions between pharmaceutical companies and physicians are also governed by strict laws, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct both at EU level and in the individual EU Member States. The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is prohibited in the European Union. The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of the EU Member States. Violation of these laws could result in substantial fines and imprisonment. Payments made to physicians in certain EU Member States also must be publicly disclosed. Moreover, agreements with physicians must often be the subject of prior notification and approval by the physician’s employer, his/her regulatory professional organization, and/or the competent authorities of the individual EU Member States. These requirements are provided in the national laws, industry codes, or professional codes of conduct, applicable in the individual EU Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment. Other Markets Following the UK’s formal departure from the EU on January 31, 2020, the UK entered a transition period to last until December 31, 2020, during which time EU medicines laws will remain applicable to the UK. After the transition period however, changes may be forthcoming as the terms of the UK and EU’s future relationship are negotiated. The UK Medicines and Healthcare Products Regulatory Agency has proposed that, subject to being approved by the UK Parliament, a centralized MA will automatically convert into a UK MA. However, the draft of the “Medicines and Medical Devices Bill 2019-21” currently discussed in the UK House of Lords does not contain such a provision, but would only authorize the UK government to become active in the field of legislation concerning market authorizations in relation to human medicines. For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing, and reimbursement vary from country to country. In all cases, again, the clinical trials must be conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension of clinical trials, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, and criminal prosecution. Human Capital Management Our approach to human capital resource management starts with our mission to discover and develop novel immunotherapies to lengthen health span by disrupting the link between chronic, low-grade inflammation and age-related diseases. Our industry exists in a complex regulatory environment. The unique demands of our industry, together with the challenges of running an enterprise focused on the discovery, development, manufacture and commercialization of innovative medicines, require talent that is highly educated and/or has significant industry experience. Additionally, for certain key functions, we require specific scientific expertise to oversee and conduct R&D activities and the complex manufacturing requirements for biopharmaceutical products. 37 Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. We recognize that attracting, motivating and retaining talent at all levels is vital to our continued success. Our employees are a significant asset and we aim to create an equitable, inclusive and empowering environment in which our employees can grow and advance their careers, with the overall goal of developing, expanding and retaining our workforce to support our current pipeline and future business goals. By focusing on employee retention and engagement, we also improve our ability to support our clinical trials, our pipeline, our platform technologies, business and operations, and also protect the long-term interests of our stockholders. Our success also depends on our ability to attract, engage and retain a diverse group of employees. Our base pay program aims to compensate management and staff members relative to the value of the contributions of their role, which takes into account the skills, knowledge and abilities required to perform each position, as well as the experience brought to the job. We also provide annual incentive programs to reward our management team and staff members in alignment with achievement of Company-wide goals that are established annually and designed to drive aspects of our strategic priorities that support and advance our strategy across our Company. Our management team and staff members are eligible for the grant of equity awards under our long-term incentive program that are designed to align the experience of these staff with that of our stockholders. All management team and staff members also participate in a regular performance measurement process that aligns pay to performance and through which they receive performance and development feedback. Our benefit programs are also generally broad-based, promote health and overall well-being and emphasize saving for retirement. All management team and regular staff members are eligible to participate in the same core health and welfare and retirement savings plans. Other employee benefits include medical plans, health savings plan, dental plans, vacation and sick-pay plans, employee assistance programs, life and accident insurance and short and long-term disability benefits. Our Compensation Committee provides oversight of our compensation plans, policies and programs. As of December 31, 2021, we had 44 full-time employees, 34 of whom were engaged in research, clinical development, manufacturing, and quality control activities, and 10 of whom were engaged in administrative activities. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good. Corporate Information We were incorporated in Delaware on April 2, 2018. Our principal executive offices are located at 2929 N Commerce Parkway, Miramar, FL 33025. Our telephone number at that location is (954) 842-2024. References in this Annual Report on Form 10-K to “we,” “our,” “us,” “HCW Biologics,” and the “Company” refer to HCW Biologics Inc. Our corporate website address is www.hcwbiologics.com. Information contained on our website is not a part of this Annual Report on Form 10-K and the inclusion of our website address in this Annual Report on Form 10-K is an inactive textual reference only. HCW BIOLOGICS INC. and TOBI are trademarks of HCW Biologics Inc. All other brand names or trademarks appearing in this Annual Report on Form 10-K are the property of their respective holders. Solely for convenience, the trademarks and trade names in this Annual Report on Form 10-K are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. Available Information We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after they have been electronically filed with, or furnished to, the SEC. The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 38