ImmunityBio, Inc. 10-Q

ITEM 1A. RISK FACTORS. Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, any of which may be relevant to decisions regarding an investment in or ownership of our stock. The occurrence of any of these risks could have a significant adverse effect on our reputation, business, financial condition, results of operations, growth and ability to accomplish our strategic objectives. We have organized the description of these risks into groupings in an effort to enhance readability, but many of the risks interrelate or could be grouped or ordered in other ways, so no special significance should be attributed to the groupings or order below. On March 9, 2021, we completed t h e merger with ImmunityBio, Inc . , a private company r e ferred to below as “Imm u nityBio.” After t he completion of this merger, we (formerly known as NantK w est, Inc.) changed our name to ImmunityBio, Inc., and references below to “the c ompan y ,” “the combined company,” “we,” “us,” and “our” refer to ImmunityBio, Inc. and its subsidiaries . Risk Factor Summary R i sks Relat e d to Our F inan c ial Condition and Capital R e qui r em e n ts • W e will need additional f i nancing to fund our operations and complete the dev e lopment and comme r cialization of our various pr o duct candidates, and if we are unable to obtain such financing, we may be unable to complete the dev e lopment and commercialization o f our product candidates. Raising addit i onal capital may cause dilution to our stockholders, restrict our operat i ons or require us to relinquish rights to our technologies or product candidates. • Our debt could adversely affect our cash flows and limit our f l exib i li t y to ra i s e a ddit i onal c a pit a l. • T he synergies and benefits expected from the integration of our operations may not be re a l i zed with i n the e xpe c ted ti m e fra m e . • Our b u sinesses may not be integrated succ e ssfully, or such integration may be more d i fficult, time consuming or costly than ex p ected. Operating costs, customer loss and business disruption, including difficult i es i n m a int a in i ng re l a t ionsh i ps with e m ploye e s , c u s tom e r s , suppliers or vendors, may be greater than expected for the combined company . Revenues may be lower than expec t ed for the combined company. • W e have a history of operat i ng losses, and we expect to continue to incur losses and may never be profitable. • W e have a limited o perating h i story, and the biotechnology in d ust r y in w h ich we operate, makes it diff i cult to evaluate our busin e ss plan and prospects. R i s k s Related to Our Business and I n d u stry R e gulation • W e may develop product candidates in combination with other therapies, which exposes us to additional risks. • It may take longer and cost more to complete our cli n ical tri a ls than we project, o r we may not be able to complete them at al l. • Our clinical trial costs may be higher than for more conventional therapeutic t e chnologies or drug products. • Our clinical trials may f a il to demonst r ate adequately the sa f e ty a nd efficacy of our product cand i dates, which would prevent o r delay regulatory approval and co m mer c i a li z at i on. • Interim, initial, “top-line” and preliminary data from our clinical tri a ls that we announce or publi s h from time to time may c hange as more patient data become a v a i lab l e and a re sub j e c t t o audit and veri f ication procedures that c ould re s ult in m a t e rial c hang e s in the final data. • W e have limited experience conducting clinical trials and have r e lied and will rely on third p a rties and relat e d parties to c o nduct many of our preclinical studies and clin i cal trials. Any failure by a third party, relat e d party, or by us to conduct the clinical trials according to Good Clinical Practi c e (“GCP”) regulations, and in a timely manner may delay or prevent our ability to seek or o btain re g ulato r y a p p r o val for or commercialize our product candidates. • Our clinical trials may not be initiated or completed when we expec t , and we may be required to conduct additional clinical t r i a ls or modify current or future cli n ical trials based on feedback we receive from the F DA. 50 Table of Contents • W e use Immuno-Oncology Clinic, Inc . , a related party, in some of our clinical trials which may expose us to significant regul a tory risks. If our data f o r this site is not sufficiently robust or if there are any data integrity i s sues, we may be requ i red to repeat such studies or required t o c ontra c t w i th o t her cl i ni c al tr i a l s i t e s, and our clinical developme n t plans will be significantly delayed, and we will inc u r additional c o s t s. • If we encounter difficulties enr o lling patients in our clinical trials, our clinical devel o pment activities and receipt of ne c essary marketing approvals could be delayed or otherwise adversely affected. • Our prod u ct candidates may cause undesirable side effects or h a ve other properties that could halt their clinical development, prev e nt t heir regulatory approval, limit the i r c omm e rc i a l pot e nti a l or result i n significant negative consequences. • T he manufacture of our product c a ndidates is complex, and we may encounter difficulties in p r o duction, particularly with resp e c t t o process development, quali t y control, or scaling-up of our m a nufacturing capabili t ies. If we or our related parties, or any of our third-party manufacturers encounter such d i fficulties, our ability to provide supply of our product candidates for clinical trials or our p roducts for patients, if approved, could be delayed or stoppe d , or we may be unable to maintain a commerc i ally viable cost structure. • Obtaining and maintaining regulatory approv a l of our product candidates in one jurisdi c tion does not mean that we will be suc c e ssful in obtaining regulatory approval of our product candidat e s in other jurisdictions. • A variety of risks associated with mar k eting our product candidates int e rnationally could materially adversely affect our bus i ness. • W e have never commercial i zed a product candidate before, and we may lack the necessary exper t ise, personnel and resources to successfully commercia l ize any products on our o w n or together with suitable collaborators. Risks Related to Government Regulation • T he FDA regulatory approval pro c ess is lengthy and time- c onsumin g , and we may experience signif i c a nt d e l a ys in the c l ini c al development and regulatory app r oval of our product candidates. • Results for any patient who r e ceives compassionate use access to our product candidates should not be viewed as representative of how the product candidate will perform in a well-controlled clinical trial, and cannot be used to establish safety or efficacy for regulatory approval. • T he clinical and commercial utility of our product candidates are uncertain and m a y never be realized. • W e are, and if we receive r e gulatory approval of our product candidates, will con t inue to be subject to ongoing r e gulatory ob l igations and continued regulatory review, which may result in significant additional expense and we may b e sub j e c t to p e nalt i e s if we f a il t o comply with regulatory requirements or experience unanticipa t ed problems with our product candidates. • Our GMP - in-a-Box will be regulated by the FDA as a medical device, and regulatory compliance for m e dical devices is expensive, complex and uncertain, and a failure to com p ly could lead to enf o r c e m ent a c tions aga i nst us and other negative consequences for our business. R i s k s R e lat e d to I n te l le c tual P r o p er t y • If we are unable to obtain, maintain, p r o t ect and enforce p a tent protection and other propri e tary rights for our product cand i dates and technologies, we may not be able to compete effectively or operate profitably. • If any of our owned or in-lice n sed patent appli c ations do not issue as patents in any jurisdiction, we may not be ab l e to com pe te eff e ctively. • If the scope of any patent pro t ection we obtain is not sufficie n t l y broad, or if we lose any of our patent protection, our ab i l i ty t o pr e vent our competitors from comme r cializing sim i lar or identical technology and product candidates would be a d v e rsely affected. • W e may be involved in lawsuits to protect or enforce our patents or o t her intellectual property or the patents or other intellectual property of our licenso r s, which c o uld be expensive, time-consuming a nd unsuccessful. • Issued patents covering our techn o logy and product candidates could be found invalid or unenforceable if challenged in court o r b e f o re administrative bodies in the United States or abroad. 51 Table of Contents • T he use of our technology a n d p r oduct candidates could potentially conflict with the rights of others, and third-party claims of i nt e ll e ctu a l property infringement, misa p p r o p r iation or other violation against us, our licensors or our collaborators may prevent or delay the development and commercialization of our product candidat e s and technologies. • Obtaining and maintaining our patent pro t ection depends on compliance with various p r ocedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be r e duced or eliminated for non-compl i an c e with t h ese r e quirements. Risks Related to Our Common Stock • Dr. Patrick Soon-Shiong, o ur E xecutive C hairman a nd our principal stockholder, has significant interests in other companies which may conflict wi t h our int e rests. • Dr. Soon-Shiong, th r o u gh his voting c ontrol of the company, has the ability to con t rol actions that re q uire stockholder approval. • T he market price of our common stock has b e en and may continue to be volatile, and inves t ors may have difficulty selling their shar e s. • W e have incurred and will continue to incur costs as a result of operating as a public company and our management has been and w i ll be required to devote substantial time to compliance initiatives and corporate governance p r actices, including maintaining an eff ec tive sys t em of internal control over financial r e porting. Risks Related to Our Financial Condition and Capital Requirements We will need ad d iti o nal financing to fund our operations and compl e te the de v e lop m ent and com m e r cialization of our various pro d u c t candidat e s , and if we are unable to obtain such financi n g, we may be u n able t o co m ple t e t h e dev e lopment and commercia l ization of our produ c t ca n didat e s. Raising additional capital may cau s e dilution to our stock h olders, restrict our operations or require us to relinquish rights t o our technologies or product candidates. Our operations have consumed sub s tantial amounts of cash since inception. We have incurred net losses in each year since our inception and, as of March 31, 2021, we had an accumulated deficit of $1.7 billion. In ad d i ti o n, r e search and development and operating costs have also b een substantial and are expected to in c r e ase. A sign i fic a nt p o r tion of our funding had been in the form of promissory notes r e presenting $297.5 million in i ndebtedness, including interest thereon, as of March 31, 2021 held by entities affiliated with Dr. Soon-Shiong with a maturity date of Se p t ember 3 0, 2025. As of March 31, 2021, we held cash, cash equiv a lents and ma r k etable securities totaling $84.3 million. In order to complete the development of our current product candidates, and in order to implement our business plan, we anticipate that we will have to spend more than the funds currently available to us. Furthermore, changing cir c umstances may cause us to increase our spending s i gnif i can t ly faster th a n we curr e ntly an t ic ip ate, and we may require additional capital for the furth e r development and commercialization of o ur product candidates and may need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate. Moreover, our fixed expenses such as rent and other contractual co m mitm e nt s , in c l uding those for our research collaborat i ons, are subs t a nt i a l and are e xpec t ed to i ncr e a se in the futur e . We will need to obtain a dditional financing to fund our fut u re o p erations, including completing the development and commercial i zation of our product candidates. Our future funding requ i rements will depend on many factors, including, but not limited to: • progr e s s, t i ming, scope a nd c os t s of our c l ini c al tr i a ls, in c luding the a bil i ty t o t im e ly i nit i a t e c l i nic a l s i tes, enro l l sub j ec t s and m a nufac t ure Anktiva and other therapies for the treat m ent of patients in our on g oing, plan n e d a nd po t ent i al future c lin i c a l t ria l s ; • t ime and cost necessary to obtain regulatory approvals that may be required by regula t ory a uthori t ies t o e xe c ute c l ini c al tr i als; • our ability to successfully commercialize any product candidates, if approved; • our ability to have clinical and commercial product successfully manufact u red consistent with FDA and European Medicines Agen c y regulations; 52 Table of Contents • a mount of sales and other revenues from p r oduct candidates that we may commercialize, if any, i n cluding the selling prices for su c h potential products and the availabi l ity of adequate third-party cover a ge and reimbursement for patients; • sales and marketing costs associated w i th commercializing any product candidates, if approved, including the cost and timing o f building our marketing and s a l e s c a pab i li t ies; • c ost of building, staffing and validating our own manufacturing facilities in t he Un i ted Sta t es; • t erms and timing of our current and any pote n tial future collaborations, contingent value rights (“CVRs”), m i lestones, r o yalti e s, l i c e n s i n g or other arrangements that we have established or may establish; • c ash requirements of any fut u r e acquisitions or the developme n t of other product candidates; • t ime and cost necessary to respond to technological, regulatory, po l itical and market developments; • c osts of filing, prosecuting, maintaining, defending and enforcing any patent claims a n d other intellectual property rights; and • c osts associated with any po t e n tial business or product acquis i tions, strategic collaborations, licensing agreements or other arrangements that we may establish. Unless and until we can generate a suffic i ent amount of reve n ues, we m a y finance f uture cash needs through pu b lic or private equity offerings, license agreements, debt financings, col l abor a t i ons, str a teg i c al l ian c e s and marketing or dis t ribution arrangements. W e expect to issue additional shares in connection with one or more future capital raising t r ansactions. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all, including but not limited to the offering, issuance and sale by us of up to a maximum aggregate offering of $500.0 million of our common stock that may be issued and sold under an “at-the-market” sales agreement with Jefferies LLC, or the ATM. We have no committed source of additional capital and if we are u n ab l e to r a ise add i tion a l capital in sufficient amounts or on terms acceptable to us, we may be r e quired to del a y or reduce the scope of or eliminate one or more of our research or development programs or our commercialization ef f orts. Our current license and collaboration a g r e ements m a y also be t e rmin a ted if we are unable to meet the payment obligations under those agr e ements. As a result, we may seek to acc e ss the public or private capital markets w henever conditions are favorable, even if we do not have an immediate need for additional c a p i t a l a t th a t t i m e . To the extent that we raise additional c a pital through the sale of equity or conver t ible debt securitie s including through the ATM or other offerings , your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of additional indebtedness would result in increased fixed payment obligations and could involve certain r e strictive covenants, such as limitations on o u r abil i ty to incur additional debt, li m it a tions on our a bil i ty to a c qu i re or l i c e nse i n t e l le c tu a l p r operty rights and other operating r e strictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships a nd alliances and licensing arrangements with third parti e s, w e m a y have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us. Our debt could adversely affect o u r cash flows and limit our flexib i li t y t o raise addit i onal c apita l . We have a significant amount of debt and m a y need to incur additional debt to support our growth. As of March 31, 2021 , our in debtedness was $297.5 mill i on, consisting of related - party promissory notes and interest thereon, all held by ent i ties affiliated w ith Dr. Soon-Shiong, w i th a m a t urity date of September 30, 2025. Our substantial amount of debt could have important consequences and could: • require us to dedicate a substantial portion of our cash and c a sh equivalents to make interest and p r incipal payments on our d ebt, reducing the availability of our cash and cash equivalents and c a sh flow from operations to fund future capital expenditures, working c a pit a l, execution of our strategy and other general corporate requirements; • i ncrease o ur cost of borrowing and even limit our ability to access additional debt to fund future growth; • i ncrease o ur vulnerability to general adverse economic a nd industry conditions and adverse c h anges in governm e ntal regulation s ; • l imit our flexibility in planning for, or reacting to, changes in our business and industry, which may place us at a disadvantage compared with our competitors; and • l imit our ability to borrow additional fund s , even when necessary to m a intain adequate liquidity, w h ich would also limit our a bi l ity to further expand our business. 53 Table of Contents The occurrence of any of the foregoing facto r s could have a material adverse effect on our business, results of o perations and financial condition. We may also need to refinance a portion of our outstanding debt as it mat u res. We may not be able to refina n c e existing debt or the terms of any refinanci n g may not be as f a vorable as the terms of our existing debt. F u rthermore, if prevailing int e rest rates or other fact o rs at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to that refinanced ind e btedness would inc re a s e . The s e risks could materially adversely a ffect our financial condition, cash flows and results of ope r a tions. The synergies and benefits e xp e c t e d fro m t h e i n t e gration of our operations may not be reali z ed wit h in t h e e xpe c ted time frame. The ability of the compan y , now renamed ImmunityBio, Inc. and forme r ly known as Nan t Kwest, Inc., to realize the anticipated be n e f its of the m e rger with ImmunityBio will depend, to a large extent, on our ability to integrate our businesses in a manner t hat fa c i l it a tes grow t h opportunities and achieves the projected synergies identified by each c o mpany without adversely affecting c u r rent revenues and investments in future grow t h. E ven i f we are a ble to i ntegr a te the t w o co m pani e s succ e ssfu l ly, the a n ticipated benefits of the merger, including the e xpected synergies, may n o t be realized f u lly or at all or may take longer to realize than expected. O u r b u s i n e s s es may not be i n t e gra t ed s u c c essfu l ly, or su c h integrat i on m a y be more difficult, time consuming or cos t ly than exp e c t ed. Operat i n g costs, customer loss and busin e ss disruption, including d i ffi c u l ti e s in m aintaining re l ationsh i ps with employe e s , c u stom e rs, s uppliers or vendors, may be greater than e xp e cted for the combined company . R ev e n u es may be low e r t h an exp e ct e d for the combined company. The co m bina t ion of two busin e s s e s is c ompl e x, costly and time-consuming and may divert significant managem e nt attention and re s ources to c o mbining o u r prior businesses. This process may dis r upt our businesses. The failure to meet the challenges involved in combining the two businesses and to rea l i z e t he ant i c i p a t e d b e nefi t s of t he merg e r c ould cause an i n terruption of, or a loss of mom e n t um i n, the a c tiv i ti e s of the combined company and could adversely affect the results of operations of the combined comp a ny. The overall combination of our b usines s es may a l s o r e sult in m a t e rial un a nti c ipa t ed problems, expenses, li a bilities, competitive responses, and loss of customer and other business relationships. The difficulties of combining the o p erations of the companies include, among others: • t he diversion of management attention to integration matters; • d i fficu l ti e s in in t e gra t ing operations and systems, including intellectual property and communications syste m s, a dmin i s t ra t ive and information technology infrastruc t ure and financial reporting and internal control systems; • c hallenges in conforming standards, controls, procedu r es and accounting and o t her policies, business cultures and compensation struc t ures between the two companies; • difficulties in integrating employees and attracting and r e taining key personnel, including talent; • c hallenges in retaining existing, and obtaining supplie r s and employees; • difficulties in achiev i ng anticipated cost savings, synergies, accretion targets, business opportunit i es, financing plans and growth prospects from the combination; • difficulties in managing the exp a nded operations of a significantly l a rger and more complex company; • c onting e nt li a bil i ti e s th a t are l a rger than exp e ct e d; and • potential unknown liabili t ies, adverse cons e quences and unforeseen increased exp e nses ass o ciated with the merger. Many of these factors are outside of our c ontrol, and any one of them could result in lower revenues, higher costs and diversi o n of management time and energy, which could materially i m pact the b usiness, financial cond i tion and results of operations of the combined company. In a ddit i on, even if the o p erations of our businesses are integrated su c c e s sful l y, the full ben e fits of the m e r g er may not be real i zed, i nc l ud i ng, a m ong others, the synergies or growth opportunities that are expected. These b e nefits may not be achieved within the anticipated time frame or at all. Furthe r , additional unanticipated costs may be incurred in the integration of our businesses. All of these factors cou l d negatively impact the company’s operations and/or the price of the company’s common stock . As a result, it cannot be assured that the combination of our businesses will result in the re a l i za t ion of the full ben e fits e xpe c ted from the m e rger w i thin the a nti c ipa t ed ti m e fram e s or a t al l . A c cord i ngly, hold e rs of t he combined comp a ny’s common stock may experie n ce a loss a s a res u lt of a de c line in the m a rket pri c e of s uch common sto c k. In addition, a dec l ine in the m a rket pri c e of the combined company’s com m on stock could adversely affect the c o mpany’s ability to issue a d d i t i on a l s e cur i ti e s and to obta i n additio n al financing in the future. 54 Table of Contents We have a history of operating losses, and we expect to continue to incur loss e s and may never be profitable. We are a bio p harmaceutical company, and now t h at the merger with ImmunityBio has been completed, we have a much broader portfolio of product candidates at various stages of development. None of our products have been approved for commercial sale or for which marketing approval has been sought, althou g h w e have generated revenues from non-exclusive license a g reements related to our cell li n es, the sale of our bioreactors and related consumables and grant programs. We expect to incur significant expenses as we seek to expand our business, including in connection with conducting research and development across multiple therapeutic areas, participating in clinical trial activities, continuing to acquire or in-license technologies, maintaining, protecting and expanding our intellectual property, seeking regulatory approvals and, upon successful receipt of FDA approval, commercializing our products. We will also incur costs as we hire additional personnel and increase our manufacturing capabilities, including the lease or purchase of a facility for the manufacturing of our product candidates for ongoing and future clinical trials and, upon potential receipt of FDA approval, for our initial commercialization activities. Moreover, we do not expect to have significant product sales or revenue for the next 12 to 24 months. These losses have had an adverse impact on our stockholders’ equity and working cap i tal and, as these operating losses continue to increase significantly in the future due to such expenditures, will continue to have an adverse effect on our stockholders’ equity and working capital. Because of the numerous risks and uncertainties associated with our product development efforts, we are unable to predict when the c ompany may become p r ofit a bl e , if at a l l. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis. Our ability to achieve profitability in the future is de p e ndent upon obtaining regulatory approvals for our product candidates a nd su c c e ssfully commercializing our product candidates alone or with third p a rties. However, our operations may not be profitable even if one o r more of our product candidates under development are successfully developed and produced and thereafter commercialized. We have a li m it e d operat i ng history, and the biotechnology ind u stry in which we op e rate, mak e s it difficult to evaluate our bu s iness plan and prospects. We have only a limited o perating h i story on which a decision to invest in us can be based and against which we can test the pl a ns and assumptions in o u r business plan. Our fut u r e is dependent upon our ability to implement our business plan, as that b usiness plan may be modified from time to time by our new management and board of dir e ctors. Investo r s therefore cannot evaluate the likelihood of our success. We face the problems, exp e nses, difficulties, compl i cations and delays normal l y associated with a pre-comme r cial biotechnology com p any, many of which are beyond our control. Accordingly, our prospects should be conside r ed in light of the risks, expe n ses and difficulties frequently encountered in the establishment of a new b u siness developing technologies in an industry that is characterized by a number of market entrants and intense competition. Because of our size and limited resources, we may not poss e ss the ability to successfully overcome many of the risks and uncer t ainties frequently encountered by pre-commercial companies invo l ved in the rapidly evolving field of immunotherapy. If our resea r ch and development efforts are successful, we may also face the risks a ssociated with the shift from development to commercialization of new products based on innovative technologies . There can be no assurance that we will be suc c essful in deve l oping our business. We will be substantially dependent on the success of our product candidates and cannot guarant e e that these prod u ct can d idates will succ e ssfully complete development, receive regulatory app r oval or be success f ully commercialized. Other than our proprietary GMP-in-a-Box bioreactors for which we have received nominal revenue to date, we currently have no p r oducts approved for commercial sale or for which regulatory approval to market has been sought. We have invested a significant portion of our effo r ts and financial resources in the development of our main product candidates, Anktiva, a ldoxorubicin a nd human adenovirus serotype 5 (“hAd5”) vac c ine c a ndid a tes, some or all of which are used in combina t ion with our natural killer cells. We expect to invest heavily in these product ca n di d a t es a s w e ll as in our existing product candidates and in any future product candidates that the com p any may develop. Our business d e pends e n t i rely on t he successful development, regula t ory approval and commercialization of such product candidates, each of w h ich may never occur. Our ability to generate revenues in the future is substantially d e pendent on our ability to dev e lop, obtain regulatory approv a l for, a nd th e n s uc c e s sful l y co m m e rci a li z e, our prod u ct candidates. We currently generate no meaningful r e venues from the sale of any product candidates, and we may never be a ble to develop or commercialize a product. Our product candidates will require additional clinical a nd non-clinical de v e lopment, regulatory approv a l, commerc i al manufacturing arrangements, estab l ishment of a com m er c ial o r ganization, significant m a rketing efforts, and further investm e nt before we can generate any revenues from product sales. We cannot assure you t h at we will meet our timelines for current or future clinical trials, which may be delayed or not completed for a number of reasons, including the negative impact o f the COVID ‑ 19 pandemic. 55 Table of Contents We will not be permitted to market or promote any of our product candid a tes without receiving regulatory approval f rom the FDA or comparable fo r e ign regulatory authorities, and we may never receive such regulatory approval for a ny of our product candidates or regulatory appr o v a l that wi l l a llow us to successfully commercialize our product cand i dates. If we do not receive FDA or compa r able foreign r e gulatory approval with the necessary conditions to allow successful commerciali z ation, and then successfully commercialize our p r oduct candidates, we will not be able to generate revenues f rom those prod u ct candidates in the United S t a tes or els e wh e re in the fore s e e a ble future, or at all. Any signific a nt delays in obtaining approval for and commercializing our produ c t candidates will have a mat e rial adverse impact on our business and financial condition. We have not previously s ubmitted a Biologics Licen s e Application (“BLA”) for a n y biologics p r o d uct candidates, or a New Drug Applicati o n (“NDA”) for any small molecule product c a ndidates or similar marketing a pplication to the FDA or compa r able foreign authorities, for a n y product candidate, and we cannot be certain that any of our curre n t product candidates or any future product c a ndidates will be su c cessful in clinical trials or receive regulatory approval. Furthermore, al t hough we do not expect to submit a B L A and/or NDA with comparisons to existing or more established t h erapies, and we do n o t expect the FDA to base its determination with respect to product approval on such comparisons, the FDA may factor these co m p a risons into its decision whether to approve Ank t iva or any of our product candidates. The FDA may also consider approvals of competing product s , which may alter the tr e a t m ent l a nds c a pe con c urren t ly w i th th eir review of our BLA and/or NDA filings, and which may l e ad to c hang e s in the FD A ’s review requirements that have been previously communicated to us and our interpretation thereof, including changes to requirements for c l ini c al da t a or c lin i cal trial design. Such changes could d e lay approval or n e cessitate withdrawal of our BLA and/or NDA filings. Our product candidates will be susceptible to the risks of fai l u r e inherent at any stage of product development, including the appearance of unexpected adverse events or failure to ac h i eve pri m ary endpoints in clinical trials. Further, our product candidates may not receive reg u latory approval even if they are succ e ssful in c l ini c al tr i a ls. If a p p r o ved for marketing by applicable regulatory authorities, our abil i ty to generate revenues from our product candidates w i ll depend on our ability to: • price our p r o d uct candidates competitively such that third-party and government reimbursement leads to broad product adoption; • prepare a broad network of clinical sites for administration of our product; • c reate market demand for our product candid a tes through our own marketing and sales a c tivities, and any other arrangements to promote these product candidates that we may othe r w i s e establish; • receive regulatory approval for the targeted patient popul a tion(s) and claims that are neces s ary or desirable for successful m arketing; • m anufacture product candid a tes through contract manufa c turing organizations (“CMOs”) or in our own, or our affiliates’, manufacturing f a c i li t ies i n suffi c i e nt qu a nti t i e s and at a c cep t a b l e qu a l i ty a nd manufacturing cost to meet commercial demand at launch and t h er e a f t er; • e stablish and maintain agree m ents with wholesalers, distributors, p harmacies, and group purc h asing organizations on commercia l ly reasonable terms; • obtain, maintain, p r otect and enforce pat e nt and other intellectual property protection and regulatory exclusivity for our pr o duct candidates; • successfully commercialize any of our product candidates that receive regulatory approval; • m ain t ain co m pli a nce with app l ic a ble l a ws, regulations, and guidance speci f ic to com m er c ia l iz a tion in c luding int e ra c tions w i th health care professionals, patient advocacy groups, and communication of health ca r e economic information to payors and formula r ies; • a chieve market acceptance of our product candidates by patient s , the medical community, and thi r d - party payors; • a chieve appropriate reimbursem e nt for our product candidates; • m aintain a distribution and logistics network capable of product storage within our specifications and regulatory guidelines, and fu r ther capable of timely product delivery to commercial clinical sites; • e ffectively compete with other therapies or competitors; and • following launch, assure that our product will be used as directed and that a dditional unexpected safety risks will not arise. 56 Table of Contents Additionally, our ability to generate revenues from our c o mbination the r apy products will also depend on the availability of the other t h er a pi e s with which our products are intended to be used. For example, we have in the past experienced, and m a y in t h e future experience, ch a llenges obtaining sufficient quantities of b a cillus Calmette-Guérin (“BCG”) for some of our clinical trials involving Anktiva due to global shor t ages. The r e can be no assurance that we will be able to source adequate supplies of BCG to continue these c l inical trials in a timely fashion or at a ll, and in the future, th e re may be other supply-related challenges that delay or prevent patient e n rollment and continued prog r ess on our clinical trials. For more information, see “ — Our clinical trials may not be initiated or completed when we expect, and we may be required to conduct additional clinical trials or modify current or future c l ini c al trials based on f e e dback we r e c e ive f r om the FDA . ” We inv e st our cash on hand in various finan c ial ins t rum e n t s which are sub j ect t o ris k s that could adversely affect our busines s , r e sul t s of op e rations, l iquidi t y and finan c ial condi t ion. We invest our cash in a variety of financi a l instruments, principally c o mmercial paper, corporate debt securities and foreign g overnment bonds. All of these inv e s t men t s are subj e c t to cr e dit, li quidity, market and interest r a te ris k . Such risks, in c luding the failure or severe financial distress of the financial institutions that hold our cash, cash equiv a lents and investments, may result in a loss of liquid i ty, impairment to our investments, realization of substantial future losses, or a complete l o ss of the investments in the long-term, which may have a material adverse effect on our business, results of o p erations, liquidity and financi a l condition. In order to manage t h e risk to our investments, we maintain an investment policy that, among other things, limits the amount that we may invest in any one issue or any single issuer and re q uires us to only i n v e st in high credit quali t y secur i ti e s to preserve liqu i d i ty. R i s k s Related to Our Business and I n d u stry We may develop product can d idates in combination with other therapies, w h ich exposes us to additional risks. We may develop product candidates in combination with one or more other therapies. Even if any product candidate we develop we r e to r e c e ive marketing approval o r be commercialized for use in combination with other existing thera p ies, we would cont i nue to be subject t o the risks th a t the FDA or comparable foreign regulatory authorities outside of the United States could revoke approval of the the r apy used in combination with o ur product or that safety, efficacy, m a nufacturing or supply issues could arise with any of those existing therapies. If the therapies we use in combination with our prod u ct candidates are rep l aced as the standard of care for the indications we choose for any of our product candidates, the F D A or comparable foreign regulatory authorities may require us to c onduct additional clinical trials. The occurrence of any of these risks could result in our own products, if approved, being removed from the market or being less successful commercially. We also may choose to evaluate product candid a tes in combination with one or more the r a p ies that have not yet been approved for marketing by the FDA or comparable foreign regulatory authorities. We will not be able to market and sell any product candid a te we develop in c o mb i nat i on with an u n approved therapy for a combination indication if that unapproved therapy does not ultimately obtain marketing approval either alone or in combination with our p r o duct. In addition, unapproved therapies f ace the same risks described with respect to our product candidates currently in development and clinical trials, including the potential for serious adverse effects, delays in c l ini c al t ria l s and la c k o f FDA approval. If the FDA or comparable foreign regulatory authorities do not approve these other d r ugs or revoke t h eir approval of, or if safety, efficacy, quality, manufacturing or supply issues arise with, the drugs we choo s e to evaluate in combination with our product candidate we dev e lop, we may be unable to obtain approval of or m a rket such comb i nat i on t herapy. It may take longer and cost more to complete our c lini c al t r i als t h an we project, or we may not be able to complete them at al l . We have projected the date for the commencement of future trials, and continuation and co m pletion of our o n going clinical trials. However, a number of factors, including s c heduling conflicts with partici p ating clinicians and clinical insti t utions, a nd difficulties in identi f ying and e n roll i ng p a ti e nts who m eet t rial e lig i bil i ty c ri t eria, may cause significant delays. Our clin i c a l tr i a ls may a l so exp e rien c e delays related to the COVID ‑ 1 9 pand e mic; for more information, see “ —Our business could be adversely a f fe c t e d by the e ff e cts of h e al t h ep i demi c s, p a ndemics o r contagious diseases, including t h e recent pandemic of t h e disease caused by the novel coronavirus SARS-CoV-2, or C O VID‑19, in regions where we or third parties on which we rely have sig n ificant manufacturing facilities, c oncentrations of cli n ical trial sites or ot h e r business operations . ” We may not commence or complete clinical trials involving any of our product candidates as pro j ected or may n ot conduct them suc ce ssfully. 57 Table of Contents We may experience difficu l ti e s in pat i ent enro l lm e nt in our c l ini c al tr i a l s for a v a rie t y of re a s ons. Our ab i li t y t o enroll or treat patients in our other studies, or the duration or costs of those studies, could be affected by multip l e factors, including, pr e li m in a ry c l ini c al re s ults, w hi c h m a y in c l ude efficacy and safety results fr o m our ongoing P hase II trials, but may not be refle c ted in the final analyses of these trials. Although preliminary data from o u r P hase I t r ials were generally positive, that data may not necessarily be representative of interim or final results, as new patients are cycled through the appl i c a ble tr e a t m ent r e g i m e s. As the t ria l s con t inue, investigators may prioritize patie n ts with more progressed forms of c a n c er than the in i ti a l patient population, bas e d on the success or perceived succe s s of that initial population. Patie n ts with more progressed forms of cancer may be less responsive to treatment, and accordingly, i n terim efficacy data may show a decline in patient respon s e rate or other assessment m e tri c s. As t he tri a ls continue, investigato r s may shift their approach to the patient population, which may ultimately result in a decline in both i n terim and final efficacy data from the preliminary data, or conversely, an increase in final efficacy data follow i ng a decline in the i n terim effic a cy data, as patients with more progressed forms of cancer are cycled out of the trials a n d rep l aced by patients with less advanced forms of cancer. This opportunity for investigator s e le c tion bi a s in our t r ia l s as a r e su l t of open-label design may not be adequately h a n dled and may cause a decline in or dist o r t ion of c l ini c al tr i a l da t a from our preliminary results. Depending on the outcome of o ur stud i es, we may need to conduct one or more follow-up o r support i ng studies in order to successfully develop our product candidat e s for FDA approval. Many companies in the biotechnology and pharmaceutical industries have suffered sig n ificant setbacks in late-st a ge clinical trials after achieving positive res u lts in earlier development, and we cannot be cert a in t hat we w i ll not face such s e tba c ks. Furthermore, the timely completion of cli n ical trials in accordance with their p r otocols will depend, a m ong other things, on our a bil i ty to e nroll a sufficient number of patients who r e main in the study until its conclusion, incl u d ing the ability of us or our collaborators to conduct clinical trials under the constraints of the COVID ‑ 19 pandemic. In addition, we expect that our c lin i c a l t ri a ls will c ompe t e w i th other c l ini c al tr i a ls for product candidates that are in the same therapeutic a r eas as our product candidates, and this competition will reduce the number and types of pat i ents av a il a ble to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Accordingly, we cannot guarantee that our trials will progress as planned or as scheduled. Delays in p a tient enrollment may re s ult in increased costs or may affect the timi n g or outcome of our c l i nic a l tri a ls, wh i c h could prev e nt c omp l e t i on of these trials and adversely affect our ability to advance the development of our product candidates. We expect to rely on medical institutions, academic instituti o ns or contract research o r ganiz a tions (“CROs”) to conduct, supervise or monitor some or all aspects of clinical t r ials involving our product candidates. We will h a ve less control over the timing and other aspects o f th e s e c lin i c a l t ri a ls th a n i f we cond u cted t h em entirely on our own. See “ — We have limited exp e rience conducting clinical trials and have relied and will rely on thi r d parties and related parties to conduct m any of our preclinical studies and clinical trials. Any failure by a third party, related party, or by us to condu c t the clinical trials according to Good Clinical Practice (“GCP”) regulations, and in a timely manner may delay or prevent our ability to seek or obtain regulatory a p proval for or commercialize our product candidate s .” If we fail t o co m men c e or c ompl e t e , or exp e ri e n ce delays in, any o f our planned clinical trials, o u r stock price and our ability to conduct our bu s iness as currently pl a nned could be harmed. We currently anticipate that we will have to rely on our CMOs or partners to manufacture our product candidates for some of our c l ini c al tr i a l s . If th e y fail to commence or complete, or exper i ence delays in, manufacturing our product candid a tes, our planned cli n ical trials will b e delayed, which will adversely affect our stock pri c e and our ability to conduct our business as currently planned. Our c l inical t r i al c osts may be higher t h an for mo r e co n v e n tional therapeutic techno l ogies or drug products. Because our product candidates inc l ude, and we expect our future product candidates to include, candidates based on advanced t h erapy technologies, we expect that t h ey will require extensive research and developme n t and have substantial manufacturing costs. In addition, costs to tr e a t p a ti e nts a nd to tr e a t p o tential side effects that m a y result from our product candidat e s can be significant. Some clinical trial sit e s may not bill, or o btain coverage from Medicare, Medicaid, or other third-party p a yors for some o r all of these cos t s for pat i ents enrol l ed in our c l ini c al tr i a ls, an d c l ini c al tr i a l sites outside of the United States may not reimburse for c o sts t y pically covered by third-party payors in t he Un i ted S ta t es, and as a r e su l t we may be required by those tri a l si t e s t o p a y such costs. A c cord i ngly, our c lin i c a l t ri a l costs are likely to be signific a ntly higher per patient than th o se of more conventional therapeutic technologies or drug products. 58 Table of Contents Our c l inical t r i als may fa i l to d e mons t r a t e adequately the safety and e fficacy of our product cand i dates, which would prevent o r d e lay regulatory a p proval and com m ercia l ization. The clinical trials of our product candid a tes as well as the manufa c turing and marketing of our product candidates will be, su b j e ct to ext e nsive and rigorous review and regula t ion by numerous government authorities in the United States and in other countries where we intend t o test and ma r k et our prod u ct candidates. Before obtaining regulat o r y approvals for the commercial sale of any of our product candidates, we must de m onstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective, or safe, pure a n d potent, for use in each target ind i cation. Because most of our produ c t candidates will be subject to regulation as biological drug product s , we w i ll n e ed to demonstrate that they are safe, pure, and potent f or use in t h eir target ind i cations. For small molec u le product candidates, we will need to demonstrate that they are safe and effective for their target indications. Each produ c t candidate must d e monstrate an adequate risk vers u s benefit profile in its intended patient population and for its intended use. The risk/benefit profile required for p r o duct licensure will vary depend i ng on these factors and may include not only the ability to s how tumor shrinkage, but also adequate duration of response, a delay in the progression of the disease, and/or an improvement in survival. For example, r e sponse rates from the use of our product candidates may not be sufficient to obtain regulatory approval unless we can also show an a d equate duration of response. Regulatory authorities may ultimately disagree w i th our chosen endpoints or may find that our stu d ies or study results do not s upport product approval. Clinical t e sting is expensive a nd can take ma n y years to complete, and its outcome is inherently u n certain. Failure can occur at any t i me during the c l ini c al tr i a l proc e s s. The res u lts of pr e c lini c al studies and early clini c al trials of our product candidates with small patient populations may n ot be predictive of the resul t s of later-stage clinical trials or the results o n ce the a p p l i c able c lin i c a l t ria l s are completed. Additionally, early clinical trials may n ot produce data that su p po r t further development of our product candidates a n d regulato r y authorities may not allow continued clinical development of our product candidates. P r eliminary, single coho r t or top-line res u l t s from cl i ni c al tr i a ls may not be representative of the final study results. The results of studies in one set of patients or l i ne of treatment may not be predictive of those o b tained in another and the results in var i ous human clinical trials r e ported in scientific and med i cal literature may not be indicative of r e sults we obtain in our clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Preclinical studies may also reveal unfavorable product candidate cha r a c ter i s t i c s, i ncluding safety concerns. There is typically an extreme l y high rate of attrition from the failure of p r oduct candidates proceeding throu g h clinical tria l s. Product candidates in later stages o f clinical t r ials may fail to show the des i red safety and efficacy profile despite having p r ogressed through preclinic a l studi e s and in i ti a l cl i nic a l trials. Many companies in the biopharmaceutical industry have suffered signi f icant setbacks in advanced clinical trials due to l ac k of effic a cy or u n acceptable safety issues, no t withstanding promising results in earlier trials. Most product c a ndidates that begin clinical t r ials are never approved by regulatory authorities f o r c om m erc i al i z a tion. In some inst a nc e s, th e re c a n be signif i c a nt v a ri a bil i ty i n saf e ty or e ffic a cy resul t s betw e e n d i ffer e nt cl i nic a l tri a ls of the same product cand i date due to n u merous factors, including changes in trial procedures set forth in pro t ocols, differences in t h e size and type of the patient populations, changes in and adherence to the clinical tri a l protocols and the rate of dropout among clinical trial partici p ants. Our current and our f u ture c l ini c al tr i a l resul t s m a y not be successful. Moreove r , should there be a flaw in a clinical trial or cross-s i te variation that are not properly addressed, it may not become apparent until the c l ini c al tr i a l is we l l advan c ed or un t il data from d i ffer e nt si t e s b e come a va i lab l e. F or e xamp l e, our current c lin i c a l t ri a ls are, and we expect our clinical trials to be, conducted at multiple sites in different geograph i es, with different levels of experie n ce and expertise by medical professionals, and these professionals may make mistakes or in t roduce sit e -sp e c i fic var i at i on t h at could have an impact on clinical trials by disqualifying patients or impacting patient abi l ity to continue in a study or on the clinical data. Further, because we currently plan to test our produ c t candidates for use with other oncol o gy products, the design, implementation and interpretat i on of the clinical trials n e cessary for marketing approval may be more complex than if we were developing our p r o d uct candidates alone. In addition, even if such t r ials are suc c essfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will i nterpr e t the resul t s as we do, a n d more trials could be required before we submit our product c a ndidates for approval. To the extent that the results of the t ria l s are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be r e quired to expend significant resources , which may not be available to us, to c onduct additional trials in s upport of p otential approval of our product candidates. We have reported preliminary results for clinical trials of our product candidates, including Anktiva. These preliminary resul t s, which include ass e s s m e nts of eff i ca c y, a r e subject to substantial risk of cha n ge due to sm a ll s a mple siz e s and m a y ch a nge as p a t i e nts a re ev a luated or as additional pat i ents are enro l led in these c l ini c al t r ia l s . T hese outco m e s may be unfavorable, deviate from our earlier reports, and/or delay or prevent regulatory approval or commercialization of our produ c t candidates, including candid a tes for which we have reported preliminary efficacy r esul t s . 59 Table of Contents Further, certain of our hypothes e s regarding the potential bene f its of our product candidates compared to alternative therapies and tr e a t m ents are bas e d on cross-tr i a l comp a risons of results that were not derived from h e ad-to-he a d c l ini c al t r ia l s . Such c l ini c al tr i a l da t a m a y not be directly comparable due to differences in study protocols, condit i ons and patient populations. Accordingly, these cross-trial comparisons may not be r e l iab l e predi c tors of the relative efficacy or other bene f its of our product candidates c o mpared to other produ c t candidates that may have been approved previously. Int e r i m, ini t ial, “top- l in e ” and preliminary data from our c lini c al trials that we ann oun ce or p u blish from ti m e to t ime m ay c h ange as more patient d a ta become available and are sub j ect to audit and verification p r ocedures that could result in mat e r i al ch anges in the final d ata. From time to time, we may publi c ly disclose preliminary or top - line data from our preclinical studies and clinical trials, whi c h are based on preliminary ana l ys e s of t hen- a vai l able d a t a , and the results and r e lated find i ngs and conclusions a r e subject to change f o llowing a more comprehensive review of the data related to the particular stu d y or t r i a l. We a lso m a y m a ke a s s u mptions, estimations, calculations and c onclusions as part of our analyses of data, and we may not have r eceived or h a d the opportunity to fully a n d carefully eva l uate all data. As a resul t , the top-line or prelimi n ary resul t s th a t we r e port may differ from future results of the same studies, or di f ferent conclusions or con s iderations may qualify such r e sults, once a dditional data have been received and fully evaluated. T op-line d a ta a l so re m a in subje c t to audit and verification procedur e s th a t m a y re s ult in the final data being m a t e ria l ly different from the prelimi n ary data we pre v iously published. As a resul t , top-line data should be viewed with caution until the fin a l data a re ava i l a ble. From t i me to ti m e, we may a l so disc l ose i nter i m d a ta from our p r ec l ini c al studi e s and c l ini c al tr i a ls. Int e rim da t a from cl i ni c a l tri a ls t hat we m a y comp l e te a re sub j ect t o the r i sk th a t one or more of the c l ini c al outcomes may materially change as patient enrollment continu e s and more patient data beco m e ava i l a b l e or a s pa t ien t s from our c lin i cal t ria l s con t i nue other treatments for their dis e ase. Adverse differences betw e en pre l im i nary or in t e rim data and final data c ould significantly harm our business p r ospects. Further, disclosure of interim data by us or by our compe t itors could r e sult in v o latility in the p r ice of our common stock. Further, others, including regulatory agencies, may not a c cept or agree with our assumptions, e s t im a t e s , c a l culations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvabili t y or commercialization of the particular product candidate or product a nd our company in general. In addition, the information we choose to publicly dis c lose regarding a particular study or clinical tri a l is based on what is typically extensive information, and you or others may not agree with w ha t we d e ter m ine is m a t e ri a l or otherwise appropriate i n for m at i on to in c lude in our d i s c losure. If the in t e r i m, top-line or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and co m mercialize, our product candidates may be harmed, which could harm our business, operating results, prospec t s or financial condition. We h ave l i mi t e d experi e n c e co n du c t i ng cl i nical trials and have relied and will rely on third parties and related parties to co n duct many of our pr e c l i n i cal stud i e s and c l i n i c al trials. Any failure by a third part y , r e l a t e d part y , or by us to c onduct t h e c lini c al t r i als a ccording to Good Clinical Practice (“GCP”) regulations, and in a timely manner, may delay or prevent our ab i lity to seek o r obtain regulatory approval for or commercialization of our product candidates. We expect to be heavily reliant on third a nd related parties to conduct our clinical trials. We h a ve a limited history of cond u c t ing c lin i c a l tr ials and have no experience as a company in filing and supporting the applications necessary to gain marketing approvals. Securi n g marketing approval requires the submission of extensive preclini c al and clinical data and suppo r ting information to r e gulatory authorities for each therapeutic i ndic a t i on to est a blish t he prod u ct candidate’s safety, puri t y, and potency, or efficacy, for that indicat i on. Securing marketing approval also requires t h e submission of information about the product manufacturi n g process to, and inspection of manufactur i ng facilities and c linical trial sit e s by, applicable regulatory authorities. Larg e -s c a l e cl i nic a l tri a ls r e quire signif i cant financial and m a nagement resources, and reliance on third-party clini c al inves t igators, CROs, CMOs, if used, partners or cons u l tants. Relying on third-party clinical investigato r s, CROs or CMOs may force us to encounter delays and ch a ll e nges t hat are o u tside of our cont r o l. We may not be a b le to demonstrate sufficient comparability between products manufactured at different fa c i li t ies to a llow for inclusion of the clinical res u lts from patients treated with products from these dif f erent facilities, in our product registrations. Further, if we u s e CMO s , they may not be able to manufacture Anktiva or our other product candidates or other w ise fulfill their obligations to us b e cau s e of interruptions to their b u siness, including the loss of their key staff or interruptions to their raw m a te r ial supply. 60 Table of Contents Our reliance on these third par t i e s for dev e lopm e nt ac t ivi t ies w i ll redu c e our c on t rol over these a c tiv i ti e s. N e verth e l e ss, we are responsible for ensuring that each of our trials is conducted in a c cordance with the applicable trial protocol and legal, regulatory and scientific standards, and our reliance on CROs, clinical trial sites, and other third parties does not relieve us of t h ese responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigat i onal plan and protocols for the trial and for ensuring that our preclinical stu d ies are conducted in accordance with Good Laboratory Practice (“GLP”) regulations, as appropriate. Moreover, the FDA and c o mparable foreign regulatory authorities require us to comply with GCP for conducting, recording, and r e porting the results of clinical trials to assure that data and r e ported results a re cr e dible a nd a ccur a te a nd th a t the righ t s, i n t e gr i t y, and confidentiality of trial pa r ti c ipan t s are pro t ec t ed. R e gula t ory a uthori t ies e nforce t hese requirements through periodic inspe c tions (inclu d i ng pre-approval ins p ections once a BLA or NDA is f i led with the FDA) of trial sponsors, clinical invest i gators, tr i a l sit e s and c e rtain third parties including CMOs. If w e , our CROs, c l i nic a l tri a l s i tes, or o t her third par t ies fail t o c o m ply w i th applicable GCP or other regulatory requirements, we or they may be subject to enforcement or o t her l e gal a c tions, the c lin i cal data generated in our clinical trials may be deemed unreliable a nd the FDA or compa r able foreign r e gulatory authorities may require us to perform ad d i tion a l cl i ni c al tr i a ls. We cannot assure you that upon inspe c tion by a given regulatory authority, such regulatory authority will determine that any of our cl i nic a l tri a ls comply with GCP regulations. Our clinical trials will need to be c onducted with product candidates that were produced under curr e nt Good Manufacturing Prac t i c es ( “ cGM P ” ) regulations. Our failure to comply or our CMOs’ f a ilure t o c o m ply w i th these regulations may require us to rep e at c l ini c al tr i als, which would delay the regulatory approval process. We also are r e qu i red to regist e r c e r t ain c l ini c al tr i a ls and post the re s ults of ce rt a in c ompl e t e d cl i ni c al tr i a ls on a g o vernment sponsored database, ClinicalTrials.gov, wit h in specified timeframes. Failure to do so could result in enforcement a c tio n s and adverse pub l i c ity. We rely on third parties to manufacture, pac k age, label and ship some of our p r oduct candidates for the clini c al trials that we conduc t . Any performance f a ilure on the part o f these third par t ies could delay clinical development or marketing approval of our product candidates or commerc i alization of our product candidates, if approved, producing additional losses and depriving us of potential product revenues. In addition, we will be required to report certain finan c ial interests of our third-party inv e s t iga t ors if t h ese relationships e xc e ed c e rtain fin a nci a l thresholds or meet other criteria. Immuno-Oncology Clinic, Inc. (the “ C linic”) has conducted, and is currently conducting, and in the future may conduct clinical trials involving our product candid a tes. Na n t Works is a colle c tion of healthcare and technology companies that is con t rolled, and a majority of which is owned, by our Executive Chairman, Dr. Patrick Soon-Shion g , and provides certain admin i strative servic e s (and has loaned money) to the Clinic. We are conducting ongoing clinical trials and single patient inv e stigational new drug (“spIND”) applications that may include the use of Anktiva, a ldoxorubicin or product cand i dates enabled by our adenovirus, or Ad, t e chnologies. The FDA or comparable fore i gn regulatory authorities may question the int e grity of the data from those c l inical trials conducted by inve s tigators that are determined to have conflic t s of int e rest. Our CROs, c lin i cal t rial sit e s and oth e r t hird parties may also have rel a tionships with other entities, some of which may be our competitors, for whom they may also be conducting clinical trials or other therapeutic deve l opment activities that could harm our competitive position. In addition, these third parties are not our employ e es, and except for remedies available to us under our agreements with them, we cannot control wheth e r or not they devote sufficient time and res o u r ces to our ongoing c l inical and preclinical programs. If these third parties do not successfully car r y out their contractual duties, meet expected deadli n e s or conduct our clinical trials in accordance with r e gulatory requirements or our stated protocols, if they need to be replaced or if the qual i ty or a ccur a cy of t he data t hey obtain is compromised due to the failure to adhere to our trial protocols, re g ulatory requirements or for other reasons, our trials may need to be repeated, e x tended, delayed or terminated, we may not be able to obtain, or may be d e layed i n obtaining, ma r k eting approvals for our product c a ndidates, we will not be able to, or may be delayed in our effor t s to, successfully commercialize o ur product candidates or we or they may be subje c t to r e gulatory enforcement actions. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could in c rease and our a bi l ity to g e nerate revenues could be del a yed. To the extent we are unable to successfully identify and manage the performance of t h ird-party service providers in the future, our business may be m a terially and adverse l y affected. Our reliance on third and relat e d parties can also present int e llectual prope r ty-related risks. For example, collaborators may not p r o p erly obtain, maintain, enforce or defend intellectual p r o p erty or propriet a ry rights relating to our product candidates or technology or may use our proprietary information in such a way as to expose us to potential litiga t ion or other intellectual p r operty-related proceedings, including proceedings challen g ing the scope, ownership, validity and e n force a bi l ity of our int e l l ec t ual property. Collaborators may also own or co-own intellectual p roperty covering our prod u ct candidates or technology that results from our collaboration with them, and in s u ch cases, we may not have the exclusi v e right to com m er c ia l ize such intellectual property or such product candidates or technology. Col l aborators may also gain ac c ess to our trade secrets or form u l ations and impact o u r ability to c o mmercialize prop r ietary technology. We may also need the cooperation of our collaborators to enfo r ce or defend any int e ll e c t ual property we contri b ute to or that arises out of our collaborations, which m a y not be provided to us. 61 Table of Contents If a n y of our relations h i ps with th e s e th i rd or re l a t e d p a rti e s t e rmin a t e , we m a y not be a ble to ent e r i nto a l t e rna t ive ar r a ng e ments or do so on commercially rea s onable terms. Switching or adding additional contrac t ors involves additional cost and time and requires manag e ment time and focus. In addition, there is a n a tural transition period w h en a new thi r d p a rty comm e n c es w ork. As a re s ult, delays could occur, which could compromise our ability to meet our desi r e d d e velopment timelines. In a dd i tion, if an agr e e m ent with any o f our collaborators terminates, our access to technology and intel l ectual property licensed to us by that coll a borator may be restri c ted or t e rm i na t e e nt i rely, which may delay our continued d e velopment of our product candidates utilizing the colla b o r ator’s technology or intellectual property or require us to stop development of those product candidates completely. Our relative lack of experience conducting clinical trials may contribute to our planned clinical trials not beginning or completing on tim e , if a t a l l. In addition, we h a ve entered into a g r eements with the Clinic, a related party, to co n t inue to conduct and oversee cer t a i n of our c l ini c al tr i a l s . L a rge-s c ale c lin i c a l t ri a ls will require significant additional resources and reliance on CROs, clinical investigators or consultants. Consequently, our reliance on outside parties may introduce delays beyond our control. Our CROs, the Clinic and o t her third parties m u st communicate and coordinate with one another in order f o r our trials to be successful. Additionally, our CROs, the C l inic a nd other third parties may also have relationships with o t her commercial entities, some of which may compete with us. If our CROs, the Clinic or other third p a rties conducting our clinical trials do not perform their contractual duties or regulatory ob l igations, experience work stoppages, do not meet expect e d d e adl i nes, ter m in a te the i r a gree m ents w i th us or n e ed t o be r e pla c ed, or if the qua l ity or a c c u r acy of t he cl i nic a l data t hey obta i n is compro m is e d due to the failure to adhere to our clinical trial protocols, GCP or other regulatory requirements or for any other reason, we may need to conduct addition a l cl i nic a l tri a ls or en t e r into new a rrang e men t s w i th al t e rn a tive CROs, cl i nic a l invest i gato r s or other third parties. We may be unable to enter into arr a ng e m e nts wi t h a l t e rnat i ve CROs on commercially reasonable terms, or at all. We, the Clinic and the third parties upon which we intend to rely for conducting our clinical tri a ls are required to comply with GC P . GCP are regulations and guidelines enforced by r e gulatory authorities around the world, th r o ugh periodic inspections, for products in clinical development. If we or th e s e t hird part i e s f a il to comp l y wi t h app l i c able GCP regu l a t ions, the c l ini c al da t a gener a t e d in our c lin i c a l t ri a ls m a y b e deemed unreliable and have to be repeated, and our submiss i on of marketing applicatio n s may be delayed or the regulatory authorities may require us to perform a ddit i onal c l ini c al trials before approving our marketing app l ications. We are sub j ect to the risk that, upon inspection, a regulatory authority w i ll determine that any of our cl i nic a l tri a ls f a ils to c omply or f a i l ed t o c omply with appl i c a ble GCP regulati o ns. In addition, our c l i nic a l tri a ls m ust be c onducted with material prod u ced under GMP and/or Good Tissue Practice (“GTP”) regulations, which are enforced by regulatory authorities. Our failure t o c omply w i th these regulations may require us to r e pe a t cl i nic a l tri a ls, wh i c h wou l d delay the reg u latory ap p r o v al process. Moreover, our business may be significantly imp a ct e d i f our CROs, the C l ini c , cl i nic a l investigators or other third parties violate federal or state healthcare fraud and a buse or false claims laws and regulations or healthcare privacy and security laws. We a l so an t ic i pate t hat part of our str a tegy for pursuing the wide ran g e of indicat i ons potentially addre s sed by Anktiva will i nv o lve further investigator-ini t ia t e d cl i nic a l tri a ls. Wh i le th e s e t r ia l s gen e ral l y prov i de us w i th v a lu a ble c l ini c al da t a that c a n inform our fu t ure d e ve l opment strategy, we generally have less control over not only the conduct but a l so the design of these clinical trials. Third-party investigators may design clinical trials involving our product candidates with clinical endpoints that are more dif f icult to achieve or in other ways that i ncre a se t he risk of nega t ive c l ini c al tr i a l resul t s co m par e d to c l ini c al tr i a ls we may design on our own. Negative results from investigator-initiated cl i nic a l tri a ls, reg a rdl e ss of h o w the clinical trial was designed or conducted, could have a m a terial adverse effect on our business and the perception of o ur product candidates. Moreover, principal investigators for our clinic a l tri a ls m a y serve a s sci e nti f ic adv i s o rs or consultants to us f r om time to t i me a nd r e c e i v e compen s a tion in connection with such services. In add i tion, the Clinic has con d ucted, is currently conducting, and in the future may conduct, clinical trials invol v i ng our product can d id a tes, and in the future t he Clinic may conduct, clinical tri a ls involving our product can d idate s . NantWorks, which is controlled by, and a majority of whi c h is owned by, our Executive Chairman, Dr. Soon‑Shiong, p r ovides certain administrative services (and has loaned money) to the Cl i nic. Under cer t a i n c i rcu m s t anc e s, we m a y be required to report some of the s e rel a t i onsh i ps to the FDA. The FDA may conclude that a financ i al relationship between us, the Clinic a n d/or a principal investigator has created a conflict of int e rest or o t herwise aff e ct e d i nterpr e t a tion of the study. The FDA may therefore question the integrity of the data gen e rat e d a t the app l ic a ble c l ini c al tr i a l site a nd t he u t il i ty of the c lin i c a l t r i a l its e lf m a y be j e op a rdi z ed. This could result in a delay in approval, or rejection, of our marketing a pplications by the FDA and may ult i ma t e ly l e ad to t he den i al of regulatory approval of one or more of our product candidates. 62 Table of Contents Our c l inical t r i als may not be init i ated or c ompl e t e d w h en we e xpect, and we may be required to conduct addit i onal c lini c al t r i als or modify current or future clinical trials based on feedback we receive from the FDA. Clinical testing is expen s ive, time consuming and subject to uncertainty. We cannot guarantee t h at any current or future clini c al trials will be conducted as planned or completed on sc h e dule, if at all, or that any of our product candidates will receive regulatory approval. We previously ini t i a ted c l ini c al tr i a ls i n p a ti e nts wi t h bl a dder c a ncer and in other indications, s om e t im e s in col l abor a tion w i th third parties. We plan to initiate trials in new indicat i ons, and new cohorts in existing t r ials. Even as these trials progress, i s sues may arise that c o uld require us to suspend or terminate such clin i cal trials or could ca u se the resul t s of one cohort to differ from a pri o r cohort. For exa m ple, we may exp e ri e nce slower th a n ant i cip a t e d enro l lm e nt in our c l ini c al tr ia ls, which may consequently d e lay our BLA and/or NDA filing timelines or permit comp e titors to obtain approvals that may alter our BLA and/or NDA filing strategy. A f a ilure of one or more c lini c a l tri a ls c a n o c cur at any stage of testing, and our future cl i nic a l tri a ls m a y not be successful. Events that may prevent successful or timely initiation or compl e tion of clinical developme n t or product approval include: • regulators or Institutional Review Boards (“IRBs”) may not authorize us or our inv e s t iga t ors to com m ence a c lin i c a l t ri a l, co n duct a c lin i c a l t ri a l a t a prosp e ct i ve tri a l s i te, or a m end t ri a l pro t oco l s, or regulators or IRBs may r e quire that we modify or amend our c l ini c al trial protocols; • delays in reaching a consensus or inability to obta i n a gree m ent with the F D A or c om p arable foreign regulatory authorities on t rial design or e l igib i li t y c r it e ria for p a t i ent enro l lm e nt; • t he FDA or comparable foreign regulatory authorities may disagree with our intended indications, t r ial des i gn or o ur interpre t ation of data from preclinical studies and clinical trials or find that a product candidate’s benefits do not outweigh its safety risks; • t he FDA or comparable foreign regulatory author i ti e s m a y not a cc e pt data from t r ia l s w i th cl i nic a l tri a l s i tes in for e ign cou n tr i e s; • t he FDA may not allow us to use the cli n ical trial data from a research institution to support an investigational new drug (“IN D ”) if we cannot demonstrate the comparability of our product candidates with the product candidate used by the relevant research instit u tion in its c lin i c a l t ri a ls; • d e lays in or fa i lure to re a c h an agre e m e nt on a c c e ptab l e ter m s w i th prosp e ct i ve CROs and c l i nic a l tri a l s i tes, the t e rms of which can be subject to extensive negotiation and may vary significantly among different CROs and c linical trial sites; • i mposition of a temporary or permanent clinical hold, such as the clinical hold on the P hase II /III clinical trial for our hAd5 COVID ‑ 19 vaccine candidate pending modific a tions to the protocol and FDA’s review of additional informatio n , i n cluding of immunogenicity and safety data from the P hase I portion of the study, or the temporary hold previously experienc e d in our 2014 clinical study rel a ting to aldoxorubicin; although this temporary clinical hold inv o lved a single death of a c o mpassionate use patient, since that time, a ldoxorubicin has been administered in mul t iple P hase II clinical trials and a Phase III c linical trial with no f u rther clinical holds; • suspensions or terminations by regulatory agencies, I RBs, or us for various reasons, incl u ding noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or ot h er unexpected characteristics of the product candidate, or due to findings of undesirable effects c a used by a biologically or mechanistically si m il a r therapeutic or th e rap e utic c a ndid a t e ; • delays in adding new investigators or c l ini c al tr i a l s i t e s, or w i thdr a w a l of c l ini c al tr i a l sit e s from a tr i a l; • f a ilure by our CROs, cl i ni c al tr i a l s i t e s or patients, or other third parties, or us t o a dhere to c l ini c al tr i a l requ i re m e nts, including regulatory, contractual or pro t ocol requirements; • failure to perform in accordance with the GCP requiremen t s, or applicable regulatory guidelines in other countries; • occurrence of adverse events associated with the product can d idate that a r e viewed to outweigh its potential benefits; • c hanges in regulatory requireme n t s and guid a nce that r e quire amending or submitting n e w clinical protocols to regulatory auth o ri t ies and IRBs, and which may cause delays in our development programs, or chan g e s to regulatory review times; • t here may be regulatory qu e stions or disagreements regarding interpretations of data and resul t s, or new information may emerge regarding our p r o duct candidates; • c hanges in the standard of care on which a clinical development plan was based, which may require new or additional trials; 63 Table of Contents • t he cost of clinical trials of our produ c t candidates being greater than we anticipate, or we may have insufficient funds for a c lin i c a l t ri a l or to pay the substantial user fees requir e d by the FDA upon the filing of a BLA or NDA; • c linical trials of our product candidates p r oduci n g negative or inconclusive results m a y fail to provide sufficient data and informati o n to support product approval, or our trials may fail to r each the necessa r y l e vel of statistical or clinical significance, which may result in our deciding, or regulators requiring us, to conduct additional clinical trials, or preclin i cal studies, or abandon product develo p ment programs; • i nterruption of, or delays in receiving, supplies of our product candidates or other drugs or components of our therapies due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems; • e arly results from our clinical trials of our product candidates may be negatively affected by changes in e fficacy measures such as overall response rate and duration of re s ponse as more patients are enrolled in our clinical trials or as new cohorts of our clinical t ria l s are t e sted, and overall response rate and duration of response may be negat i vely a f fected by the inclusion of unconfirmed res p onses in pre l iminary results that we report if such r e sponses are not later confirmed; • we may not be able to demonst r ate that a product candidate provides an a d vantage over current standards of care or current or future competitive therapies in developme n t; • t here may be changes to the therapeutics or their regulatory s t atus which we are administering in combination with our product candidates; • t he FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fau l t with the manufacturing proc e s s es or our manufacturing fac i li t i e s for c lin i c a l a nd fu t ure com m erc i al suppli e s; • t he FDA or comparable regulatory autho r ities may take longer than we anticipate when making a decision on our product candidates; • transfer of our manufacturing processes to our CMOs or other larger-scale facilities operated by a CMO or by us and delays or failure by our CMOs or us to make any necessary changes to such manufacturing process; • our use of different manufactur i ng processes within our clinical tri a l s , and any eff e cts that may result from the use of diff e rent processes on the c l ini c al d a ta th a t we have r e ported and will report in the future; • delays in manufacturing, testing, releasing, validatin g , or importing/exporting sufficient sta b le quantities of our product c a ndidates for use in clini ca l tri a ls or the in a bili t y to do any of the foregoing, including as a result of any qua l ity issu e s associ a t e d wi t h the contract manufacturer; • delays and additional costs associated with business disruption s , new regulatory requirements, social distancing and other re s tri c tions imposed b y governmental or regulatory agenc i es and clinical trial sites due to the C OVID ‑ 19 pandemic, which may include enroll m ent d e lays or f a ilur e s to follow tri a l protoco l s; a nd • obtaining sufficient supply of therapies that may be used in combinati o n with our mol e cular a g ents or as comparative age n ts in c l ini c al tr i a l s . We are conducting our P hase II trial of Anktiva in combination with BCG in BCG unresponsive patients with non-muscle invasive bladder cancer, (“NMIBC”) in both carcinoma in s i tu (“CIS”) and papillary forms. Due to BCG shortages, delays were encountered in p a tient enro l lm e nt. As of December 2020, we com p leted o ur planned enrollment in the BCG unresponsive C I S cohort. We have en r olled patients who have rec e iv e d a lower dos a ge of BCG t herapy before e nroll m ent in its tri a l as a result of BCG shortages. During the p e riod of shortages, we have also enrolled patients who have received a lower dosage of BCG th e rapy before enro l lm e nt in t he tri a l due to the global shortage of BCG; for e x ample, some p a ti e nts r e c e ived the recommended number of doses, but the amount per dose was one-third of recommended stre n g th. All patients, with o ut exception, r e ceived the number of BCG doses consistent with F D A guidance, and no less than app r oximately 90% of patients enrolled i n the tr i a l a s o f D e c e mb e r 2020 have received the am o unt of BCG recommended by t h e A m eri c an Uro l ogic a l A s soci a t i on befo r e e nrol l ing i n the t ri a l. The FDA agreed with our modification of t h e study design to allow enrollment of patients who have received a reduced dose o f BCG as first line therapy. These patients received the full dose of BCG + A nktiva during the trial; however, such patients should not be considered BCG u n r e sponsive. The disposition of such patients in the assessment of our trial r e sults to support approval of Anktiva in BCG un r esponsive CIS NMIBC pat i ents w i ll be det e rmin e d by the FDA dur i ng t heir rev i ew. We m a y consider enro l ling additional patients b e fore BLA submissio n , and the labeling will reflect the enrol l ed patient population and will also be determined by the FDA d u r ing their review. 64 Table of Contents We also may conduct clinical and preclinical research in collaboration with other acade m ic, pharmaceutical, biotechnolo g y and b io l o g i cs e nti t i e s in which we combine our technologies with those of our collaborators. Such c o llaborations may be subject to additional delays bec a use of the management of the trials, contract negotiations, the need to obtain agreement from multiple par t ies and the necessity of obtaining additional approvals for ther a peut i cs used in the co m bina t ion tri a ls. Th e s e c o m bin a tion ther a pi e s w i ll requ i re additional testing and clinical trials will require additional FDA regulatory approval and will increase o ur future cost s . Any inab i li t y t o suc c essfu l ly c omp l e te pr e c l i ni c a l and cl i ni c al development could result in addit i onal costs to us or impair o u r ability to generate revenues. In addition, if we m a ke manufacturing changes to our product candidates, we m a y be required to, or we may elect to, conduct additional trials to bridge our modified product candidates to earlier versions. These changes may require FDA approval or no t ification and may not have their desired effect. The FDA may also not acc e pt data from prior versions of the product to support an application, delaying our clinical t r ials or programs or nec e ssi t a t ing a ddit i onal c l ini c al tr i a l s or pr e c l i ni c a l s t udi e s . We may find that this change has unintended con s equences that necessitates additional development and manufacturing work, additional clinical and precl i nical studies, or that results in refusal to file or non-app r oval of a BLA and/or NDA. Clinical trial delays could shorten any p e riods during which our product candidates have patent protecti o n and may allow our c o mpetitors to bring products to market before we do, which c ould impair our ability to successfully commercialize our product candidates and may h a rm our business and results of operati o ns. Regulatory authorities have sub s tantial discretion in the approv a l process and may refuse to accept any application or may dec i de that our data are ins u f ficient for approval and r e quire additional preclini c a l studi e s , c lin i c a l t ri a ls or o t her research. The number and types of preclinical stu d ies and clinical trials that will be required for regulatory approval also v a ry depen d ing on the product c a ndidate, the disease or condition that the product candidate is designed to addre s s and the regulations applicable to any particular product candidate. Approval policies, regula t ions or the type and amount of clinical data necessary to gain approval may change du r ing the course of a product candidate’s clinical development and may vary among jurisdictions. It is possible t h at any produ c t candidates we may seek to develop in the future will never o b tain the appropriate regulatory approvals necessary for us or any futu r e collaborators to commence p r o du c t s a l e s. Any d e l a y in co m ple t ing development or obtaining, or f a iling to obtain, required approvals could also materially adversely affect our ability or that of any of our collaborators to generate revenues from any such product candidate, which likely would result in significant harm to our f i nancial position and adverse l y impact our stock price. We use Immuno-Oncology Clinic, I n c., a related party, in some of our clinical trials which may expose us to significant regula t ory risks. If our data for this site i s not suff i c i e n tly rob u st or if there are any data integrity iss u e s , we may be r e quir e d to r e p e at s u ch st u di e s o r r e q u i r ed to c ontra c t with other clinical trial sites, and our clinical deve l opment plans will be sig n ificantly delayed, and we will incur additional cos t s. Many of our P hase I and II clinical trials for our haNK, PD-L1.t-haNK and other t-haNK products as well as Anktiva have been co n ducted by Immuno-Oncology Clinic, Inc., which is a related party. Relying on a relat e d party clinical site to develop data t h at is used as the basis to support regulatory approval can expose us to significant regulatory risks. For example, a study u s ed to support regulatory approval that is condu c ted at a related party site can be rejected by the FDA if there are data integrity issue s , or if there are significant GCP violations at the site. If any data integrity, or regulatory non-compliance issues occur during the study, we may not be able to use the data for our regulatory approval. Furth e rmore, if the operations of the clinical site are disrupted or if the site experiences disruptio n s in its cli n ical supplies or resources, such as potent i al disruptions due to COVID ‑ 19, then we may be required to suspend or terminate the study at this site, and we may need to contract with other clinical sites for the study, which will delay our clinical development and regulatory approval for the product candidate. Failure of this site to comply with the regulations or to recruit a sufficient number of patients may require us to delay submission for regulatory approval or repeat clinical trials, which would delay the regulatory approval process. Moreover, our business may be implicated if the site violates federal or state fraud and abuse or false claims laws and regulations or healt h care privacy and security laws. If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities and receipt of necessary marketing approvals could be delayed or otherwise adversely affected. The timely completion of c linical trials in accordance w i th their protocols depends, among o t her things, on our ability to enr o ll a sufficient number of pat i ents, who r e ma i n i n the t rial un t il its c onclusion. We may experience difficulties or del a ys in patient enrollment in our c linical trials for a va r iety of reasons, including: • t he size and nature of the patient po p ulation; • t he severity of the d i sease under investigation; • t he pat i ent e l igib i li t y c rit e ria defined in the protocol; 65 Table of Contents • t he size of the study population required for analysis o f the trial’s primary endpoints; • t he proxim i ty of pa t ien t s to tri a l s i tes; • our ab i li t y to re c ruit c l ini c al tr i a l inv e s t iga t o r s with the a ppropria t e comp e t e n c i e s a n d e xp e r i e n c e ; • t he efforts to facilitate timely enr o llment in clinical t r ials and the effective n ess of recruiting publicity; • t he patient referral p r actices of physicians; • t he number of patients required for clinical trials of our product candidat e s may be larger than we a n ticipate or enrollment i n t hese cl i nic a l trials may be slower than we antic i pate, potentially affecting our timelines for approval of our product candidates; • patients that enroll in our studies may m i sr e present th e ir el i gibi l ity or m a y otherwise not co m ply wi t h t he c l i nic a l tri a l pr o toco l , result i ng in the need to d r o p such patients from the study or clinical t r ial, increase the needed enroll m ent size for the study or clini c al trial or extend the study’s or clinical trial’s duration; • c ompeting clinical trials for similar therapies or other new therapeutics not involving cell-ba s ed immunotherapy; • c linicians’ and patients’ percept i ons as to the potential advantages and side effects of the product c a ndidate being studied i n relation to o t her ava i lab l e the r api e s, i nclud i ng any new drugs or treatments that may be approved for the indications we are investigating; • c lin i c a l i nvestig a tors e nrol l ing p a ti e nts who do not meet the enrollment criteria, requiring the inclusion of additional pati e nts in t he cl i nic a l tr i a l; • a pproval of new indications for existing therapi e s or ap p r o v al of new therapies in general; • our ability to obtain and m a in t a in p a t i e nt con s en ts; • t he impact of the current COVID ‑ 1 9 pandemic or other material adverse events, which may affect the conduct of a clinical tria l , including by slowing potential enrol l ment or reducing the number of eligible p a ti e nts for c l ini c al tr i a l s ; and • t he risk th a t pat i ents enrol l ed in c l i nic a l tri a ls wi l l not c ompl e te a c l ini c al tr i a l, r e turn for post- t rea t m e nt fo l low-up, or follow t h e required study procedures. For instance, patients, i n cluding patients in any control groups, may withdraw from the clinical trial if th e y are not experiencing improvement in their underlying disease or c ondition. Withdrawal of patients fr o m our clinical trials may comprom i s e t he quality of our data. In addition, we expect that our clinical trials will c o mpete with other clinical trials for product candidates that are in the s a me th e rap e utic a reas as our prod u ct candidates, and this competition w i ll reduce the number and types of patients available to u s , because some patients w h o might have opted to enroll in our trials may instead opt to enroll in a trial being c o nducted by one of our competitors. Bec a use the number of qua l if i e d c l in i c a l investigators is limited, we may need to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will r e duce the n u mber of patients who are available for o u r clinical trials at such clinical tri a l sites. Moreover, because our product candi d ates represent a departure from more commonly u sed methods for cancer and/or viral disease treatm e nt, potential patients and their doctors may be inclined to use conventional therapies, such as chemotherapy and approved immunotherapies, rather than enroll patients in a ny future clinical trial. Amendments to our clinical protocols may a f fect e nroll m ent in, or results of, our t r i a ls, including amendments we have made to further define the patient population to be studied. Even if we a re able t o e nroll a suff i ci e nt number of p a t i ents i n our c l ini c al tr i a ls, de l a ys i n p a ti e nt e nrol l ment or small population size may result in increased costs or may af f ect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and ad v e rsely affect our ability to advance the develop m ent of our product candidates. 66 Table of Contents Our product candidates may cause undesirable side effects or h a ve other properties that c ould halt their cl i n ical devel o pment, pre v e n t th e ir regulatory approval, limit t h eir commercial pote n tial or result in si g n ificant negative consequences. Results of our trials could reveal a high a nd unacceptable severity and p r ev a len c e of s i de e ff e cts, adverse events or unexpect e d char a c t e rist i c s. Undesirable side effects caused by our product candidates cou l d cause us, IRBs, Drug Safety Monitoring Boards (“DSMBs”) or regu l a tory au t horit i es t o int e rrupt, de l a y or h a lt cl i ni c al tr i a ls a nd could result in a more restrictive label or t h e delay or denial of regulatory ap p r oval by the FDA or other comparable foreign regulatory authorities. Even if we were to receive product approv a l, such approval could be contingent on inclusion of unfavorable information in our product labeling, such as limitations on the indicated uses for whi c h the products may be marketed or distribu t ed, a l a bel with sig n ificant safety warnings, including boxed warnin g s, contraindicati o ns, and precautions, a lab e l without statements necessary or desirable for successful commercialization, or requirements for costly post marketing testing and surveillance, or other requirements, including a Risk Evaluation and Mitigation St r a tegy (“REMS”) to monitor the safety or efficacy of the p r oducts, and in turn prevent us from commercializing and generating r e venues from the sale of our current or future product candidates. If unacceptable toxicities or side effects arise in the development of our product candidates, we, an IRB, DSMB or the FDA or c omparable foreign regulatory authorities could order us t o c e ase c l ini c al tr i a ls, ord e r our cl i nic a l trials to be placed on clinical hold, or de n y approval of our product candidates for any or all targe t ed indications. The FDA or comparable foreign regulatory authorities may also requi r e additional d a t a , clini ca l , or preclinical studies should unacceptable toxicities a r ise. We may need to abandon development or limit development of that product c a ndid a te to ce r ta i n uses or subpopulations in which t h e undesirable side effects or other characteristics are less prevalent, less severe or more ac c ept a ble from a risk/b e nefit perspective. Toxicities a s sociated with our trials and produ c t candidates may also n e gatively impact our ability to conduct cl i n i c a l t ri a ls using tumor-infiltrating lymphocyte (“TIL”) therapy in lar g er patient p opulations, such as in patients that have not yet b e en treated with other therapies or have not yet progressed on other therapies. Tr e a tment-em e rgent a dv e r s e e v ents could a lso a ff e ct p a t i e nt r e crui t ment or the ab i li t y of enrol l ed sub j ec t s to co m ple t e our tr i a l s or r e su l t i n po t ent i al prod u ct liability claims. We h a ve observed that certain events associated w i th our product candidates may include, for example, injection site pain and reacti o n, fatigue, nau s ea, vomiting, diarrhea, muc o sitis, abdominal pain, anorexi a , chills, pyrexia, arthr a lgia, limb edema, myelosuppression (neutropenia , thromboc y t openia, and ane m ia) and hypoalbuminemia. Combination immunotherapy that includes our current product candidates may be associated with more frequent a dverse events or additional adver s e events, such as esophagitis, s t omatitis, epist a xis, weight loss, head a c h e , alop e c i a, night sweats, peripheral neuropa t hy, and death. In addition, t h ese serious adverse e ffects may not be app r opriately recognized or managed by the treating medical staff, as toxicities res u lting from our product candidate are not norm a lly encountered in the general patient population and by medical personnel. Any of these occurrences may materially harm our business, financial c o ndition and p r os p e cts. The manufacture of our product candidates is compl e x, a n d we may e n co u n t e r diffic u lties in p roduction, part i cularly wi t h r e spe c t to pro c e s s development, quality control, or scaling-up of our manufacturing capabilities. If we or our related partie s , or any of our thi r d-party manufacturers encoun t e r su c h diff i cult i es, our abil i ty to provide supply of our product candidates for clinical t r ials or our products for p a tients, if approved, could be delayed or stopped, or we m a y be unable to maintain a comme r cially viable cost structure. Our current product can d idates include predominately biologics, v e ctors, small molecules and decentralize d , advanced cell ther a pies. The manufacture of these product candidates involves complex processes, es p ecially for our biologics, vecto r s and cell therapy product candidates, which are complex, highly regulated and subject to m u lt i ple risks. As a r e sult of t he c omp l e xi t ies, t h e co s t to m a nuf a c ture biol o gics, vectors and c e ll th e rap i e s i s gen e ral l y higher than traditional small molecule che m ical compounds, and the manufacturing process is less reliable a nd is more difficult to rep r o duce. Even minor deviatio n s from n o r mal manufacturing processes could result in reduced production yields, produ c t defects, and other supply disruptions. If microbial, viral, environmental or other contaminations are d i scovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufa c turing fa c il i ti e s m a y n e ed to be closed for an extended period of time to investigate and rem e dy the contamination. Currently, our product candidates are manufact u red using processes developed or modified by us, our affiliates or by our third-party research institution collaborators that we may not include for more advanced cli n i ca l tri a ls or comm e r c i a l i z a tion. As a r e sult of the s e ch a ll e ng e s, we may experience delays in our clinical development and/or comme r cialization plans. We may ultimately be unable to redu c e the cost of goods for our p ro d uct candidates to levels that will allow for an attractive return on investme n t if and when those product candidates are commercialized. 67 Table of Contents Currently we ma n u f acture our product candi d a t e s or use CMOs. We may use t h ird-party CMOs or some of our related parties to man u facture our prod u ct candidates. Our p r oduct candidates may compete with other products and product candidates for access to ma n u f acturing f ac i li t i e s. T here are a limited number of manufac t urers that operate under cGMP regu l ations and that are both capable of manufacturing for us and will i ng to do so. If our CMOs should cease manufacturing for us, we would experience delays in obtaining sufficient qua n tities of our product candidates for c l ini c al tr i a l s and, if approved, commercial supp l y. Further, our CMOs may breach, terminate, or not renew these agreements. If we were to need to f ind a l tern a t i ve manuf a c tur i ng f a c i li t ies i t would significantly impact our ability to develop, obtain regu l atory approval for or market our product candidates, if approved. The commercial terms of any new arrangement could be less f a vorable than our existing arr a ngements and the expenses r el a t ing to the transfer of necessary technology and processes could be significant . Reliance on third-party manufacturers entails exposure to risks to which we wou l d not be subject if we manufactured the product candidate ourselves, including: • i nability to negotiate manu f acturing and quality agreements with third parties under commercially reaso n able terms; • reduced day-to-day control over the manufacturing process for our product candidates as a result of using third-party manufac t urers for all aspects of manufact u r i ng a c t i vit i es; • reduced control over the protection of our t r ade secrets, kno w -how and other proprietary inf o rmation from misappropriation or i n advertent disclosure or from being used in such a w a y as to expose us to potential litigation; • t ermination or nonrenewal of manufacturing agreements with third p a rties in a manner or at a time that may be costly or damag i ng to us or result in delays in the development or commercialization of our product candidates; and • disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including t h e bankruptcy of the manufacturer or supplier. The manufacture of cell therapy products r e quires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufactur e rs of cell therapy products often encounter difficulties in p r oduction, particular l y in s c a l ing up in i ti a l prod u ction. These problems include dif f icu l ties with production costs and yields, quality control, including stability o f the p roduct candidate and quality assurance testing, shortages of qualified personnel and compl i ance with strictly enforced fed e ral, state, local and foreign re g ulations. Moreover, any problems or delays we or our CMOs ex p e rience in preparing for c o mmercial scale manufa c turing of a product candid a t e may result in a delay in the FDA approval of the product candidate or may impair our ability to manufacture commercial quan t ities or such quanti t ies at an a c cep t a ble cost, which could result in the delay, prevention, or impairment of clinical deve l opment and commerciali z ation of our product c andidates and could adversely affect our business. Furthermore, if we or our commercial manufacturers fail to del i ver the required commercial quantities of our product candidates on a timely basis and at reasonable costs, we would likely be unable to meet demand for our products and we would l o se po t ent i al revenues. In addition, the manufacturing process and f a cilities for any products that we may d e velop are su b j ect to FDA and foreign regu l atory authority approval processes, and we or our CMOs will need to m e et a ll appl i c a ble FDA a nd foreign regulatory authority r e quirements, incl u ding cG M P, on an ongoing basis. The cGMP requi r e ments include quality control, quality ass u rance and the maintenance of records and documentation. The F DA and other regulatory authorities enforce t h ese requirements through facility inspections. Manufacturing fac i lities must sub m it to pre-ap p roval inspections by the FDA that will be conducted after we submit our ma r k eting appli c ations, including our BLAs and N DAs, to the FDA. Manufacturers a re a l so sub j e c t t o continuing FDA and other regulato r y authority inspections following marketing ap p r o v al. Further, we and our third-party CMOs must supply all nece s sary chemi s try, manufacturing and quality c o ntrol documentation in support of a B L A or NDA on a timely basis. There is no guarantee that we or our CMOs w i ll be able t o suc c e s sfully pass all aspects of a pre-approval inspection by the FDA or other foreign regulatory aut h or i ti e s. As product candidates progress through preclinic a l and clinical trials to marketing app r oval and comme r cializa t ion, it is common that various aspects of the development program, such as manufactur i ng methods and formulation, are altered along the way in an effort to optimize yie l d and manufacturing batch size, minimize costs and achieve consistent quality and re s ults. S uch ch a nges c a rry the risk that they will not achieve t hese intended objectives. Any of these changes could cause o u r product candidates to perform differen t ly and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. This could d e lay completion of clinical trials, require the conduct of bridging c l in i c a l t ri a ls or the rep e ti t ion of one or more clinical trials, increase clinical trial cos t s, delay approval of our product candidates and jeopardize our ability to com m er c ia l ize our prod u ct candidates, if approv e d, and generate revenues. 68 Table of Contents Our or our CMOs’ manufacturing fac i lities may be unable to com p ly with our speci f ications, cGMP, and with other FDA, state, and foreign regulatory requirements. Poor control of production processes can lead to the introdu c tion of adventitious agents or other contaminants, or to inadv e rt e nt changes in the properties or stability of product c a ndidates that may not be detectable in f i nal product testing. If we or our CMOs are unable to reliably produce produ c ts t o spe c ifi c a t ions a cc e pt a ble to t h e FDA or other regulatory authorities, or in a c c ordance wi t h t he str i ct r e gu l a t ory r equirements, we may not o b tain or maintain the approvals we need to commercialize such products. Even if we obtain r e gulatory approval for any of our p roduct candidates, there is no assurance that either we or our CMOs will be able to manufacture the approved product to specificatio n s acceptable to the FDA or other regulatory authorities, to produce it in s u fficient quantities to meet the requirements for the potential launch of the product, or to me e t potential future demand. Deviations from manufactur i ng requirements may further require remedial m e a s ures that m a y be costly and/or time-consuming for u s or a third party to implement and may include the temporary or p e rman e nt s uspe n sion of a clini c al tri a l or c omm e rcial s a l e s o r the t e mporary or p e r manent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materi a lly harm our business. To the extent we use CMOs, we are ultimately responsible for the manufacture of our products, if approved, and product ca n didates. A failure to comply with these requirements may result i n regu l a t ory enfo r ce m ent a c tions aga i nst our manufacturers or u s , inclu d ing fines and civil and criminal penalties, which could result in imprisonment, suspension or restrictions of production, injunctions, delay or denial of produ c t approval or supplements to approved products, clinical holds or termination of clinical trials, warning or untitled letters, r e gulatory authority communications warning the public about safety issues with the biologic, r e fusal to permit the import or export of the products, product seizure, detention, or r ecall, operating restrictions, suits under the federal civ i l False Claims Act (“FCA”) corporate integrity agr e ements, consent decrees, or withdrawal of produ c t approval. Any of these challenges could delay completion of clinical trials, require bridging clinical trials or the repetition of one or mo r e c l i nic a l tri a ls, incr e a se clinical trial costs, delay approval of our product candidate, impair commercialization efforts, increase o u r cost of goods, and have a material adverse effect on o u r business, financial cond i tion, results of operations and growth prospects. Cell-based therapies and b i ologics rely on the availability of reagents, specialized equip m ent and other special t y mat e r i als, w hich may not be available to us on acceptable terms or at all. For some of t h e s e r e age n t s , eq ui pment and materials, we rely or may r e ly on sole source vendors or a limited num b er of vendors, which c o uld impair our ability to manufacture and supply our products, if appro v ed. Manufacturing our product candidates will require many reagents, which are substances used in our manufacturing processes to bring about chemical or biological reactions, and other specialty materials and equipment, some of which are manufactured or supplied by small companies with limited resources and experience to support commercial biologics production. We currently depend on a limited number of vendors for certain materials and equipment used in the manufacture of our product candidates. Some of these suppliers may not have the capacity to support clinical trials and commercial products manufactured under cGMP by biopharmaceutical firms or may otherwise be ill-equipped to support our needs. We also do not have supply contracts with many of these suppliers and may not be able to obtain supply contracts with them on acceptable terms or at all. Accordingly, we may experience delays in receiving key materials and equipment to support clinical or commercial manufacturing. For some of these reagents, equipment and materials, we rely, and we may in the future rely, on sole source vendors or a limited number of vendors. An inability to continue to source product from any of these suppliers, which could be due to a number of issues, including regulatory actions or requirements affecting the supplier, adverse financial or other strategic developments experienced by a supplier, labor disputes or shortages, unexpected demands or quality issues, could adversely affect our ability to satisfy demand for our product candidates, which could adversely and materially affect our product sales and operating results or our ability to conduct clinical trials, either of which could significantly harm our business. As we seek to develop and sca l e our manufactu r ing process, we ex p e ct t h at we will need to obtain rights to and supplies of cer t ain materials and equipment to be used as part of that p r ocess. We may not be able to obtain rights to such materials on co m me r ci a lly re a s on a ble terms, or at all, and if we are unable to alter our process in a commercially viable manner to avoid the use of such materials o r find a suitable substitu t e, it would have a material adverse effect on our business. Even if we are able to alter our process so as to use other m a ter i a l s or e quipm e nt, such a cha n ge may lead to a delay in o u r clinical deve l opment and/or commerci a lization plans. If such a change occurs for a product candidate that is already in clinical testing, the change may require us to perform both ex vivo comparability studies and to collect additional d a ta from patients prior to undertaking more a d van c ed clini ca l tri a ls. 69 Table of Contents We wi l l be u n able to co m merc ia lize our product candidat e s if our trials a r e not s u c ce ssf u l . Our research and development programs are each at an early stage. We must demonstra t e our product candidates’ safety and ef f ic a cy in humans through ext e ns i ve cl i nic a l test i ng. We may experience nu m erous unforeseen events during, or as a r e su l t o f , th e t e s t ing process that could delay or prevent commercialization of our product candidates, includi n g but not limited to the following: • s a fety a nd e ffic a cy re s ults in various human clinical trials reported in scientific and medic a l literature may not be indicat i ve of res u lts we obtain in our clinical trials; • a fter re v i ewing test res u lts, we or our collaborators may a b andon projects that we might previously have believed to be promising; • we, our collaborators or regulators may sus p e nd or t e r m ina t e cl i nic a l tri a ls i f t he p a rticipating subjects or patients are be i ng exposed to unacceptable health risks; • t he standard of care may change as the result of new tech n ology or therapies in our target clinical i ndicatio n s, precluding r e gulatory approval or limited commercial use if approved; • t he effects our potential products have may not be the desired effects or may include undesirab l e side effects or other chara c teristi c s that precl u de regulatory approval or limit their commercial use if approved; • m anufacturers may not meet the necessary standa r ds for the production of the p r oduct candidates or may not be able to supply t he product candidates in a sufficient quantity; and • regulatory authorities may find that our clinical trial design or conduct does not meet the applicable approval requirements. Clin i cal t e sting is v e ry expensive, can take many years and the outcome is uncertain. It could t a ke as much as 12 months or more before we learn the results f r om any clinical trial using Anktiva, a ldoxorubicin, Ad and yeast technologies or other therapy. The data collected f r om our c l i nic a l tri a ls m a y n o t be sufficient to support approval by the F D A of our Anktiva product candidate for the treatment of bladder cancer or of ot h er th e rapi e s, including o u r hAd5 COVID ‑ 19 vaccine candidate. The cli n ical trials for our product candidates und e r development may not be completed on s ch e dule and the FDA may not ultimately approve any of our product candidates for commercial sale. If we fail to ad e quately demonstrate the saf e ty and efficacy of any prod u ct candidate under development, we may n ot receive regulatory approval for those product candidates, which would prevent us from generating revenues or achieving profitability. Even if one of our leading product candidates, A n ktiva, is approved and commercialized, we may not become profitable. One of our leading product candid a tes, Anktiva, is initi a lly targeting a small population o f p a tients that suffer from bladder c ance r , lung cancer and me t a sta t ic pan c re a tic c a n c er, when us e d a s a comb i nat i on t her a py. Even if the FDA approves this candidate for these indication s , and e ven if we obtain significant market share for it, because the potential target population may be small, we may never achieve p r ofitability without obta i ning regulatory approval for additional indications. The FDA often approves new therapies initially only for use in patients with relapsed or refractory metastatic disease, which may l i mit our patient population. Additionally, in connection with the merger with ImmunityBio, we assum e d the obligation to issue CVRs to the former stockholde r s of Al t or BioScience Corporation (succeeded by Altor B i oScience LLC) (“Altor”) in connection with the acquisit i on of Altor. These CVRs b e come payable u p on the attainment of certa i n regulatory and sales milestones related to Anktiva. The former Altor stockholders have t h e ability to choose to receive these payments either in cas h , in an equivalent value of our common stock or in a combination of both cash and stock at t h e time such payments are due, except that Dr. S o on-Shiong and his related party, as prior stockholders of Altor, have irrevocably elected to receive all pay m ents in re s pe c t of th e ir CVRs in the form of our common stock. Such CVR payments to Dr. Soon-Shiong and his related party aggregate to approximately $2 7 9 . 5 million. We may, however, still be requi r e d to pay the other prior Altor stockholders up to $164.2 million for the CVRs r e lating to the regulatory milestone and up to $164.2 million for the CVRs relating to the sales milestone should they cho o se to have the s e CVRs paid in c ash instead of common stock. If this were to occur, we may need to seek additional sources of capital, and we may not be able to a c hieve profitability or p o sitive cash flow. We plan to collaborate with governmen t al, academic and corporate pa r tners, including affili a tes, to improve and develop Anktiva, hAd5 and other therapies for new indications for use in combinat i on with other therapies and to imp r o v e and develop other prod u ct candidates, which may e xpose us to additional risks, or we may not realize the benefits of such collaborations. 70 Table of Contents Because some of our collaborations are conducted at outside labo r atories, and we do not have c o mplete control over how the studies are conducted or reported or over the manufacturing methods used to manufacture our Anktiva product candidate, the results of such studies, whi c h we may use as the basis for our conclusions, projections or d e cisions with respect to our current or future product candidates, may be incorrect or u n r e liable, or may h a ve a negative impact on us if the results of such studies are imputed to our product candidates or proposed in d i cations, even if su c h imputation is improper. Additionally, we may use third-par t y data t o a naly z e, r e ach conclusions or make predictions or decisions with respect to our product candidates that may be in c ompl e t e , ina c cur a te or otherwise unreliable. Further, collaborations involving our product candidates will b e subject to numerous risks, w h ich may include the followin g : • c ollaborators, including their related or affiliated companies, may be entitled to receive exclusive rights f o r or involving our products; • c ollaborators have signif i cant discretion in deter m ining the efforts and resources t h at they will apply to a collaboration; • c ollaborators may not pursue devel o pment and commercialization of our product candidates or m a y elect not to c ontinue or renew development or commercialization of our product candidates b a sed on clinical t r ial results, changes in their strategic focus due t o the acquisition of competitive prod u cts, availability of fundi n g or o t her external factors, such as a business combination that d i v er t s resourc e s or cr e a t e s co m pe t ing pr i orit i es; • c ollaborators may delay clinical trials, provide insufficient f u nding for a clini c al trial, stop a clinical trial, abandon a product ca n didate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • c ollaborators could independe n t ly develop, or develop with third parties, products that compete d i rectly or ind i rectly with our product candidates; • a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their ma r keting and distribution; • c ollaborators may not properly m a intain, defend or enfo r ce our intellectual p r operty rights or may use our intellectual prope r ty or proprietary information in a way that gives r i se t o a c tu a l or th r ea t en e d l i tig a tion th a t c ould jeop a rdi z e or inv a lid a te our in t e ll e c t ual property or proprietary in f o r mation or expose us to potential liability; • disputes may arise between us and a collaborator that cause the delay or termination of the r e search, development or commerci a lization of our product candidates, or that result in costly litigation or arbitra t ion that diverts management attention and resources (see “ — If conflicts arise between us and our collaborators or strat e gic partners, these parties may act in a manner adverse to us and could limit our ab i li t y t o i m p l ement our strat e gie s . ” ); • c ollaborations may be terminated a nd, if ter m ina t ed, m a y r e su l t in a n e ed for a ddit i onal c a pit a l to pu r sue further devel o pment or commercialization of the app l icable product candidates; • i f an ag r eement with any collaborator terminates, our access to technology and intel l ectual property licensed to us by that c o llaborator may be restricted or terminate entirely, whi c h may delay our continued d e velopment of our product cand i dates utilizing the collabo r ator’s technology or intellec t ual property or requi r e us to stop development of those product candidates completely; and • c ollaborators may own or co-own intelle c tual property covering our product candidat e s or technology that results from our col l aborating with t h em, and in su c h c a s e s, we m a y not have the exclusive right to comm e rc i a l i ze such int e ll e c t ual proper t y. As a result, if we enter into collaboration agreements and str a tegic partnerships or license our product candidates, we may not be able t o re a l i ze the benefit of such transactions if we are un a ble to su cc e s s fully int e g r a te th e m w i th our existing operations and company culture, which could delay our timelines or otherwise a d versely affect our b usiness. Add i tionally, exclusive rights that we may grant in connection with coll a boration agreements may li m it our a bil i ty t o e nter in t o n e w or a ddit i onal co l labor a tion agr e e m ents or stra t e g i c partnerships if we e xperi e nce i s sues with existing collaborations. We also cannot be certain that, following a strategic transa c tion or license, we will achieve the revenues or specific net inc o me th a t j us t ifi e s such transaction. Any delays in entering into new collaborations or strat e gic partnership agreements r e lated to our product candidates could delay the development and commercialization of our product candidates in certain geograph i es for certain indications, which would harm o u r business prospects, financial condition and results of o perations. 71 Table of Contents Our efforts to develop, manufacture a n d market COVID ‑ 19 therapeutics will require additional personnel who w i ll require training, which may cause some of our employees to reallocate t h e i r t i me from other duties which could in turn cause delays in clinical supply of our other product candidates or trials. We have been planning for the development of COVID ‑ 19-related p r oduct candidates. We have repurposed some of our personnel overseeing q u ality, clinical operations and manufacturing of their oncology product cand i dates to support our COVID ‑ 19 e fforts and we plan to hire a ddit i onal s t aff to support the COVID ‑ 19 efforts, which will increase our expenses. If our personnel fail to remain focused on our o n cology or oth e r infectious disease drug candidates or, if the services of employees that may have shifted to the COV I D ‑ 19 efforts are not adequately covered by o t her em p l oyees, or if new personnel that we plan to hire to support the COVID ‑ 19 effor t s require extensive training, our current oncology ope r a tions may be adversely impacted. If conflicts arise betwe e n us and our collaborators or strat e gic partners, these parties may act in a manner adverse to us and could limit our ability to i mpl e m e n t o u r s t ra t e gi e s. If c o n f licts arise between our corporate or academic collaborators or strategic pa r tners and us, the other party may act in a m anner adverse to us and could limit our ability to implement our strategies. Some of our e xist i ng a c ad e mic c oll a bora t o r s and strategic partners are co n ducting multiple product development efforts. Such collaborato r s or strategic partners may develop, either alone or with others, p r oducts that are comp e titive with the product candidates that are the subject of these collaborations. Competing p r oduct candidates, either dev e loped by the collaborators or strategic partners or to which the collaborators or strategic partners have rights, may result in the withdrawal of our collaborator’s or partner’s sup p o r t for our product candidates. Some of our future collaborators or strategic partners could also become our competitors in the future. Our collaborators or s t rategic partners could develop competing products, prec l ude us from entering into collaborations with their competitors, fail to obtain timely regula t ory approvals, terminate the i r a gree m ents w i th us prem a tur e ly or f a il to devote sufficient resou r ces to the development and c o mmercialization of our product candidates. For example, in May 2019, Sorrento Therapeutics, Inc. (“Sor r ento”) with which we jointly established a new entity called Immunothe r apy NANTibody, LLC (“NANTibody”) as a stand-alone biotechnology company, commenced li t igation against us and certa i n of our officers and directors, alleging that w e improperly caused NANTibody to acquire Ig D raSol, Inc. (“Ig D raSol”) and in January 2020 and A pril 2020, Sorrento sent letters purporting to terminate an exclusive li c ense agreement with us and an excl u sive license agreement with NANTibody. Additionally, in July 2020, we r ec e iv e d a Request for Arbitration before the International Chamber of Commerce, International Court of Arbitration, served by Shenzhen B e ike Biotechnology Co. Ltd. (“Beike”) asserting breach of c ontract under our subsidiary Alt o r ’s license agreement with them. For more information regarding these dis p u t es, see Note 8 , Commitments and Contingencie s—Contingencies , of the “Notes to Unaudited Condensed Combined Consolidated Financial Statements” that appear in Item 1. “Financial Statements” of this Quarterly Report on Form 10‑Q. Any of these developments could harm our produ c t development efforts. Our ability to use net operating losses and research and development credits to offset future t axable income may be subject to c e rtain l im i tat i ons In general, under Sections 382 and 383 of the Internal Revenue Code, or Code, a corporation that undergoes an “ow n ership change” is subject to limitatio n s on its a bi l ity to utilize its pre-change net operating losses or tax credits, or NOLs or cr e dits, to offset future t a xab l e inco m e or t a xes. For th e s e pu r poses, an ownership change generally occurs where the aggregate stock ownership of one or mo r e s t ockholders or groups of stockho l ders who owns at least 5% of a corporation’s stock increases its ownership by mo r e than 50 percentage points over its l o west ownership percentage with i n a spe c ifi e d t e sting period. We have not conducted a complete study to assess whether a change of control has occurred or whether there h a ve been multiple chan g e s of control since inception d u e to the significant complexity and cost associated with such a study. If we have e xperienced a change of control, as defined by Section 382, at any time since inception (inc l udi n g as a result of the merger), utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an a nnual limitation under Section 382. Any limitation may r e sult in expiration of a portion o f the net operating loss carryforwards or research and development tax credit carryforwards before utilization. I n addition, our NOLs or credits may also be impaired under state law. Acc o rdingly, we m a y not be able to utilize a material portion of our NOLs or credits. 72 Table of Contents Since we will need to raise s ubstantial ad d i ti o nal funding to finance our operations, we may e xperience further ownership chan g e s in the futur e , some of which may be outside of our contr o l. L i mi t s on our abi l ity to use our pre-change NOLs or credits to offset U.S. federal taxable income could potentially result in increased future tax liability to us if we earn net taxable income in t h e future. In addition, under the legislation commonly referred to as the Tax Cuts and Jobs Act of 2017, or TCJA, as modified by the Co r o n a virus Aid, Relief, and E c onomic Security Act, or the CARES Act, t h e amount of NOLs generated in taxable periods beginning after December 31, 2017, that we are permitted to deduct in any taxable year beginning after December 31, 2020 is limited to 80% of our taxable income in such year, where t a xable income is determined wi t hout regard to the NOL deduction it s e lf. The TCJA a llo w s p o st-2017 unused NOLs to be car r ied forward indefi n itely. Similar rul e s may apply under state tax laws. Changes in tax law could adv e r s e ly affe c t o u r b u sin e ss and financial co n dition. The rules dealing with U . S. federal, sta t e, and local income taxation are constantly under review by persons involved in the l e gislative process and by the IRS and the U.S. Treasury Department. Changes to tax laws (which changes may have ret r oac t ive app l ic a tion) could adversely affect us and our stockholders. In recent years, many such changes have been made and changes are likely to continue to occur in t h e future. For e xamp l e, t he TCJA was enacted in 2017 and significantly reformed the Code. The TCJA, among other things, contained signifi c ant ch a nges t o corporate taxation, including reduction of the co r p o r ate t a x r a te from a top ma r g i nal r a te of 35% to a flat rate of 21%, a limitation of the tax deduction for net interest expense to 30% of adjus t ed earnings (except for certain small businesses), a limitation of the deduction for n et operating losses to 80% of current year taxable income and an eli m ination of net operating loss carrybacks (though any net operating los s es generated in t axable years beginning after December 31, 2017 may be carried for w ard indefinitely), and the modification or repeal of many business deductions and c r edits. Additionally, on March 2 7 , 2020, the Coronavirus Aid, Relief, and Economic Security Act was enacted, w h ich, among other things, suspends the 80% l imitation on the deduction f o r net operating losses in taxab l e years beginning before January 1, 2021, p e rmits a 5-year carryback of net operating losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021, and gen e rally caps the limitation on the deduction for net interest expense at 50% of adjusted taxable income for t a xable years beginning in 2019 and 2020. It cannot be predicted whether, when, in what form, or with what effective dates, new t a x laws may be enacted, or regulat i ons and rulings may be enacted, promu l gated or issued u n der existing o r new tax law s , which could result in an inc r ease in our t a x liability or require changes in t h e m a nner in whi c h we operate in order to m i nimize or mitigate a ny adverse effects of changes in t a x l a w or in the int e rpre t a t i on t hereo f . Our transfer pricing poli c ies may be subject to challenge by the IRS or other taxing a u thorities. Our intercompany relationships are subject to complex trans f er pricing regulations administered by taxing authorities in vario u s juri s di c tions. The relevant taxing authorities may disa g r ee with our deter m ina t ions a s to the va l ue of a s se t s sold or acquired or income and expe n ses a ttr i butab l e to sp e c if i c jurisdictions. If such a disagreement were to occur, and our position were not sustain e d, we could b e required to pay additional taxes, interest and penalties, which could result in one-time tax charges, high e r effective tax rates, reduced cash flows, and lower overall profitability of our operations. We bel i eve th a t our fin a nc i a l s t a t em e nts r e fle c t ad e quate r e s e rves to cover such a contingency, but there can be no assurances in that regard. We may b e come subje c t to examinations of our tax returns by t h e IRS and other domestic a n d foreign tax authorities. An adverse out c ome of any such audit or examination by the IRS or other tax authority cou l d have a material adver s e eff e ct on o u r op e rating results and finan c ial condit i on. We may become subject to regular review and audit by the IRS a nd other tax authorities in various domestic and foreign jurisdi c tions. As a resul t , we may in the future r e ce i ve ass e ssm e nts i n m u l t i ple jurisdi c t i ons on various tax-related assert i ons. Taxing authorities may in t h e future challenge our tax p o sitions and methodologies on var i ous matters, including our posit i ons r e garding the collection of sales and use taxes, the d e termination and payment of value added taxes and the jurisdictions in which we are subject to t a xes, which could e xpose us to additional taxes. We regularly assess the likelihood of adverse outcomes result i ng from future tax e x aminations to determine the a d equacy of our provision for income taxes. These assessments can require considerable estimates and judgments. The calculation of our tax liabilities involv e s dealing with uncertainties in the applic a tion of complex tax laws and regulations in a variety of jurisdictions. There can be no assurance that our tax positions and m e thodologies or calculati o n of our tax liabilities are accurate or that the outcomes f r o m ongoing and future tax examinations will not have an adverse eff e ct on our operati n g results and financial condition. 73 Table of Contents We wi l l be subj e c t to ext e nsi v e r e gu l ation, which c an be cost l y, time consuming and can subject us to unanticipated delays; even if we obtain regulatory approval for some of our product candidates, those products may still face r e gulatory d i fficulties. Our potential products, cell processing and m a nufacturing activities will be subject to comprehensive regulation by the FDA in the Uni t e d States a nd by comparable authorities in other countries. The process of ob t aining FDA and other required regulatory approvals, including foreign approvals, is expensive and often takes many years and c a n vary substantially based upon the type, c o mplexity and novelty of the products in v olved. In addition, regulatory agencies may lack e xperience with our te c hnologies and products, which may lengthen the regulatory review process, i ncrease our development costs and delay or prev e nt t he i r c omm e rci a li z a t ion. No fusion protein or cell thera p y using Anktiva has been approved for marketing by the FDA. Consequently, there is no precedent for the suc ce ssful commercialization of produ c ts based our technolog i es. In addition, we have only limited experience in filing a n d pursuing appl i cations necessary to gain regulatory approvals, which may impede our ability to obtain time l y FDA approvals, if at all. We have not yet sought FDA appro v al for any adaptive cell therapy product. We will not be able to commerciali z e any of our potential products until we obtain FDA approval, and so a ny delay in obtaining, or inability to obtain, FDA app r oval would harm our business. If we violate regulatory re q uirements at a ny stage, whether before or after marketing approval is obtained, we may face a numb e r of regulatory consequences, including refusal to approve pending application s , license suspension or revocation, withdrawal of an approval, imposition of a clinical hold or t e rm i nat i on of c l ini c al tr i a ls, warn i ng l e tt e rs, unti t led l e tt e rs, m odifi c a t ion of p romot i onal m a t e ria l s or labeling, provision of corrective information, imposit i on of post-market requiremen t s, including the need for additional testing, imposi t ion of distribution or other restrictions under a REMS, product recalls, product seizures or det e ntions, refusal to allow imports or exports, total or part i al suspension of production or distribution, FDA debarment, injunctions, fines, consent decrees, corporate integrity agreements, debarment from receiving government contracts, exclusion from participation in federal and state healt h care programs, restituti o n, disgorgement, or civ i l or cr i min a l pena l ti e s, including fines and imprisonment, and adverse publicity, among other adverse cons e quences. Additionally, we may not be able to obtain the labeling claims necessary or desirable for the promotion of our product candidates. We may also be required to undertake post-m a rketing trials. In a d dition, if we or others identify side effects after any of our therapies are on the market, or if manufacturing proble m s occur, regulatory approval may be withdrawn, a n d reformulation of our product candidates may be required. Our projections regarding the market opportu n ities for our product candidates may not be accurate, and the actual market for o u r products, if a p proved, may be small e r t h a n w e e s t ima t e . We do not have verifia b le internal marketing data regarding the potential size of the commercial market for our product candidates, nor have we o b tained current independent marketing sur v eys to verify the potential size of the commercial ma r kets for our current product c andidates or any future prod u ct candidates. Since our c u rrent product candidates and any future product candidates will represent novel approaches to t reating various conditions, it may be difficult, in any eve n t, to accurately estimate the potential revenues from these product candidates. Ac c ordingly, we may spend sig n ificant capital trying to obtain approval for product candidates that have an uncertain commercial market. Our projections of both the number of people who have the cancers or viral dis e a s e s we are t a rget i ng, as we l l as t he subset of p e ople wi t h th e s e d i s e ases who are in a position to receive second- o r third-line therapy, and who have the potential to benefit from treatme n t with our product cand i dates, are based on our beliefs and estimates. These estimates have been derived from a v a riety of sources, including scientific lite r ature, surve y s of clinics, patient foun d ations, or mar k et r e s e ar c h by third parties, and may prove to be incorrec t . Further, new studies or a pprovals of new therapeutics m a y change t he e sti m at e d in cidence or prevalence of these diseases. The number of patients may turn out to be lower than expected. Add i tionally, the potentia l ly addressable patie n t population for our prod u ct candidates may be limited or may not be amenable to treatment with our p r o d uct candidates and may also be limited by t h e cost of our tre a tm e nts a nd t he r e i m burs e ment of those tre a t m ent costs by thi r d-party payors. For instance, we exp ec t Anktiva to init i a lly t arget a sm a ll pat i ent p o pulation that suffers from bladder cance r . Even if we obtain significant market share for our product candidat e s, because the p o t e nt i a l t a rg e t p o pulations may be s m all, we may never achie v e profitability without obtaining regulatory approval f o r additional indications. 74 Table of Contents Because our current product candidates r e present, and o u r other potential product candidates w i ll represent novel approaches to the treat m ent of dis e ase, t h ere are many un certa i n t ies r e gard i ng t h e dev e lop m e n t, market acceptance, third-party reimbursement coverage and t h e co m merc i al p o tential of our product candidates. Human immunotherapy products are a new category of therapeutics. B e cause this is a relatively new and expanding area of novel therapeutic int e rv e nt i on s , th e re a re m a ny un ce rt a inti e s r e l a ted to de v e lopment, marke t ing, reimbursement and the co m me r ci a l poten t ial for o ur product candidates. There can be no assurance as to the length of the trial period, the number of patients t h e FDA will requ i re to be e nrol l ed i n t he tri a ls i n order to est a blish the safety, efficacy, purity and potency of immunotherapy p r o ducts, or that the data g e nerated in these trials will be accepta b le to the FDA to support marketing approval. The FDA may t a ke longer than usual to come to a decision on any BLA and/ o r NDA that we submit and may ultimately det e rmine that there is not en o ugh data, information, or exper i ence with our product candidates to support an approval decision. The FDA may also require that we conduct additional post-marketing studies or implement risk management programs, such as REMS, until more experience with our p roduct candidates is obtained. Finall y , after i n creased usage, we may find that our product candidates do not have the i n tended effect, do not w o rk with other combinati o n therapies or have unanticipated side eff e c t s, pot e nt i al l y j e opard i z ing in i ti a l or continuing regulatory approval and commercial prospects. We may also find that the manufacture of our product candidates is more d i fficult than anticipated, resulting in an inability to produce a sufficient amount of our product candidates for our clini c al trials or, if approved, commercial s upply. Moreover, because of the complexity and novelty of our manufacturing process, there are o nly a limited number of manufactu r e rs who have the capability of produ c ing our product candidates. Should any of o u r CMOs no l onger produce our product candidates, it may take us significant t i me to find a r e placement, if we a re ab l e t o f i nd a r e pla c em e nt at all. There is no assurance that the approaches offered by our product candidates will gain broad acceptance among docto r s or patients or that governmental agencies or third-party medical insurers will be willing to provide reimbursement coverage for our p r oposed product candidates. The ma r ket for any prod u cts that we successfully develop will also depend on the cost of the product. We d o not yet have sufficient information to r e l i ably est i ma t e wh a t it will cost to commercially manu f acture our current produ c t candidates, and the actual cost to manufacture these products could materially and adversely affect the commercial viability of the s e products. Our goal is to reduce the cost of manufacturing and providing our therapies. However, u n less we can reduce those costs to an acceptable amount, we may never be able to develop a commercial l y viable product. If we do not succes s fully develop and commercialize products based upon our approach or find suit a ble and economical sources for materials used in the production of our potential products, we will not become profitable, which would materially and adver s ely affect the value of our com m on stock. Our Anktiva therapies and our o t her therapies may be provided to pat i ents in combination with other agents provided by third parties or our affiliates. The cost of such co m bina t ion t her a py may inc r ease the ov e rall c ost of therapy and may result in issues regarding t h e allocation of reimbursements between our thera p y and the other agents, all of which may affect our ability to o b tain reimbursement coverage for the combi n ation therapy from governmental or private t hird-party medical insu r e rs. If product liability law s uits are brought against u s , we may incur substanti a l liabilities and may be r e quired to limit commer c ialization of our product candidates. We face an inherent risk of product liability as a result of the clinical testing of o ur product candidates and will face an e v en gre a ter risk i f we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise u n suitable during clinical tes t i n g, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dange r s inherent in the product, negligence, strict lia b ility or a brea c h of warranties. Claims could also be asse r ted under state consumer pro t ection acts. Large judgements have also been awarded in c l ass action lawsuits based o n ther a peu t ics that h a d u n anticipated side effec t s. If we cannot successfu l ly defend ourselves against product lia b ility claims, we may incur substant i al l i ab i li t ies or be required to limit commercia l ization of our product candidates. Even successful defense w ould require significant financial and management resources. Regardless of the merits or eventual ou t com e , li a bil i ty cl a ims may result in: • decreased demand for our products, if approved; • i njury to our reputation; • wi t hdrawal of cl i nic a l tri a l part i c i pants or sit e s and poten t i a l t e r m ina t ion of c l ini c al tr i a l sit e s or e nt i re c l i nic a l progr a ms; • i nitiation of investigations by r e gulators, refusal to approve market i ng applications or supplement s , and withdrawal or limit a tion of product approvals; • c osts to defend litigation; • a diversion of managemen t ’s time and our resources; 75 Table of Contents • substan t ial m onet a ry a w a rds to tr i a l par t ic i pants or pa t i e nts; • product recalls, wi t hdrawals or labeling, marketing or promotional restrictions; • l oss of revenues; • significant negative media attention; • decrease in the price of our stock and overall value of our company; • e xhaustion of our available insurance coverage and our cap i tal resources; or • t he inability to commerc i alize our produ c t candidates. Our inability to obtain sufficient product l i ability insurance at an acceptable cost to protect again s t potential product liab i lity claims could prevent or inhibit the commercialization of products we may develop, alone or with corporate c o llaborators. Our insurance policies may also have various exclusions, and we may be subject to product liability claims for which we have no cove r a ge. While we have obta i ned clinical t rial insurance for our cl i ni c al tr i a ls, we may have to pay am o unts awarded by a court or negotiated in a set t l e ment th a t exceed our coverage li m it a tions or th a t are not covered by our insurance, and we may not have, or be able to ob t ain, sufficient c a pital to pay such amounts. Even if our agreem e nts w i th a ny future corporate collaborators entitle us to indem n ifi c a t ion a ga i nst losses, such i ndemn i fi c a t ion may not be a v ail a ble or adequate should any claim arise. Due to the signif i c ant r e so u rces r e qu i r e d for t h e development of our product candidates, and dependi n g on o u r ability to access c apita l , we must pri o ritize among many d i fferent opportunit i es. Moreover, we may expend our limited resources on programs that do not yield suc c essful product candidates as opposed to indications that may be more profi t able or for which there is a greater likelihood of success. We do not have sufficient resources to pursue development of all or even a substantial portion of the potential opportunities that we believe will be afforded to us by our product candidates. Because we have limited resources and access to capital to fund our operations, our management must make signific a nt prioritization decisions as to which product candidates and i ndications to pursue and how much of o u r resources to allocate to each. Our m a nag e ment must a l so ev a lua t e the ben e fits of developing in-licensed or jointly owned tech n ologies, which in some c i r c umstan c e s we may be contractually obligated to purs u e, relative to dev e loping o t her product candidates, i ndications or programs. Our man a gement has broad discretion to suspend, scale down, or discontinue any or all of these developme n t efforts, or to initia t e new programs to treat other diseases. I f we select and commit resources to opportunities that we are unable to successfully develop, or we forego more pro m ising opportunities, o u r business, financial condition and results of operations will be adversely affected. We wi l l face signifi c ant c ompe t it i on from other biotech n ology and pharmaceutical companies and from non-prof i t ins t itut i ons. Competition in the field of cancer and viral infectious disease therapy is intense and is acce n tuated by the rapid pace of tec h nological development. Research and discoveries by others may result in breakthroughs which may render our product candidates obsolete e v en before th e y generate any revenues. There are products that are app r oved and currently under d e velopment by others that could compete with the product c a ndidates that we are developing. Many of our potential competitors have substantially gre a t e r re s e a rch and development capabilities and approval, ma n u f acturing, marketing, f i nancial and managerial resourc e s and experience than we do. Our competitors may: • develop safe r , more convenient or more effective immunothe r a pies and other therapeutic products; • develop therapies that are less expensive or have better reimbursement from private or public payors; • reach the market more rapid l y, reducing the potential sales of our product candidates; or • e stablish superior proprietary positions. We will focus our efforts on onco l ogical and infectious d i s e ase indi c a t ions th a t are diff i cult to treat and with large unmet n e eds, and we believe our platforms will be broadly app li cab l e ac r oss m ult i ple tu m or typ e s and infections. Based on the b r eadth and depth of our platforms, we believe our competitors will ran g e from lar g e pharmaceutical companies to e m erging novel biote c hnology companies. 76 Table of Contents From an oncology perspective, we have diff e rent competitors bas e d on modality. In the NK and T c e lls activation modality, we pri m ari l y c ompe t e w i th large pharmaceutical companies marketing checkpoi n t inhibitors including AstraZeneca PLC, or AstraZeneca, Bristol-Myers Squibb Company, or BMS, GlaxoSmithKline plc, or GSK, Merck & Co., Inc., or Merck, Pfizer Inc., or Pfizer, and Roche Holding AG, or Roche. The pot e nti a l e xi s ts for some of these large pharmaceutical companies to seek collaboration for combinat i on of Anktiva with their marketed checkpoint inhibitors . A lso, in the NK and T c ell activation modality, we will compete with immunotherapy fusion p r otein c o mpanies d e veloping similar approaches including N ekt a r Ther a peuti c s , Neoleukin Therapeutics, Inc. Nov a rtis International AG, R o che, Sanofi S.A., and in the context of NMIBC, FerGene, Inc., Merck a nd Sesen Bio, Inc. In the tumoricidal macrophage activation modality, we will compete with various che m otherapeutic agents, including Abraxane, d o xorubicin and paclitaxel/Taxol, as well as an antibody drug conjugate produced by I mmunomedics, Inc., or Immunomedics. In the T c e ll m e mory moda l ity, we a l so co m pete wi t h c e ll t her a py and chimeric antigen receptor T cell, or CAR-T c ell, based companies including A l logene T herap e ut i cs In c . , CRI S P R Th e rapeu t i c s AG, F a te T her a p eut i cs, Inc . , Gilead Sciences, Inc., or Gilead, I n tellia Therapeutics, Inc., Iovance Biotherapeutics, Inc. and Legend Biotech Corporation. From an infectious disease per s pective, we will compe t e with Abbott Laboratories Inc., or Abbott Laborato r ies, BMS, Gilead, and GSK, in the field of human immunodeficiency virus, or HIV. Compe t itor co m p a ni e s focused on COVID ‑ 19 c e ll th e rapy curren t ly i n clude Altimmune, Inc., AstraZeneca, Athe r s y s , Inc . /He a lios K . K . , CanSioBio Biologics Inc., Capr i c or Ther a peu t ics, Inc . , CAR-T (Shanghai) Biotechnology, C e llavita Pesquisa Científica L t da, Cellenkos, Inc., Cellular Bio m edicine Group, Inc., Celularity, Inc., Sorrento Therapeutics, Inc., Chinese Academy of Sciences, Chongqing Sidemu Biotechnology Technology/ImmunCyte Life Science, I nc., Enli ve x T her a peut i cs Ltd, Green Cross LabCell Co r p ., Hope Biosciences, Johnson & Johnson, Merck, Me s oblast Limited, Moderna, Inc., Novavax, Inc., Orbsen T h e rapeu t i c s Limited, Pfize r /BioNTech SE, Pluristem Therapeutics, Inc . , Rigshospitalet, Tianhe Stem Cell Biotechno l ogies Inc., University of Minnesota/Fate Ther a peut i cs, Inc . , Vaxart, Inc., X i nji a ng Med i c a l Univ e rsity, and many other new competitors that are emerging frequently. A large number of compa n ies, government agenc i es and academic centers around t h e world are developing COVID ‑ 1 9 vaccines, and many of t hese ent i ti e s are i n more advanced stages of development than we are, including some that have started P hase II and/or III clinical trials or have already obtained emergency regulato r y approval in the United States and internationally . Even if our COVID ‑ 19 vaccine candidate is ultimately approved for m arketing, the value of our op p o r tunity will be adversely impacted by other COVID ‑ 19 vaccines that have obtained emergency regulatory approval, obtain full regulatory approval, or demonstrate better efficacy or sa f e ty than our COVID ‑ 19 vaccine candidate. Many of these companies and our other current and potential competitors h a ve subst a nti a lly gre a ter r e search and development cap a bil i ti e s and fin a nci a l, scientific, regulatory, manufacturing, marketing, sales, human resources, a nd experience than we do. Many of our competitors h a ve s e veral t her a peut i c prod u cts that have already been developed, approved and successfully commercialized, or are in the process of obtaining regula t ory approval for their therapeutic products in the United States and internationally. Our c o mpetitors may obtain regulatory approval for their produc t s more rapidly than we may obtain approval for ou r s, whi c h could result in competitors establishing a strong m a rket position before we are able to en t er the m a rke t . Universities and public and priva t e research instit u t ions in the United States and Europe a r e also potential competitors. While these universities and p u blic and private research institutions primarily have educ a tional objectives, they may develop proprietary technologies that lead to other FDA approved therapies or that secure patent protection that we may need for the development of o ur technologies and product candi d ates and that can be licensed or sold to other parties, including our competitors. One of our product candidates, Anktiva, is a potential therapy for the treatment of bladder cancer and (1) when used in combin a tion with checkpoi n t inhibitors, lung cancer, and (2) when used in combination with natural killer cells, metastatic pancreatic c a ncer and triple negative brea s t can c e r, or TNBC. Currently, there are numerous companies that are developing v a rious a l t e rna t e tre a t m ents for bl a dd e r, pancreatic and breast ca n cer, including patients that ha v e progressed after prior treatment with checkpoint inhibitors and chemotherapy. For e x ample, Nektar T h erapeutics is cu r rently developing an imm u notherapy t r eatment for muscle-invasive bladder cancer u sing an IL-2 agonist and is in Pha s e III clinical trials. Accordi n g ly, A nktiva f a c e s sig n ificant competition in the bladder, lung, pancreatic and brea s t cancer treatment space from multiple companies. Even if we obtain regulatory approval for Anktiva, the avail a bility and price of our competitors’ products c ould limit the demand and the price we are able to charge for our therapies. We may not be able to imple m ent our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from oth e r methods of treatment to our product, or if physicians switch to other new therap i es, drugs or biologic prod u cts or choose to reserve our product cand i dates for use in limited circumstances. 77 Table of Contents In addition, we could face litigation or other proceedings with respect to the scope , ownership, validity and/or enforceability of our patents or other intellectual property relating to our competitors' products, and our competitors may allege that our product candidates infringe, misappropriate or otherwise violate their intellectual property. See “ Risks Related to Intellectual Property.” Mergers and acquisitions in the pharmaceutical and biotechnology indu s tries may result in even more resources being co n c entrat e d among a smaller n u mber of our competitors. Early stage companies may also prove to be significant c o mpetitors, par t icularly through collaborat i ve arrangements with large and established compani e s. Th e se third parti e s c omp e te with us in re c ruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient regist r a tion for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Pu b l ic opinion and s c rutiny of immunotherapy app r oaches may impact public per c eption of us and our product candi d ates, or may ad v e rsely aff e ct our abil i ty to condu c t our business and our business plans. We use r e latively novel technologies in v olving the Anktiva, a ldoxorubicin, hAd5 and yeast technologies and cell-based therapies and o ur natural killer cell platform utilizes a relatively novel technology involv i ng the genetic modification of human cells and util i zation of those modified cells in other individuals. Public pe r ception may be influ e nced by claims, such as claims that our technologies are unsafe, unethical or immo r al and, consequently, our approach may not gain the acceptance of the public or the medical community. Negative public react i on to cell-based immunotherapy in general could result in greater government regulation a nd stricter labeling requirem e nts of immunotherapy products, including any of our product candidates, and could cause a decrease in t h e demand for any products we may develop. Adverse public attitudes may adversely impact our ability to enro l l c lin i c a l trials. Moreover, our success will depend upon physicians specializing in the treatment of those dis e ases that our p r o duct can d ida t es t a rget pr e s c ribing, and their patients being willing to receive treatments that involve the use of our product candidates in lieu of, or in addit i on to, ex i s t ing tre a tm e nts t hey are already familiar with and f or which greater clinical data may be available. More restrictive gove r n ment reg u lations or negative public o p inion could have an adverse effect on our business or financial condition and may del a y or impair the de v e lopme n t and commercialization of our product candidates or demand for any products we may develop. Adverse events in our clinical trial s , even if not ultimately attributable to our p r oduct candidates, and the resulting publicity could result in increas e d governmental regulation, unfavorable pub l ic perception, potential regulatory del a ys in the testing or approval of our potential product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates. Development of a product candidate intended for use in combinati o n with an already approved product may present more or different challenges than development of a product can d idate for use as a single agent. We are currently developing Anktiva for use along with our natural killer cell platfor m . We are also studying Anktiva thera p y along with other product candidates, such as a ldoxorubicin and hAd5 product candidates. The development of produ c t candidates for use in combination wi t h another product may present c hal l e nges. F or e xamp l e, the F DA may re q uire us to use more comp l e x cl i nic a l tri a l designs in order to ev a lua t e the contribution of each prod u ct and product candidate to any observed effects. It is possible that the results of these trials could show that any pos i tive r e su l ts a re at t ribut a ble to the already approved product. Moreover, fol l owing product approval, the FDA may require that products used in conjunction with each other be cross labeled for combined use. To the extent t h at we do not have rights to already ap p r o v ed products, this may require us to work w i th another company to satisfy such a requirement. Moreov e r, developments related to the already approved products may i m pact our clinical trials for t he c omb i nat i on as w e ll as our commercial prospects should we receive marketing approval. Such developments may include changes to the approved produc t ’s safety of efficacy profile, changes to the a v ailability of the approv e d product, and c h anges to the standard of care. A Fast Track designation, Breakthrough Therapy designation or other designation to facilitate product candidate development may not lead to faster development or a f aster regulatory review or approval process, and it does not increase the likelihood that our product ca n didat e s will r e c e i ve marketing approval. We have received, and may seek in the f u ture, Fast Track or Breakthrough Therapy designation for current or future product can di dat e s. Rec e ipt of a designation to facilitate product cand i date development is within t h e discretion of the FDA. Accordi n gly, even if we believe o n e of our product cand i dat e s m e e t s the cr i te r ia for a d e s i gnat i on, the FDA may disagree. In any event, t h e receipt of such a desig n ation for a prod u ct candidate may not result in a faster development process, review or approval compa r ed to product c a ndidates considered for approval under conventional FDA procedures and does not ass u r e ultimate mar k eting approval by the FDA. In addition, the FDA may later decide that the product candidates no longer meet the designation conditions. 78 Table of Contents As a condition of approval, the FDA m a y re q u ire that we implement var i ous post-marketing requirements and conduct post-marketi n g studies, any of which would require a substantial investment of time, effort, and money, and which may l im i t our c omm e rcial prospects. As a condition of biologic licens i ng, the FDA is authorized to r e quire that s ponsors of approved BLAs implement various post-m a rket requirements, including REMS and P hase IV trials. For e x ample, when the FDA approved Novartis’ Kymriah in August 2017, a CAR-T cell therapy for the t r eatment of patients up to 25 years of age with B - cell precursor acute lymphoblastic leukemia (“ALL”) that is refractory or in second or l a ter re l a pse, t he FDA required significant post-marketing commitments, including a Phase IV trial, revalidation of a t e st method, and a substantial R EMS program that included, among other requirements, the certification of hospitals and their associated cli n ics that dis p ense Kym r iah, which certification includes a n u mber of requirements, the implementation o f a Kymriah training program and l i mited distribution only to c e r t ifi e d hospit a ls a nd t heir associ a t e d clinics. If we receive a pproval of our product candidates, t h e FDA may determine that similar or additional or more burdensome post-ap p r o v al requirements are necessary to ensure that our product ca n didates are safe, pure and potent. To the extent that we are required to e s tablish and implement any post-approval requirements, we w ill likely need to invest a signif i cant amount of time, effort and mon e y. Such post-approv a l requirements may a l so l i mit the commercial prospects of our product candidates. We may be unable to establish e ffective marketing and sales capabilities or enter into agreements with third parties or related parties to market and sell our product candida t es, if they are approved, and as a result, we may be unable to generate product revenues. We currently do not have a comme r cial infrastructure for the marketing, sale and dis t ribution of our products. If approved, i n order to commercialize o u r product candidates, we must build our m a rketing, sales and distribution capabilities or a rrange with third parties to perform these s e rvic e s , whi c h wi l l take t ime and req u ire significant f i n a ncial expenditures and we may not b e successful in doing so. There a re risks involved with establishing our own marketing and sales capabilities. For example, recruiting and tra i ning a sales force is expensive and time-cons u m ing and could delay any product launch. If the commercial l a u nch of a product candidate for which we recruit a sales force and establish marketing capab i li t i e s is delayed or does not occur for any reason, we would have incurred these commercialization expenses prematurely or unnecessarily. These effor t s m a y be costly, and our investment would be lost if we cannot retain or reposi t ion our sales and marketing p e rsonnel. Even if we are ab l e to e ffe c t i v e ly est a blish a sales force and develop a marketing and s a l e s infr a structure, o ur s a les force and marketing teams m a y n ot be successful in c o mmercializing our current or future product candidates. To t h e extent we rely on third parties to comm e rcialize any products for which we obtain regulatory approval, we would have less control over their sales ef f o r ts and could be held liable if they fai l ed to comp l y with app l ic a ble l e gal or re g ulatory requirements. We have little to no prior experience in the ma r k eting, sale, and distribution of biopharmaceutical products, and there a r e significant risks involved in the building and managing of a commercial infra s t ru c ture. The e s t a bli s hment and development of co m m e r c i a l c a pab il i ti e s , in c l uding a comprehensive healthcare compliance progra m , to market any products we may develop will be expensive and time consuming and c ould delay any product launch, and we may not be able to successf u lly dev e lop this c a p a bil i ty. W e , or our collaborators, will have to compete with other pharmace u tical and biotechnology companies to recruit, hire, train, manage and retain medical affairs, marketing, sales and commer c ial support personnel. In the e vent we a re unable to develop a commercial infras t ructure, we may not be able to commercialize our current or fut u re product candidates, which would l i mit our abi l ity to generate product revenues. Facto r s t h at may inhibit our efforts to commercialize our current or future product candidates and g enerate product revenues inc l ude: • i f t h e COVID ‑ 19 pandemic continues or reocc u rs it may negatively impact our ability to establish commercial operations, educa t e and interact with healthcare pro f essionals, and successfully laun c h our product on a timely basis; • t he inability of sales personnel to obtain access to physicians or persuade adequ a te numbers of physicians to prescribe our c u rrent or future product candidates; • our inability to effectively oversee a geogr a phically dispersed sales and marketing team; • t he costs and time associated with t h e i n itial and ongoing training of sales and m a r k eting pe r s onnel on legal and regulatory compliance matters and monitoring their actions; • a n inability to secure adequate coverage and reimbursement by government and private health plans; • t he clinical indications for which the products are approved and the claims that we may make for the products; • l imitations or warnings, including distribution o r use restrictio n s, conta i ned in the products’ approved labeling; • a ny distribution and use r e strictions imposed by the FDA or to which we agr e e as part of a mandatory REMS or voluntary risk management plan; 79 Table of Contents • l iability for sales or marketing personnel who fail to comply with the applicable legal and r e gulatory requirements; • t he lack of complementary products to be offered by sales personnel, which may put us at a com p etitive disadvantage relative t o companies with more extensive product lines; and • unforeseen costs and expenses a s sociated with creating an independent sales a nd marketing organization or engaging a contract s a l e s organization. If our product candidates do not achieve b r oad market acceptance, the rev e nues that we generate from their sales will be limit e d. We have not commercialized a p r oduct candidate for any indication. Even if our product candidates are approved by the appropri a te regulatory authorities for marketing and sale, they m a y not gain acceptance among physicians, patients, t h ird-party payors and others in t he medical community. If any product candidate for which we obtain regulatory approval does not gain an adequate level of market acceptance, we may not generate significant prod u ct revenues or bec o me pro f itable. Market acceptance of our product candidates by the medic a l community, patients and third-party payors will depend on a number of factors, s o me of which are b e yond our control. For example, physicians are often reluctant to switch the i r patients, and patients may be relu c t a nt t o swit c h fro m , exist i ng th e rap i e s e ven wh e n n e w and poten t ia l ly more eff e c t ive or s a f e r t re a tm e nts e nter the m a rke t . Efforts to educate the medical community and third-party payors on the benefits of our product cand i dates may require signific a nt resources and may n o t be success f u l . If any of our product cand i dates is approved but does not achieve an adequate level of market acceptance, we may not generate sig n ificant revenues and we may not become p r ofitable. The degree of market acceptance of any of our p r o duct candidates will d e pend on a number of factors, including: • t he continued safety and efficacy of our product candidates; • t he prevalence and severity of adverse events associated with such product candidates; • t he clinical indications for which the products are approved and the approv e d claims that we may make for the prod u cts; • l imitations or warnings contained in the product’s FDA-approv e d labeling, including po t ential limitations or warnings for such p r o ducts that may be more r e strictive than other competitive products; • c hanges in the standard of care for the tar g eted indications for s u ch product candidates; • t he relative diffic u lty of adminis t ration of such product candidates; • c ost of treatment versus economic a nd clinical benefit in relation to a l ternative treatments or therapies; • t he availability of adequ a te coverage or reimbursement by third parties, such as insurance companies and other healthcare payors, and by government healthcare programs, including Medicare and Medicai d ; • t he extent and strength of our marketing and distribution of such product candidates; • t he safety, efficacy and other potential advantages over, and a v ai l a bi l ity of, a l te r nat i ve tre a tm e nts a lr e ady used or t hat m a y later be approved for any of our intended indications; • distribution and use restricti o ns imposed by the FDA with respect to such produ c t candidates or to which we agree as part of a mandatory REMS or voluntary risk management plan; • t he timing of market introduction of such product candidates, as well as competitive products; • our ability to offer such product cand i dates for sale at competitive prices; • t he willingness of the target patient population to try new therapies and of ph y sicians to prescribe these therapies; • t he extent and strength of our third - party manufacturer and supplier support; • t he approval of other new produ c ts for the same indications; • a dverse publicity about t h e product or favora b le publicity about com p etitive products; and • potential product liability claims. 80 Table of Contents Our efforts to educate the medic a l community and third-party pa y o r s as to the benefits of our product candidates may require s i gnificant resources and may never be successful. Even if the med i cal community accepts that our product candidates are safe and effective for their approved indications, p h ysicians and patients may not immediately be receptive to such product candidates and may be slow to adopt them as an accept e d t re a tm e nt of the approved indications. If our current or fut u re product candidates are app r oved but do not achieve an a d equate level of accepta n ce among physicians, patients, and third-party payors, we may not generate meaningful revenues from our product candidat e s, in which case we would n ot expect to become profitable. Our product candidates may face c o mpetition sooner than anticipated. The enactment of the Biologics Price Competition and Innovation A c t of 2009 (“BPCIA”) created an abbre v iated p a thway for the a p proval of biosimilar and inte r c hangeable biological products. The abbreviated regulatory pathway establi s hes legal authority for the FDA to review and approve biosimilar biologics, including the possible d e signation of a biosimilar as “in t erchangeable” based on its sim i lar i ty to a n e xisting brand product. Under the BPCIA, the FDA cannot make an approval of an a pplication for a biosimilar product effective until 12 years after t h e original branded product was approved under a BLA. Certain changes, ho w ever, and supplements to an app r oved BLA, and subsequent applications fil e d by the same spons o r, manufacturer, li c ensor, pred e cessor i n in t e r e st or other related entity do not qualify for the 12-year exclusivity period. Our product candidates may qualify for the BPCIA’s 12-year period of exclusivity. Howev e r, the r e is a risk that the FDA will n o t consider our p r od u ct candidates to be reference products for competing products, p o ten t ially creating the opport u nity f o r bi o similar competition sooner th a n a nti c ipa t ed. Additionally, this pe r iod of regulatory exclusivity does not b l ock companies pursu i ng regulatory approval via their own tradit i onal BLA, rather than via the abbreviated pathway. Changes may also b e made to this exclusivity period as a result of future legis l ation as there have b e en ongoing efforts to reduce the period of exclusivity. Even if we receive a period of BPCIA exclusivity for our first licensed product, if subse q ue n t products do not include a modification to the structure of the produ c t that impacts safety, purity, or potency, we may not receive a dditional periods of exclusivity for those prod u cts. Moreover, the extent to which a biosimilar, once approv e d, will be substituted for a ny one of our refere n c e product candidates in a way that is similar to traditional generic substitution for non-biological products is not y e t clear, and will dep e nd on a number of marke t place and regulatory factors that are still developing. Medicare Part B encourages use of biosimilars by paying the provider the sa m e perc e nt a ge of the r e f e rence product average sale price as a mark-up, regardless of whi c h product is reimbursed. It is also possible that payors w ill give rei m bursement pr e feren c e to biosim i lars even o v er reference biologics abs e nt a de t e rm i na t ion of interchangeability. For our small molecular product candidates, if qualified, the regulatory exclusivity period is less than for our biologic product candidates. The Federal Food, Drug, and Cosmetic Act (“FDCA”) provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion respons i ble for the action of the drug substance. During the e x clusivity period, the FDA may not a c cept for rev i ew a n abbr e vi a ted new drug application or a 505(b)(2) NDA submitted by another company for a generic version of such drug where the applica n t does not own or have a legal right of refe re n c e to a ll th e da ta required for approval. However, an application may be submitted after four years if it c ontains a certification of patent inva l idity or non-infringement. The FDCA also provides three years of mar k eting exclu s ivity for an NDA, 505(b ) (2) N D A or supplement to an exi s ting NDA if new c l in i c al investigations, other than bioav a ilability studies, that were c onducted or sponsored by the appli c ant a r e deemed b y the FDA to be e ss e nti a l to t he approval of the applicatio n , f or example, n e w indications, dosages or strengths of an existing drug. As su c h, we m a y f a ce c omp e tition from gene r ic versions of our small molecule product c a ndidates, which will negative l y impact our long-term busi n ess prospects and marketing opportunities. We will need to obtain FDA approval of a n y proposed branded product names, and any f a ilure or delay associated with such approval may adversely affect o u r b u s i n e s s . Any name we intend to use for our product c a ndidates in the United States will require approval from the FDA regardless of whether we have secured a formal t r ademark registration from the U.S. Patent and Trademark Office (“USPTO”). The FDA typically conducts a review of prop o sed product names, including an e v aluation of the pote n tial for confusion with other product names. The FDA may also object to a product n a me if it beli e v e s the name i n appropriately implies medical claims or contributes to an overstatement of e fficacy. If the FDA objects to any of our proposed product names, we may be required to adopt alternative names for our product candidates. If we adopt alternative names, we would lose the benefit of any existing tradema r k applications for such product cand i date and may be required to expend significant a dditional resources in an effort t o iden t ify a sui t ab l e prod u ct name that would qualify under applicable trademark laws, not infringe or other w ise violate the existing ri g hts of third parties, and be ac c ep t a ble to the FDA. We may be unable to build a successful brand identity for a new product name in a timely manner or at all, which w o uld li m it our a bil i ty to commercialize our product candidates. 81 Table of Contents We will be d e pendent on informa t i o n te c h n olog y , s y s t e m s, i n fras t ructure and data. Our i n te r n al c omputer s y s t ems, or those used by our CROs, C M Os, c li n i c al s i t e s or other contractors or consultants, m a y fail or suffer s e c u rity b r ea c h e s. We will be dependent upon inform a tion technology systems, infrastruc t ure and data. In the ordinary course of our business, we will directly or indirectly col l ec t , s t ore and transm i t s e ns i tive d a ta, including intellectual property, confidential i nforma t ion, pre c l i nic a l and c l i nic a l tri a l dat a , proprie t a ry bus i ness information, personal data and personally identifiable health information of our cl i nic a l tri a l sub j ec t s and employees, in our data centers and on our networks, or on those of third parties. T h e secure processing, ma i nten a nce a nd tr a ns m iss i on of this inform a tion is c rit i c a l to our operations. The multitude a n d complexity of our computer systems and those of our CROs, CMOs, clinical sites or other con t ractors or consultan t s make them inherently vulnerable to service interruption or destruction, mal i cious intrusion and r a ndom attack. Data privacy or security b reaches by third parties, employees, contractors or others may pose a risk that sensiti v e data, including our intellectual property, trade secrets or personal information of our employees, patients, or other business partn e rs may be exposed to unaut h o r ized persons or to the public. Despite the implement a tion of security measures, our internal computer systems and those of our CROs, C M Os, c l ini c al sit e s and oth e r c ontractors and consultants are vulnerable to failure or damage from computer viruses and other mal w are, employee error, unauthorized a n d authori z ed a c c e ss or oth e r cybe r s ecurity attacks, natural disasters, terrorism, war, fire and telecommunication and electrical failures. Cyberattacks are increasing in their f r equency, sophistica t ion and intensity. The techniques used by cyber crimina l s change frequently, may not be recognized until launched and can originate from a wide variety of sources, including o u tside groups such as external service p r oviders, organized crime aff i liates, terrorist organizations or ho s tile foreign gove r nments or a gen c ie s . Cy b e rattacks could include the deployment of h a rmful m a lwar e , deni a l-of-serv i ce, soc i al engineering and other means to affect s ervice reliability and thre a ten da t a confid e nti a l i ty, in t e gri t y a nd av a i l a bi l ity. W hile we and our shared services partner, NantWorks, have invested, and continue to invest, in the protection of our data and information technolo g y infrastruc t ure, there can be no assurance that our efforts, or the e f forts of our partners, vendors, CROs, CMOs, clinical sites and other c o ntractors and co n sultants will prevent service inte r ruptions, or identify brea c hes in our or their systems, that could adversely a ffect our business and operations and/or result in the loss of cr i ti c al or s e nsi t ive infor m a t io n , which could result in financial, legal, business or reputational harm to us. In addit i on, our liability insurance may not be suf f icient in type or a m ount to cover us against claims rel a t e d to s e cur i ty b r ea c hes, cyb e r a ttacks and other related breaches. If a n y such event were to occur and cause interruptions in our operations, it could r e sult in a dis r u ption of our drug develop m ent progra m s. F or e xa m p l e, the loss of clinical trial data from completed or ongoing clinical trials for a product candidate could r e sult in delays in our regulatory approval efforts and significantly increase our costs to r e cover or r e produce the data, or may limit our ability to effec t ively execute a product recall, if required. To the extent that a n y disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confid e nti a l or propri e t a ry i nforma t ion, we could in c ur l i abi l ity and the further development of any p r od u ct candidates could b e dela y e d. Any such event could also result in legal claims or proceedings, liability under laws that p r otect t h e privacy of personal information and si g nificant regulatory penalties, and damage to our reputation and a loss of confidence in us and our ability to conduct clinical trials, which could delay the c linical development of our prod u ct candidates. O u r b u s i n e ss c ou l d be adversely affected by t h e eff e c t s of h ea l th ep i de m i c s, pandemics or contagious diseases, including the r e cent pandemic of the disease caused by t h e novel coronav i r u s SARS-CoV-2 or COVID‑19, including its currently known and unknown variants, in regio n s w h e re w e o r t h i rd parties on which we rely have signif i cant man u fa c tu r i n g faci l it i es, co n c e n t ra t ions of c lini c al t r i al s i t e s or other business operations. Outbreaks of epidemic, pandemic or contagious diseases, such as the COVID ‑ 19 pandemic, may significantly disrupt our operations and adversely affect our business, financial condition and results of operations. In March 2020, the World Health Organization (“W H O”) declared the outbreak of the COVID ‑ 19 pandemic as the novel coronavirus continues to spread throughout the world. The spread of this pandemic has caused significant volatility and uncertainty in the U.S. and international markets and has resulted in increased risks to our operations. The COVI D ‑ 19 pandemic, including currently known and unknown variants of COVID ‑ 19, could materially affect our operations, including at our headquarters and at our manufacturing facilities, whi c h are currently subje c t to state executive orders and shelter-in-place orders, a nd a t our c l ini c al tr i a l sit e s, a s well a s t h e business or operations of our other manufacturers, CR O s, CM O s, c l inic a l sit e s or other third parties with whom we condu c t business. 82 Table of Contents Executive orders have been iss u ed by state and local gove r nments in California a nd elsewhere, and states of emergency have been d e cl a red at the st a te and local level in most juris d ictions throughout the United Sta t es. Quarantines, shelter-in-place and similar gov e rnment orders, or the perception that such orde r s , shutdowns or other restrictions on the conduct of business operations could occur, related to the COVID ‑ 19 pandem i c or other infectious diseases could impact our personnel or personnel at third-party manufacturing faciliti e s in the United States and other countries, or t he ava i l a bil i ty or cost of materials, whi c h would disrupt our supply chain. We are monitoring a number of risks related to this pandemic, includi n g the following: • Financial : We anticipate that the pandemic could have an adverse financial impact in the short-term and potentially beyond. As a result of slower patient enrollment, we may not be able to complete our clinical trials as planned or in a timely manner. We expect to continue spending on research and development during the ye a r-ended December 31, 2021 and beyond, and we could also have unexpected expenses related to the pandemic. The short-term continued expenses, as well as the overall uncertainty and disruption caused by the pandemic, will likely cause a delay in our ability to commercialize a product and adversely impact our financial results. • Supply Chain : An extended duration of this pandemic could result in significant disruptions in our respective supply chains and distribution channels in the future. For example, quarantines, shelter-in-place and similar government orders, travel restrictions and health impacts of the COVID ‑ 19 pandemic, could impact the availability or productivity of personnel at third-party laboratory supply manufacturers, distributors, freight carriers and other necessary components of our supply chain. In addition, there may be unfavorable changes in the availability or cost of raw materials, intermediates and other materials necessary for production, which may result in disruptions in our supply chain and adversely affect our ability to have manufactured certain product candidates for clinical supply. • Clinical Trials : This pandemic may adversely affect certain of our clinical trials, including our ability to initiate and complete our clinical trials within the anticipated timelines. Due to site and participant availability during the pandemic, new subject enrollment is expected to slow, a t l e ast in the short-term, for most of our clinical trials. For ongoing trials, we have seen an increasing number of clinical trial sites imposing restrictions on patient visits to limit risks of possible COVID ‑ 19 exposure, and we may experience issues with participant compliance with clinical trial protocols as a result of quarantines, travel restrictions and interruptions to healthcare services. The current pressures on medical systems and the prioritization of healthcare resources toward the COVID ‑ 19 pandemic have also resulted in interruptions in data collection and submissions for certain clinical trials and delayed starts for certain planned studies. As a result, our anticipated filing and marketing timelines may be adversely impacted. • Overall Economic and Capital Markets Environmen t : The impact of the COVID ‑ 19 pandemic could result in a prolonged recession or depression in the United States or globally that could harm the banking system, limit demand for all products and services and cause other seen and unforeseen events and circumstances, all of which could negatively impact us. The continued spread of COVID ‑ 19 has led to and could continue to lead to severe disruption and volatility in the United States and global capital markets, which could result in a decline in stock price, increase our cost of capital and adversely affect our ability to access the capital markets in the future. In addition, trading prices on the public stock market have been highly volatile as a result of the COVID ‑ 19 pandemic. • Regulatory Reviews : The operations of the FDA or other regulatory agencies may be adversely affected. In response to COVID ‑ 19, federal, state and local governments are issuing new rules, regulations, orders and advisories on a regular basis. These government actions can impact us, our members and our suppliers. There is also the possibility that we may experience delays with obtaining approvals for our IND applications, BLA s , and/or NDA s . We have formed, and may in the future form or seek, strategic alliances or enter into additional licensing arrangements in the future, and we may not real i z e t h e b e n e fits of such alliances or li c e n s i ng ar r a n gem e n t s . We have formed, and may in the future fo r m or seek, str a t e gic a l li a nces, c rea t e joint v e ntures or co l l a bo r at i ons or e nter in t o additio n al licensing arrangements with third a n d relat e d parties that we believe will complement or augment our dev e lopm e nt and com m erc i a l iz a tion effor t s with respe c t to o u r product candidates and any future product candidates that we may develop. For example, we have entered into an agreement w h er e by Vir a cta granted to us exclusive world-wide rights to Viracta’s Phase II drug candidate, VRx-3996, for use in combination with our plat f orm of NK cell therapies. However, i f Vir a cta f a i l s to raise suffic i ent c a pit a l to comp l e te t heir pivo t al P hase II t ria l , if the i r t rial i s u n s uc c e s sful, or if our future clini c al trial of NK cell therapy in combination with VRx-3996 fails, the value of the Vi r acta license would be a d ver s ely affected. 83 Table of Contents Any of these relationships may require us to incur non-recurring and other charg e s, increase our near and long-term expenditur e s, issue s e curi t ies that dilute our existing stockholders or disrupt our management and business. In addition, we face signif i cant competition in seeki n g appropriate st r a tegic partners and the negotiation process is time-consuming and complex. Moreover, we may not be suc c essful in our efforts to estab l ish a strategic partnership or other alternative arrangements for our product candi d a t e s because they may be deemed to be at too early of a stage of development f or collaborative ef f ort and third parties may not view our product candidates as having t h e requisite po t ential to demonstrate safety a nd e ffic a cy. If we license products o r acquire busine s ses, we may not be able to r e alize the benefit of such t r ansactions if we are unable to suc c essfully in t e gra t e them wi t h o u r existing operations and company culture. We cannot be certain that, following a strategic transaction or l i cense, we will a chieve the revenue or sp e c if i c net in c ome th a t j us t ifi e s such transa c t i on. Any del a ys in en t e ring into new s t rat e gic partnership agreements related to o u r product candidates could delay the development and commercialization of our product c a ndidates in certain geographies for certain indications, which would h a rm our b u siness prospects, financial condition and results of operations. O u r ma nu facturi n g fac i li t i e s may be n e gat i ve l y impacted by the ongoing COVID-19 pa n demic. The COVID ‑ 19 pandemic, including any actions we have taken in response, may disrupt our internal operations, including by heightening the risk that a sig n ificant portion of our workforce could suffer illness or othe r w ise not be permitted or be unable to work, a n d required that certain of our employees work remotely, which has heightened certain risks, including those relat e d to cybersecurity and int e rnal controls. Additionally the COVID ‑ 19 pandemic has impacted, and may conti n ue to impact, our office and manufa c turing lo c a t i ons, a s w e ll as our analytica l , process developme n t, a nd tr a nsit i on a l resea r ch teams, including through the effects of facility closures, reductions in o pe r ating h ours and other social distancing e fforts. For example, if even a small number of our employees in our working clusters related to manufacturing, analytical, process development, or translational r e s e ar c h, t e s t e d p o sitive for COVID ‑ 19, it would require us to temporarily close a number of our offic e s or manufacturing fa c il i t i es a n d t e mpora r ily suspend operations in order to con d uct a deep cle a n of the facilities in order to ensure the safety of our employees. Additionall y , we cannot predi c t wh e th e r th e s e c ondit i ons and concerns will continue or whether we will experience more significant or frequent disruptions i n the fu t ure, in c lud i ng the complete closure of one or more of our facilities. Our fai l ure to comp l y with sta t e, nation a l and/or international data p r otection laws and regulatio n s could lead to government enfo r c e ment actions and significant penalties against us, and adve r sely impact our operating results. There are numerous laws and legislative and regu l a t ory in i ti a tiv e s at th e federal and state levels addressing privacy and security concerns, and some state privacy laws apply more broadly than the Health Insuran c e Portability and Accountability Act (“HIPAA ” ) a n d associated re g ulations. For example, California recently enacted legislation—the Cali f ornia Consumer Privacy Act (“CCPA”)—which went into effect on January 1, 2020. The CCPA, among other things, creates new data privacy and secur i ty obligations for covered companies and provides new privacy rights to California con s umers, including the right to opt out of certain disclosures of their informatio n . The CCPA also provides for c i vil pen a lt i es a s well a s a priv a te right of action with statuto r y damages for certain data br e a c hes, ther e by po t ent i al l y i ncre a sing r i sks asso c ia t ed with a data breach. Although the law includ e s limited exceptions, including for certain information collected as part of clinic a l tri a ls a s spec i fi e d in the law, it may regulate or impact our proce s sing of personal information depending on the context. Additionally, a new privacy law, the California Privacy Rights Act (“CPRA”), was approved by California voters in November 2020. The CPRA significantly modified the CCPA, which may require us to modify our practices and policies and may further increase our compliance costs and potential liability. To the extent these state laws as well as other federal and state privacy laws, including new laws and changes in existing laws, apply to our business and operations, our compliance costs and potential liability with respect to personal information we collect could expose us to great liability and increase compliance costs. There are also various laws and regulations in other jurisdictions rel a ting to privacy and security. For example, European Uni o n (“ E U”) member states and other foreign jurisdictions, including Switzerland, have ado p ted data protection laws and r e gulations which impose signific a nt comp l i a nce o b ligations on us. Moreover, the EU Data Protection Directive, which formerly governed the coll e ction, process i ng and other use of personal health or other data in the EU, was replaced with t h e EU General Data Protection Regulation ( “ GDPR”) in May 2018. The GDPR, which is wid e -ranging in scope and applies extraterritorially, imposes sev e ral requirements relating to the consent of the individuals to whom the personal d a ta r e la t e s, the infor m a t ion provided to such individuals, the security and confidentiality of the personal data, data breach n o tification, the adopti o n of appropriate privacy g o vernance, including policies, p r ocedures, training and audits, and the use of t h ird-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU, including to the United States, provides an enforcement authority and imposes large pe n a lties for noncompliance, including the potential for fines of up to €20 million or 4% of the ann u al global r e venues of the n o ncompliant entity, whichever is greater. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiarie s , including employee infor m at i on. 84 Table of Contents Complying with these numerous, complex and o f ten changing regulations is expensi v e and difficult, and f a ilure to c omply with any pri v acy laws or data security laws or any security incident or breach involving the misapp r opriation, loss or other unauthorized processing, use or disclosure o f sensitive or confid e nti a l pat i ent, c onsumer or other personal i n formation, whether by us, one of our CROs or business associates or another third party, could adversely affect our business, financial condition and r e sults of operations, including but not l im i ted to: inv e s t iga t ion cost s ; material fines and penalties; compensatory, special, punitive and statutory damages; litigati o n; consent orders regarding our pri v a c y and secur i ty pra c ti c es; requireme n t s that we provide notices, credit monitoring s e rvices and/or credit restorat i on services or other relevant services to impacted i n dividu a ls; adverse actions against o u r licenses to do business; repu t ational damage; a n d injunctive rel i ef. T he r e c e nt imp l em e nta t ion of the CCPA and GDPR has incr e a s ed our responsibility and liability in r e lation to personal data that we process, including in clinical trials, and we may in the future be r e quired to put in place a ddition a l m e c hanisms to e nsure c ompli a n c e with the CCPA, G DPR and other applicable laws and r e gulations, which could d i vert m a nagement’s attention and increase our cost of doing bu s iness. In addition, new regulation or leg i slative actions regar d ing data privacy a n d security (together with applicable industry standards) may inc r ease our costs of d o ing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry s t andards relating to privacy and data protection in the United States, the EU and other jurisdiction s , and we cannot determine the imp a ct such future l a ws, regu l a t ions and standards may have on our business. We cannot assure you that our CROs or other third-party service providers with access to our or our customers’, suppliers’, tr i al patients’ and employees’ personally identifiable and other sensitive o r confide n tial information in relation to which we are responsible will not breach contractual o b ligations imposed by us, or that they w ill not experience data security breache s , which could have a corresponding effect on our business, including p u tti n g us in breach of our obligations under privacy laws and r e gulatio n s and/or which could in turn adve r s ely affect our bus i ness, results of operations and financial condition. We cannot assure you that our contractual measures a nd our own privacy and security-related safeguards will p r otect us from the risks associ a t e d with the t hird-par t y processing, use, storage and tr a ns m iss i on of su c h i nforma t ion. Any of the foregoing c ould have a material adverse effect on our business, financial condition, results of operations and prospects. We will be heavily dependent on our senior management, particularly Dr. Soon-Shiong, our E xecutive C hairman, and a loss of a member of our senior manageme n t t e a m in t h e fu t u r e , e ven if only temporary, c ould harm o u r busines s . If we lose members of our senior manageme n t for a short or an extended time, we may not be able to find appropriate r e placemen t s on a t i m e ly b a s i s, and our business co u l d be adversely affec t ed. Our existing operations and our future development depend to a significant extent upon the performance and active participation of certain key individuals, particularly Dr. Soon-Shiong, our Executive Chairman. Although Dr. Soon-Shiong focuses heavily on our matters and is highly active in our management, he do e s devote a si g nificant amount of his time to a number of different endeavors and companies, including NantHealth, Inc., Nan t Media Holdings, LLC (which operates t h e Los Angeles Times and the San Diego Union-Tribune) and NantWorks, which is a collection o f multiple companies in the healthcare and technology space. The r i sks related to our dependence upon Dr. Soon-Shiong are particularly acute g i ven his ownership percentage, the commerc i al and other relationships t h at we have with entities aff i li a t e d with hi m , h i s role in our company and his pub l ic reputati o n. We may also be dependent on additional funding from Dr. Soon-Shiong and his aff i liates, which may not be available when needed and which he is under no obligation to p r o vide. If we were to lose the services of Dr. Soon-Shiong for a short or an extended time, for any reason, including, for example, due to the contraction of COVID ‑ 19, we may not be able to find appropriate replace m ents on a t i me l y b a s i s and our financial condition and results of operations could be materially adversely affected. Competition for qualified personnel in the biotechnology and pharmaceuticals industry is intense due to the limited number of i ndividuals who possess the skills and experience required. To induce valuable emp l oyees to remain at our company, in addition to salary and cash incentives, we have provided, and plan to contin u e providing, e quity in c e ntive a w ards that v e st o ver tim e . The value to employees of equity incentive awards that vest over time may be significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more luc r ative offers from other companies. Despite our e ffor t s to ret a in valu a ble e m ploye e s, me m be r s of our manageme n t , scientific and d e vel o pment t ea m s m a y ter m ina t e the i r e mploy m ent with us on short notice. We face sign i ficant competition for employee s , particularly scientific per s onnel, from other biopharmaceutical companies, which include both publicly traded and privately held companies, and we may not b e able to hire n e w em p l oyees quickly enough to meet our nee d s. We do not have employment agreements with our key employees and all of o u r employees a r e hired on an “ a t-wi l l” basis, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain “key m an ” in s u r a n c e p o l i c i e s o n the l i v e s o f th e s e individuals or the lives of any of our other employees. We may not be able t o a ttr a c t and re t a in quality personnel on ac c ep t a ble t e rms, or a t a l l, which may cause our business a n d operating results to suffer. 85 Table of Contents We will need to grow the size and capabili t ies of our organization, and we may experie n ce difficulties in managing this growth. Our operations will be dependent u p on the s e rv i ces of our exe c ut i ves a nd our employees who are en g a g e d in research and develop m en t . The loss of the services of our executive officers or s e nior research personnel could delay our product development programs a n d our r e search a nd development efforts. In order to develop our business in accordance with our business p l an, we will have to hire a dditional qualified personnel, including in the areas of resea r ch, m a nufa c turing, c lin i cal t ria l s m a nagement, regulatory affairs, and sales and marketing. We are continuing our efforts to r e cruit and hire the necessary employees to support our planned operations in the near term. However, competition for quali f ied em p l oyees among com p ani e s in the biotechnology and biopharmaceutical i ndustry is intense, and no assur a nce can be given that we will be able att r act, hire, retain and motivate the highly skilled employees that we need. Future growth will impose significant added responsibilities on members of management, includi n g: • i dentifying, recruiting, integrating, mai n t a in i ng, and m otiv a ting additional employees; • m anaging our internal develop m ent efforts effectively, including the clinical and FDA rev i ew process for our product candidat e s , wh i l e complying with our contractual obligations to contractors and other third parties; and • i mproving our operational, financial and management controls, re p o r ting systems, and procedures. Our future financial performance and our ability to commercialize our product c a ndidates will depend, in part, on our ability t o effectively manage any future growth, and our management may also have to divert a disproportionate amount of our atte n t ion away from day-to-day activit i es i n ord e r to devote a substan t ial amount of time to manag i ng these growth activities. We currently rely, and for the foreseeable future we exp e ct to re l y, in substan t i a l part on certain independent organizations, advisors and c onsultants to provide certain services. There can be no a s surance that the services of these indep e ndent organizations, a dvisors and consult a nts will continue to b e ava i lab l e to us on a t i me l y b a s i s when n e e d ed, or that we can find q ualified replacemen t s. In addition, if we are unable to ef f ectively manage our o u tsourced activities or if the quality, compliance or accuracy of the services provided by c o nsultants is compromised for any reason, our cl i nic a l tri a ls may be extended, delayed, or terminated, and we may not be able to obtain regulato r y approval of o ur product candidates or otherwise advance our b u siness. There can be no assurance th a t we wi l l be a ble to m a nage our e xist i ng consultants or find oth e r competent outside contra c tors a nd consultants on economically reasonab l e terms, if at all. If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to su cc e s sfully implem e nt the t a sks necessary to further develop and commercialize our p r oduct candidates and, accordi n gl y , may not achieve our res e arch, d e ve l opmen t , and c om m erc i a l iz a tion goals on a timely b a s i s, or at a ll. If we engage in future acquis i tions or strate g i c partne r ships, this may increase our capital requirements, dilute our stockhol de r s , c a u s e u s t o i n c u r debt or assume contingent liabilities, and subject us to oth e r risk s . We may evaluate various acqui s itions and strategic par t nerships, including licensing or acqu i ring complementary products, inte l lectual property rights, technologies, or business e s. Any potential acquisition or strategic partnership may ent a il numerous risks, including: • i ncreased operating expenses and cash requirements; • t he assumption of additional indebtedness or c o ntingent l iab i li t i e s; • t he issuance of our equity securities; • a ssimilati o n of operation s , intellectual property a n d products of an acquired compa n y or p r oduct, including d i fficulties associ a ted with integrating new personnel; • t he diversion of our managem e nt’s attention from our existing product programs a nd initiatives in pursuing such a strategic m e rger or acquisition; • retention of key employees, the loss of k e y personnel, and uncert a inties in our ability to mai n tain key business relationship s ; • r i s ks a nd un c er t a in t ies asso c ia t ed w i th t h e other pa r ty to such a transaction, inc l uding the prospects of that party and their existing products or product candidates and regulatory approvals; and • our inability to generate revenues from acquired technology and/or products sufficient to meet our objectives in undertaking t he acquisition or even to offset the associated acquisition and maintenance costs. 86 Table of Contents Depending on the size and nat u r e of future strategic acquisitions, we may acquire assets or busine s ses that require us to raise a ddit i onal c a pit a l or to o p erate or manage businesses in which we have limited experience. Mak i ng larger acquisitions that require us to raise additional capital to fund the acquisition will expo s e us to the risks associated with capital raising activities. Acquiring and t h ere a fter operating larger new busin e s s e s w i ll a l so increase our management, operat i ng and reporting costs and burdens. In addition, if we undertake acquisitions, we may issue di l utive s e curiti e s, a ssume or incur debt o b ligations, incur large one- t ime expenses and acquire int a ngible assets that co u l d res u lt in significant future a m ort i za t ion expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow o r ob t ain a c c e ss t o technology or products that m a y be important to the development of our business. We may seek orphan drug status or B reakthrough T herapy designation for one or more of our product candidates, but even if either is granted, we may be unable to maintain any b e nefits associated with B reakthrough T h erapy designation or orphan drug status, including market exc l u s i v i t y. Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a ra r e disease or cond i tion or for which there is no r easonable expectation that the cost of developi n g and making ava i lable in the U.S. a drug or biologic for a disease or c ondition will be recovered from sales in the U.S. for that drug or biologic. If a product that has orphan drug designation s ubsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan produ c t exclusivity, which means that the FDA may not a p p r o ve any other applications, including a full BLA to market the same drug or biologic for the same indication for seven y e ar s , ex c e pt in lim i ted c i rcumst a nc e s, such as a showing of clinical s uperiority to the product with orphan drug exclusivi t y. In 2012, the FDA est a blished a Breakthrough The r apy d esignation, which is intended to expedite the development and review of products that treat serious or life-threatening conditions. We may seek orphan drug status for one or more of our product cand i dates, but exclusive marketing rights in the U.S. may be lo s t if we seek approval for an indication broader than the orphan d e signated indicat i on and m a y be lost if the FDA l a t e r d e t e rmin e s th a t the requ e st f o r designation was materially defective or if we are unable to assure suffi c i e nt qu a nti t i e s of the p r o duct to meet the needs of patients with the rare disease or condition. In addition, we may seek B reakthrough T herapy d e signati o n for o n e or more of our product candidates, but there can be no assurance th a t we wi l l rec e ive such designation. We may b e come i n v olv e d i n securit i es l it i gation or stockholder derivative l it i gation i n conn e c t ion wi t h the merger with Im m u ni t yBio, and this could divert the attention of our ma n agement and harm our bus i n e s s , and i n s u rance c ov e rage may not be s u ffi c ie n t to cov e r all r e l ated costs and damages. Securities litigation o r stockho l der derivative litigation frequently follows the annou n cement of certain significant business t rans a c tions, such as the s a l e of a business division or announcement of a bu s iness combination transaction. We are involved in this type of litigation in c o n nection with the merger with ImmunityBio, and we may become involved in this type of litigation in the future. Litigation often is expensive and dive rt s management’s attention and reso u r ces, which could adversely affect our business and the combined company. We e x pect to rely on third pa r ties to p e rfo r m many e ssential s e r v i c es for any products that we commerci al i z e , i n c l u d i n g s e r v i c es r e lat e d to distribution, gove r nme n t pri c e r e porti n g, c u stom e r s e r v i c e, a cc ounts r e c e ivable management, cash coll e ction and adverse event re por t i n g. If t h ese third parties fail to perform as expected or to comply with legal and regulatory req u ire m ents, our abil i ty to com m erc i a l ize our c u r r e n t or f u ture product candidates w i ll be s i gn i ficant l y impa c ted and we may be subject t o regulatory san c tions. We expect to retain third-party service prov i ders to perform a variety of functions rel a ted to the sale of our current or futu r e product candidates, key aspects of which will be out of our direct control. T h ese service providers may provide key services related to distribution, c ustomer service, accounts receivable management, and cash c oll e c t ion. If we r e ta i n a servi c e provider, we would substanti a lly re l y on it as w e ll as o t her third-party providers that perform services for us, including entrusting our inventories of products to their c a re and handling. If these thi r d - party ser v i c e providers fail to co m ply w i th a ppli c ab l e laws a nd regulations, fail to m e et exp e c t ed d e ad l ines or otherwise do not carry out th e ir c ontr a ctu a l duti e s to us, or encounter physical or natural damage at their f aciliti e s, our ability to deliver product to meet commercial demand wou l d be significantly impaired and we may be subject to regulatory enforcement action. In addition, we may engage in the future with t h ird parties to perform various other services for us r el a ting to adve r s e e v e nt reporting, safety database management, fulfillment of requ e sts for medical information regarding our produ c t candidates and relat e d services. If the qual i ty or accuracy of the data m a int a in e d by the s e s e rvi c e providers is insufficient, or these third parties oth e rwise fail t o co m ply with regulatory requiremen t s re l a t e d t o a dverse event reporting, we could be subject to regulatory sanctions. 87 Table of Contents Add i tion a lly, we m a y c o n t ra c t in t he future with a third par t y to calculate and report pricing information mandated by various government programs. If a third party fails to timely report or adj u st prices as required or errs in calculating government pric i ng information from t r ansac t ion a l d a ta in our financial records, it could impact our d i scount and rebate liability, and po t e n tially subject us to regula t ory sanctions or FCA lawsuits. Obtaining and maintaining regulatory approval of our product can d idates in one jurisdiction does n o t mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions. In order to market and sell our product candidates outside the United States, we or our third-party collaborators may be requi r ed to obtain separate marketing approvals and comply with numerous and vary i ng regulatory r e quirements. Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does n ot guarantee that we will be a ble to obta i n or ma i nt a in r e gulatory approval in any other j urisdiction, while a failure or delay in o btaining regulatory approval in one jurisdiction m a y have a negative effect on the regulatory approval process in others. Approval policies and requirements may va r y among jurisdictions. For example, e v en if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in forei g n jurisdictions must also approve the manufacturing, marketing a nd promotion of the product candidate in t hose countries. Approval procedures vary among jurisdict i ons and can inv o lve requirements and administ r a tive r e view periods different from, and greater t han, those in the United States, including additional preclinical studies o r clinical t r ials as c linical trials c o nducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdict i ons. In many jurisdictions outside the United S t ates, a product candidate must be approved f o r r eimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our product candidates is also subject to approval. We or o u r collaborators may not b e able to file for reg u latory a p p r o v al of our product candidates in international jurisdicti o ns or o btain approvals from regulatory authorities outside the United S t a t e s o n a t im e ly b a s i s , if a t a l l. We may also submit m a rketing applications in o t her countries. Regulatory authorities in j u risdictions outside of the United St a tes have requirements for approval of product candidat es with which we must comply prior to marketing in those jurisdictions. O b taining foreign regulatory approvals and compliance with foreign regulatory requirements could r e sult in significant delays, d i fficulties and costs for us and could delay or prevent the introduction of our product candidates in cer t ain countries. If we fail to comply with the regulatory requirements in internat i onal markets and/or receive applicable marketing approvals, our target market will be r e duced and our ability to re a li z e the full m a rket pot e nti a l of our p roduct candidates will be harmed. A v ariety of r i s ks associat e d with ma r keti n g our product candidates internationally could materially adversely affect our busi n e ss. We plan to seek regulatory approval of our product candidates outside of the United States and, accordingly, we expect that we will be subj e c t to additional risks related to operating in foreign countries if we ob t ain the necessary approvals, including: • differing regulato r y requirem e nts in foreign countries; • unexpected changes in tariffs, trade b a rriers, price and exchange controls and o t her regulatory requirements; • e conomic weakness, including inflation, or political instability in particular fore i gn economies and markets; • c ompliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including wi t hholding of payroll taxes; • foreign currency fluctuations, which could re s ult in in c re a s e d op e r a t i ng expenses and reduced revenues, and oth e r obligations incident to doing business in an o t her count r y; • difficulties sta f fing and managing foreign operations; • workforce uncertainty in countries where labor unrest is more common than in the United States; • differing payor reimbursement regimes, governm e ntal payors or patient self-pay systems, and price controls; • potential liability under the Foreign C o rrupt Practices Act of 1977, or the FCP A , or comparable foreign regulations; • c hallenges enforcing our contrac t ual and intellectual property rights, especially in those for e ign countries that do not resp e ct and protect i nte l le c tu a l p r op e rty rights to t he s a me ex t e nt as the Un i t e d S ta t es; • production s h o r tages resulting from any events affecting raw mat e rial supply or manufact u ring capabilities abroad; 88 Table of Contents • t he impact of public health epidemics on the global economy, such as the coronavirus pandemic currently hav i ng an impact throughout the world; and • business interruptions resulting from geo-po l itical actions, including war and terrorism. These and oth e r risks a s soc i at e d wi t h i nter n ational operations may material l y adv e rsely aff e ct our a bi l ity to a t t a in or m a in t a i n profitable operations. We have n ev e r co m m e r c ial i z e d a product candi d ate before, and we m ay l ack t h e n e cessary e xpertis e , personnel and r e so u r c e s t o s u c c e ssf u l ly commercialize any products on our own or together with s u itable collaborators. We have never commercialized a product candidate, and we currently have no therapeutic sales for c e, marketing or distribution c a pabi l it i es. To ach i e ve commercial success for t h e product candidates, which we may li c ense to others, we will rely on the assistance and guidance of those collaborators. For prod u ct candidates for which we retain comm e rcialization rights and marketing approval, we will have to develop our own sales, marketing and sup p ly organization or outsource these a c tivities to a third party. Factors t h at may affect our ability to commercialize our product c andidates, if approved, on o u r own include recruiting and retaining ad e quate numbers of effective sales and mar k eting personnel, deve l oping adequate educational and marketing programs to increase public acc e ptance of our approved product candidates, ensuring regulatory compliance of our compan y , empl o yees and third parties under applicable h e althcare laws and other unforeseen costs associated with creating an independent sales and marketing organization. Developing a sales a n d marketing organization will be expensive and time-consuming and could delay the launch of o ur product c a ndidates upon approval. We may not be able to build an effective sales and market i ng organization. If we a r e unable to build our own distribution and marketing capabilities or to find suitable partners for the commercialization of our product candidates, we may not genera t e revenues from them or be able to reach or sustain profitability. R i s k s R e lat e d to Government Regulation The FDA regulatory ap p roval process is len g thy and time-consuming, and we m ay exp e r i e n ce sig n ifi c ant de l ays i n t h e cl i n i c al de v elopment and regulatory approval of our product candidates. We have not previously sub m itted a BLA or NDA to the F DA, or similar approval filings to compa r ab l e fore i gn au t horit i es. BLAs a nd N D As mu s t include extensive preclini c al and clinical d a ta and supporting information to establish t h e product candidate’s safety and efficacy for NDAs, or safety, p u r ity and potency for BLAs, for each des i red indication. Additionally, the patient p o pulation is defined per the discussion wi t h the FDA as patients who have progressed following initial systemic therapy for recurrent or m e t a s t at i c disease, whi c h in clude many of the more advan c ed pat i en t s enrolled to date. Our current bel i efs regarding the re g i stration pathway for our A n ktiva product candidate are based on our interpretat i on of our communications with the FDA to date and its efforts to address such communic a tions, which m a y be in c orre c t. Fu r ther, e nroll m ent in our t ria l s may need to be further adjusted based on future feedback from the FDA or ot h e r regulatory agency inp u t. The revised protocol whi c h further defines the patient population to include more advanced patients in the study, may ha v e an adverse effect on the results reported to date, c h anges to implement a n independent review committee and assay validat i on and implementation, and the data within this study may not ultimately be supportive of product a pproval, all of which could result in significant delays to our currently anticipated timeline for deve l opment and approval of our product candidates or prevent their approval ent i rely. We may also experience delays, including delays ar i s i ng from the n e ed to i ncr e a se enrol l m e nt, in comp l e t i ng planned clinical t r ials for a va r iety of reasons, including delays related to: • t he availability of financial resourc e s to com m ence a nd c ompl e te the p l anned tr i a ls; • reaching agreement on acceptable contra c t terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • obtaining approval at each clinical trial site by an IRB or cen t ral IRB; • recruiting suitable patients to participate in a trial; • h a ving patients complete a trial or return for post-treatment follow-up; • clinical trial sites deviating from trial protocol or dropping out of a trial; • adding n e w clinical trial sites; 89 Table of Contents • m anufacturing sufficient quantities of qual i fied materials under cGMP and appl y i ng them on a subje c t by subject basis for use in clinical trials; or • t imely implementing or validating changes to our manufacturing or quality control processes and methods needed to address FDA feedback. We could also encounter delays if physicians encounter unresolved e t hical issues associated with enrolling patients in clinical trials of our product candidates in lieu of prescrib i ng existing t r eatments that have e s tablished safety and efficacy profil e s. Furth e r, a c l ini c al trial may be suspended or terminated by us, the IRBs for the institutions in which such trials are being conducted by the FDA or other regulatory authorities, or recommended for suspension or termination by DSMBs due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in g o vernmental regula t ions or administrative actions or l a ck of adequate funding to continue the clinical trial. If we experience termination of, or delays in the completion of, any clinical trial of our product candidates, the commercial pro s pects for our product candidates will be h a rmed, and our ability to generate product revenues will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenues. Results for any patient who receives compassionate use access to our product candidates should not be viewed as representative of how the product candidate will perform in a well-controlled clinical trial, and cannot be used to establish safety or efficacy for regulatory approval. We often receive requests for compassionate use access to our investigational drugs by patients that do not meet the entry criteria for enrollment into our clinical tri a ls. Generally, patients requesting compassionate use have no other treatment alternatives for life threatening conditions. We evaluate each compassionate use request on an individual basis, and in some cases grant access to our investigational product candidates outside of our sponsored clinical trials if a physician certifies that the patient receiving treatment is critically ill and does not meet the entry criteria for one of our open clinical trials. Individual patient results from compassionate use access may not be used to support submission of a regulatory application, may n o t support approval of a product candidate and should not be considered to be indicative of results from any on-going or future well-controlled clinical trial. Before we can seek regulatory approval for any of our product candidates, we must demonstrate in well-controlled clinical trials statistically significant evidence that the product candidate is both safe and effective for the indication we are seeking approval. The results of our compassionate use program may not be used to establish safety or efficacy or regulatory approval. The clinical and commercial utility of our product candidates are uncertain and may never be realized. Our current product can d idates are in the early stages of development. We currently have ongoing clinical trials to evaluate our r e spective product cand i dat e s. Success in early clinical trials does not ensure that large-scale clinical trials will be successful, nor does it predict final results. In addition, we will not be able to treat patients if we cannot manufacture a sufficient quantity of Anktiva or therapies that meet our minimum specifications. In addition, Anktiva and many of our other product candidates have only been tested in a small number of patients. Results from these clinical trials may not necessarily be indicative of the safety and tolerability or efficacy of our product candidates as we expand into larger clinical trials. We may not ultimately be able to provide the FDA with substantial clinical evidence to support a claim of safety, purity and potency sufficient to enable the FDA to approve our product candidate for any indication. This may be because later clinical trials fail to reproduce favorable data obtained in earlier clinical trials, because the FDA disagrees with how we interpret the data from these clinical trials or because the FDA does not accept these therapeutic effects as valid endpoints in pivotal clinical trials necessary for market approval. We will also need to demonstrate that our product candidates are safe. We do not have data on possible harmful long-term effects of our product candidates and do not expect to have this data in the near future. As a result, our ability to generate clinical safety and effectiveness data sufficient to support submission of a marketing application or commercialization of our prod u ct candidates is uncertain and is subject to significant risk. 90 Table of Contents We are, and if we recei v e regulatory a p proval of our product c andida t es, wi l l c on t i n ue t o be subject to ongoing regulatory obl i gations and continued r e g u latory re v iew, w h i c h m a y r e sult in significant additional expense and we may be sub j e c t t o p e na l ti e s if we fail to comp l y w ith regula t ory requirements or experience unanticipated problems with our product candidates. Any regulatory approvals that we receive for our product candidates will requi r e surveillance to monitor the safety and efficacy of the product ca n didate. The FDA may also require a REMS to app r ove our product candidates, which could entail requirements for a medication guide, phy s i c ian communication plans or addit i onal elements to ensure safe use, such as restricted distribution methods, patient regist r ies and other risk minimization tools. The FDA may also requi r e post-approv a l P hase IV trials. Moreover, the F DA and comp a rable foreign regulatory authorities will continue to closely monitor the safety profile of any product even after approval. If the FDA or comparable foreign regulatory authorities b e come a w are of new safety information after approval of any of our product candidates, t h ey may withdraw approval, require lab e ling changes or es t a blishm e nt of a REMS or similar strategy, impo s e significant restrictions on a product’s indicated uses or m a rketing, or impose ongoing requirements for pot e nti a lly cost l y p o st - a pproval studies or post - market surveillance. Any such restric t ions could limit s a les of the product. In addition, we, o ur contractors, and o u r collab o r ators are and will remain responsible for FDA compliance, including requirem e nts related to product design, t e s t ing, clinical trials and preclinical studies approval, manufacturing processes and quality, lab e ling, packaging, d i stribution, adverse event and deviation reporting, storage, advertising, marketing, promotion, sale, imp o r t, export, sub m issions of safety and other post-ma r keting information and reports such as deviation reports, registration, product listing, annual user fees, and reco r dkeeping for our product candidat e s. We and any of o u r collaborators, including our con t ract manufacturers, could be s ubject to periodic unannounced ins p ections by the FDA to monitor and ensure compliance with regulatory requ i rements. Application holders must further notify the FDA, and depending on the nature of the c h ange, obtain FDA pre-approval for product and manufacturing changes. The cost of compl i ance with post-approval regulat i ons may have a negative effe c t on our operating results and financial condition. Later discovery of previously unknown problems with our product cand i dates, including adverse events of unanticipated severity or frequency, that the prod u ct is less effective than previously tho u ght, problems with our third-pa r ty manu f acturers or manufacturing processes, or fa i lure to co m ply wi t h regulatory requirements, may result in, among o t her things: • restrictions on the marketing, distribution, or manufacturing of our p r o duct candidates, withdrawal of the product f r o m the market, or voluntary or mandatory product recalls; • restrictions on the labeling of our produ c t candidates, including required additional warnings, s u ch as black box warnings, contraindications, pre c autions, and restrictions on t h e approved indication or use; • m odifications to p r omotional p i e c e s ; • c hanges to p r o d uct labeling or the way the product is administered; • l iability for harm c a used t o p a ti e nts or subjects; • fines, restitution, disgorg e m e nt, warning l e tt e rs, un t it l ed letters, or holds on or ter mi nat i on of cl i ni c al tr i a ls; • refusal by t h e FDA to approve pending appli c ations or supplements to approved applications filed by us or suspension or revoc a tion of license approvals; • product seizure or detention, or refusal to permit the import or export of our product candidates; • i njunctions or the imposition of civil or cri m in a l p e na l ti e s, including imprisonment; • F DA debarment, debarme n t from government contr a cts, and refusal of future orders und e r existing cont r acts, excl u sion from fed e ral healthcare programs, consent decrees, or corporate integrity agreements; • regulatory authority issuance of safety al e rts, D e ar H e a l thc a re Prov i der le t t e rs, press r e leases, or o t her communications con t aining warnings or other safety i n formation about the biologic; • reputational harm; or • t he product becoming less competitive. Any of these events could further have o t her material a n d adverse effects on our op e rations and business and could adversely impact our stock p r ice and could significantly harm our busi n ess, financial condit i on, results of operat i ons, and p r o spects. 91 Table of Contents The FDA’s and other regulatory authorities’ policies may change, and add i tional g overnment r e gulations may be enacted that cou l d prevent, limit or delay regulatory approval of our product candidates. We cannot predict t h e likelihood, nature or extent of government regulati o n that may arise from future l e gisla t ion or ad m inistr a t i ve a c t ion, e i ther in the Unit e d S t a tes or ab r o a d. If we a r e slow or un a ble to adapt t o ch a ng e s in existing requirements or the adoption of new requirements or policies, or if we are not a b le to maintain regulatory compl i ance, we may lose any marketi n g approval that we may have obtained, be subject to other regu l atory enfor c e m ent a c tion, and we may not achieve or sustain profitability. Our GMP-in-a-Box will be regulated by the FDA as a medical device, and regulatory com p liance for medical devices is expensive, complex and uncertain, and a failure to com p ly could lead to enforcement actions against us and o t her negative consequen c es for our busine s s. The FDA a nd si m il a r a genc i es r e gula t e med i c a l devices. Complying with t h ese regulations is costly, time-consuming, complex and u ncertain. For instance, be f ore a new medical device, or a new intended use for an existing dev i ce , c a n be m a rketed in the Unit e d State s , a c o mpany must f irst submit and receive either 510(k) clearance or pre-marketing approval from the F D A, unless an exe m ption applies. FDA regulations and regulations of similar agencies are wide-ranging and include, among other things, oversight of: • product design, development, manufacture (including su p plie r s) and testing; • l aboratory and preclinical s t udi e s and cl i nic a l tri a ls; • product safety and effectiveness; • product labeling; • product storage and shipping; • record kee p ing; • pre-market clearance or approval; • m arketing, adverti s ing and promotion; • product sales and distribution; • product changes; • product recalls; and • post-market surveillance and r e porting of deaths o r serious injuries and certain malfunctions. Medical devices regulated by the FDA are subj e c t to gen e ral con t rols whi c h in c lud e: r e gistr a tion w i th the FDA; list i ng c omm e rc i ally distributed prod u cts with the FDA; complying with cGMP under Quality Systems Regulations; filing reports with t h e FDA of and keeping recor d s r e l a tive t o certain types of adverse events associated with devices under the medical device repo r ting regulation; assuring that device la b eling complies with device labeling requirements; reporting c e rtain device field removals and corrections to the FDA; and obtaining pre-market notification 510(k) clearance for devices prior to marketing. Some devices known as 510(k)-exempt d e vices can be m a rketed without prior marketing-clearance or a p proval from the FDA. In addition to the general controls, some Class II medical devices a re also sub j ect t o spe c ial controls, including adherence to a particular guidance d o cument and compliance with the performa n ce standard. Instead of obtaining 510(k) cle a rance, most Class I II devices are subje c t to pre-m a rket approval, or PMA. The FDA can also refuse to clear or approve pre-market applications for any medical device we develop. Any enforcement action by the FDA and other comparable non-U.S. regulatory agencies c ould have a material adver s e effect on our business, f i nancial condit i on and results of operations. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA or state agencies, which may i n clude any of the following a c tions: • un t it l ed le t ters, warn i ng l e tt e rs, fines, in j unctions, consent dec r ees and civil penalties; • un a nti c ip a ted exp e nditur e s to address or defend such actions; • c ustomer notificatio n s for repair, replacement or refunds; • recall, detention or seizure of our products; • operating restrictions or partial suspension or total sh u t down of p r o duction; 92 Table of Contents • refusing or delaying our requests for 510(k) clearance or PMA approval of new products or modified products; • operating r e s t ri c tions; • withdrawing 510(k) clearances or PMA approvals that h a ve already been granted; • refusal to grant export approval for our products; or • c riminal prosecution. If a n y of these events were to occur, it would have a material and adverse effect on our business, financial condition and res u lts of operatio n s. We may n o t be able to obtain the neces s ary clearances or approvals or may be un d uly delayed in doing so, for any medical device products we develop, which could harm our business. Further m ore, even if we are g r anted r e gulatory clearances or approvals for any medical device product s , they may include sig n ificant limitations on the i ndicated uses for the product, which may limit t h e market for the product. The FDA also regula t es the a d verti s ing a n d promotion of medical devices to ensure that t he cl a ims are consist e nt w i th t he i r r e gu l atory clearances or approvals, that there are adequate and reasonable data to substantiate the c l ai m s and that t he promotional labeling and adv e rtising is n e i t her f alse nor misleading in any respect. If the FDA determines that any of our adv e rtising or promotional claims a r e misleading, not subst a ntiated or not permi s sible, we may be subje c t to enforc e m e nt actions, including warning letters, and we may be required to r e vise o u r promotional claims and make other cor r ections or rest i tutions. Any medical device products we develop will be subject to extensive regulation by the FDA and non-U.S. regulatory agencies. Further, all of our potential medical device products and material modifications will be subject to extensive regulation and clearance or approval from the FDA and non-U.S. regulatory agencies prior to commercial sale a nd distribution as well as after clearance or approva l . Fai l ure to c omp l y with applicable U.S. r e quirements regarding, for example, promoting, manufacturing, or labeling our medical device products, may subject us to a variety of administrative or judicial actions and sanctions, such as F o rm 483 observations, warning lette r s, untitled lett e rs, product re c alls, product seiz u r es, total or partial suspension of production or dist r i bution, injunctions, fines, civil penalties and criminal prosecution. If any of o u r me d i cal device products cause or contribute to a d e ath or a serious i n jury or malfunction in certain ways, we will be required to report under applica b le medical device reporting regulations, which can result in voluntary corr e c t ive a c tions or ag e ncy enfor c em e nt ac t ions. We will be subject to governmental export and import controls that could impair our ability to compete in international markets du e to l i c e n s i n g requirements and subject u s to liability if we are n ot in c omplian c e with applicable laws. Compliance wi t h these legal require m ents c ou l d l i mit our ab i l i ty to comp e te in for e ign marke t s and s u b j ect us to liab i li t y if we v io l ate the m . Our product candidates will be subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Cust o m s regulations and v a rious economic and trade s a nctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Co n t rols. Exports of our product candidates and solutions outside of the United States must be made in compliance with these laws and regulations. If we f a il to comp l y with th e s e l a ws and regu l ations, we and certain of our employees could b e subject to substantial civil or criminal penalties, including the possible loss of export or import privi l eges; fines, which may be i m posed on us and responsible employees or managers; and, i n e x tre m e c a s e s , t he incarceration of responsible employees or managers. In addition, changes in our product candidat e s or solutions or changes in applicable export or import laws and regulations may cr e a t e d e l a ys in the introduction, provision, or sale of our product candidates and solutions in international markets, prevent customers from using o u r product candidates and solutions or, in some cases, preve n t the export or import of our product candidates and solutions to certain countries, governments or persons altogether. Any limitations on our ability to export, provide, or sell our produ c t candidates and solutions could adversely affect our business, financial condition and results of operations. 93 Table of Contents We are subject to U.S. and for e ign anti-corruption and anti-money l aundering l aws with r e sp e c t to our o p erations and non-compl i an c e with such laws can subj e c t us to c riminal an d / or civil liabi l ity and harm our business. We are subject to the FCPA, the U . S. domestic bribery sta t ute contained in 18 U.S.C. §201, the U.S. T r avel Act, the USA PATRIOT Act and possibly other state and nation a l anti-bribery and anti-money laund e ring laws in countries in which we conduct a c tivities. Anti-corruption laws are interpreted broadly and prohibit companies and their e m ployees, agents, third-party in t e rm e di a ries, jo i nt ventu r e partners and collaborato r s from authorizing, promising, offering or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. We use CROs abroad for clinical t r ials. I n addition, we m a y engage third-party intermediaries to sell our product candidates and solu t ions abroad once we enter a commercialization phase for our product cand i dates and/or to obtain nec e ssary permits, licenses, and other regulatory approvals. We or our third-party intermediaries may have direct or in d i rect interactions with o fficials and employees of government agencies or state-owned or a ffi l i a ted en t it i es. We c a n be h e ld li a ble for the corrupt or other i l leg a l ac t ivi t ies of these third-party intermediarie s , o ur employees, representatives, contractors, partners and agents, even if we do not explicitly authori z e or have actual knowledge of such activities. We have adopted an anti-corruption policy , which mandates compliance with the FCPA and other anti - corruption laws applicable to our business throughout the world. However, the r e can be no assurance that our employees and third-par t y in t e rm e di a ries w i ll co m ply wi t h t his po l icy or such anti-corruption laws. Non-compl i ance wi t h a nti-corruption and anti-money laundering laws could subject us to whistleblower compl a ints, investigations, sanctions, settlements, prosecution, other investigations, or other en f orcement actions. If such actions are launched, or governm e ntal or o t her sanctions a r e imposed, or if we do not prevail in any p o ssible civil or criminal liti g ation, our business, results of operations and financial condition could be mat e rially harmed. In addition, res p onding to any ac t ion w i ll lik e ly result in a ma t e r i al l y sign i ficant diversion of manag e me n t ’s attention and resources and significant defense and compliance costs and other professional fees. In certa i n cases, enforcement a u tho r ities may even cause us to appoint an inde p e ndent compliance monitor, whi c h c a n result in added costs and administrative burdens. If we fail to comp l y with e n v iron m ental, he a l th, and safety laws and r e g u lations, in c luding reg u lations go v e r ning t h e han d ling, storage or disposal of hazardous materials, we could become subj e c t to fines or p e na l ti e s or inc u r co s t s that c ould harm our busi n e s s . We will be subje c t to numerous environmental, health and safety laws and regulations, including those governing laboratory pro c edures and the handling, use, storage, treatme n t and disposal of hazardous mat e rials and wastes. Our operations involve the use of hazardous mat e ri a ls, inc l uding chemicals, biol o gical m a terials and infectious agents. Our operations also may p r oduce hazardous waste p r oducts. We generally c ontract with third parties for the disposal of these ma t e r i als and w a s t es. We will not be ab l e to e li m in a te the risk of c o n t a m ina t ion or in j ury f r om the s e m a t e rials. In the event of contami n ation or injury resulting from any use by us of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur s i gnifi c a nt costs asso c i a ted w i th c i vil or c r iminal fines and penalt ie s for fai l ure to c omply with such laws and regulations. Although we will maintain wo r k ers’ compensat i on insu r a nce to cover us for costs and expenses, we may incur due to injuries to our employees resulting from the use of hazardous materia l s, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability o r toxic tort claims that may be ass e rted against us in connection with our storage or disposal of bio l ogical or hazardous ma t e ri a ls. In addition, we may incur subst a nti a l c osts in order to comp l y wi t h cur r ent or future environmental, h e al t h, and s a fety l a ws a nd regulations. These current or future laws and regu l ations may impair our research, development, or production efforts. Our failure to comply with the s e l a ws a nd regulations also may result in substanti a l fines, penalties or other sancti o ns. 94 Table of Contents If we or any of our thir d - p a r t y manufacturers that we may engage use hazardous and biological materials in a manner that causes injury or violates a p plicable law, we may be liable for damages. Our research and development activities involve the co n t rolled use of p otentially hazardous substan c es, incl u ding chemical and biological mate r ials, by us and any third-party manufacturers that we may use in the future. We and a n y of our third-party manufact u rers that we may eng a ge are s ubje c t to federal, state and local l a ws and regulations in the U.S. gov e rning the use, manufacture, stora g e, handling and disposal of medical and haza r d ous materials. Although we believe that our pro c edures for using, storing and disposing of these materials comply with legally pre s cribed standards, we cannot completely elimi n ate the risk of contamination or i n jury resulting from medic a l or hazardous materia l s. As a result of any such contamination or injury, we m a y in c ur l iab i li t y or loc a l, c ity, st a te or f e der a l author i ti e s m a y c urta i l the use of th e s e m a t e ri a ls and in t e rru p t our business operations. In the event of an accident, we could be held l i able for damages or penalized w i th fines, a n d the l iab i li t y could exceed o ur resources. We do not have any ins u r a nce for liabilities arising f r om medical or hazardous mate r ials. Compliance with applicable environme n tal laws and regulations is e x pensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business, prospects, financial condition or results of operations. Changes in funding for the FDA, the SEC and other government agen c i e s co u l d hind e r t h eir abili t y to hire and retain key leader s hip and other personnel, preve n t new products and services from being developed or commerc i alized in a t i me l y manner or otherwise p r e v e n t t h ose agencies from performing normal functions on which the operation of our b u s i n e ss may r e l y , wh i c h c o u ld negatively impact o u r busines s . The ability of the FDA to review and approve new products can be affected by a v a riety of factors, i n cluding government budget and funding levels, ability to hire and retain key personnel and accept payment of u s er fees and statutory, regulato r y, and policy changes. Average rev i ew t i m e s at the agency have fluctuated in recent years as a result. In addition, government funding of the FDA, t h e Securities and E x change Co m mission, or the SEC, and other government agencies on w h ich our operations may rely is i nherently fluid and unpredictable. Disruptions at the FDA and oth e r a genc i es m a y also slow the time necessary for new drugs to be reviewed and/or approved by nec e ssary government agencies, which would adversely affect o ur business. For example, over the last several years, incl u d ing beginning on December 22, 2018, the U.S. g o vernment has shut d o wn several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough crit i c a l F D A, SEC and other government employ e es and stop critical activities. In respo n se to the COVID ‑ 19 pand e mic, in 2020, the FDA had announced that it will contin u e to p o stpone domestic and f o reign routine surveillance inspections due to COVID ‑ 19. According to FDA’s 2021 guidance on manufacturing, supply chain, and drug and biological product inspections during COVID ‑ 19 public health emergency, FDA indicated that it intends to continue using other tools and approaches where possible for pre-approval inspections, and that it will continue to conduct “mission-critical” inspections on a case-by-case basis, or, where possible to do so safely, resume prioritized domestic inspections, such as pre-approval and surveillance inspections. If a prolonged government shutdown occurs, or if the government experiences a protracted backlog of inspections and regulatory review, it could significantly impact the abi l ity of t he FDA to t i me l y r e view and p r o c ess our regulatory submissions, which could have a material adverse effect on our business. F u rther, future government shutdo w ns , delays, or prioritization policies could potentially impact our ability to access the public markets and obtain necessary capital in order to properly ca p i talize and cont i nue our operations. If we fail to comp l y with f e deral and s t ate healthcare and promotional laws, including fraud and ab u se and information privacy and security laws, we could face substantial penalties and o u r busines s , fi n an c ial c onditio n , r e sults of operations, and prospects could be adversely affe c ted. As a biopharmaceutical company, we are sub j ect to many federal and sta t e healthcare laws, including the federal Anti - Kickback S t a tut e , or AKS, t he FCA, the civil monetary pen a lt i es st a tut e , the Medicaid Drug Rebate s t atute and other price reporting requirements, the federal Physician Payment Sunshine Act, the Veter a ns Health Care Act of 1992, HIP A A (as amended b y the Health Inf o rmation Technology for Economics and C l ini c al He a lth Act), the FCPA, the Patient Pro t ection and Affordable Care Act of 2010 (as amended by the Health Care and Education Reconcilia t ion Act), or the ACA, and similar state laws. Even though we do not make referrals of healthcare services or bill directly to M e dicare, Medicaid, or other third-party payors, certain fe d e ral and sta t e healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and w i ll be applicable to our b u siness. If we do not comply with all app l icable fraud and abuse laws, we may be sub j ect to healthcare fraud and abuse enforc e ment by both the federal government and the states in which we conduct our business. 95 Table of Contents Laws and re g ulations re q uire c a lculation and reporting of compl e x pricing information for presc r iption drugs, and compliance will require us to invest in sig n ificant resources to develop a price reporting infrastructure, or depend on third parties to compute and report our drug p ricing. Pricing reported to the Centers for Medicare and Med i caid Services, or CMS, must be certified. Non - compliant activiti e s expose us to FCA risk if t he y re s u l t in o v ercharging agencies, underpaying rebates to age n cies, or causing agencies to overpay providers. If we or our operations are found to be in violation of any fed e ral o r state healthcare law, or any other gove r n mental regulations that apply to us, we may be subject to penalties, including civ i l, c r im i nal, a nd a dministrative pen a lties, d a mag e s, fin e s, d i sgorgement, debarment from government contracts, refusal of orders under existing contracts, exclusion from participation in U.S. federal or state hea l th care programs, corpor a te i ntegr i ty agre e m e nts a nd the curtailment or restructuring of our op e rations, any of which could materially adv e rsely affect our ability to operate our business and our financial results. If any of the physicians or other healthcare p r o v iders or entities with whom we expect to do bu s iness, including our collaborators, is found not to be in compliance with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including but not limited to, exclusions from participation in government healt h care programs, which could also materially affect our business. In particular, if we are found to have impermissibly promoted any of our product candidates, we may become subject to significant liability and government fines. We, and any of our collaborators, must comply with requirements concerning advertising and promotion for any of our product candidates for which we or they obtain marketing approval. Pro m otional communications with respe c t t o t her a peut i cs are subject to a variety of legal and regulatory restrictions and continuing review by the FDA, Department of Justice, Department of Health and Human Services’ Office of Inspector General, state attorneys general, members of Congress, and the public. When the FDA or comparable foreign regulatory authorities issue regulatory approval for a product candidate, the regulato r y approval is limited to t hose specific uses and i n dications for which a product is approved. If we are not able to obtain FDA approval for desired uses or indications for our produ c t candidates, we may not m arket or promote our prod u ct candidates for those indic a tions and uses, refe r red to as off-label uses, and our busin e ss may be adversely affected. W e further must be able to sufficiently substantiate any c l aims that we make for our p r oduct candidates including claims comparing our product candidates to other companies’ prod u cts and must abide by the FDA ’ s s t rict requirements regarding the content of p r omotion and advertising. While physicians may c h oose to prescribe produ c ts for uses that are not described in the product’s labeling and for uses that d iffer from those tested in clinical trials and approved by the regula t ory authorities, we are prohibited from m a rketing and promoting the products for indications and uses that are n o t specifically approved by the FDA. These off-label uses are common across medical specialties and may c onstitute an appropriate tr ea t m e nt for s o me pat i ents in v a ri e d c i rcu m s t anc e s. Regulatory authorities in the United States generally do not restrict or regulate the behavi o r of physicians in their choice of treatment within the practice of medicine. Regulatory au t horities do, however, restrict communications by biopharmace u t i c a l co mp a n i e s concerning off-label use. The FDA and ot h e r agencies actively enforce the laws and regulations r e garding product promotion, p a rticularly those prohibiting the promotion of off-label uses, and a company t h at is found to ha v e imprope r ly promoted a produ c t may be subject to s i gnificant sanctions. The fe d e ral government has lev i ed large c ivil a nd cr i min a l fines aga i nst c ompan i e s for a l leged improper promotion and has en j oined s e ver a l comp a nies from engaging in off-label promotio n . The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. Thus, we and any of our collaborators will not be able to promote any products we develop for indicat i ons or uses for which they are not approved. 96 Table of Contents In the United States, engaging in the imp e rmissible promotion of our products, follow i ng approval, for off-label uses can also subje c t us to false c l ai m s and other litigation under f e deral and state statutes, inc l uding fraud and abuse and consumer protection laws, which can lead to civil and criminal penalties and fines, agreements with governmental authori t ies that materially restrict the manner in whi c h we promote or distr i bute therapeutic products and do business through, for example, corporate integrity agreements, sus p ension or exclusion f rom participation in fede r a l and s t ate h e a l thc a re programs, and debarment from gove r n ment c o ntracts and refusal of future orders under existing contracts. These false claims st a tut e s in c lude the F CA, which allows any individual to bring a l a wsuit against a biopharmaceut i cal company on behalf of t h e fe d e ral government alleging submission of false or fraudulent claims or causing others to pre s ent such false or fraudulent claims, for p a yment by a federal program such as Medic a re or Medicaid. If the g o vernment decides to intervene a nd pr e va i ls in the l a wsu i t, t h e individual will share in the proceeds from any fines or settl e me n t funds. If the g o vernment declines to inte r v ene, the individ u al may pursue the case alone. The s e FCA lawsuits a ga i nst m a nufacture r s of drugs a nd biologics have increased significantly in volume and breadt h , l e ading to s e ver a l substan t i a l c ivil a nd criminal settlements, up to $3.0 billi o n, pertaining to c e rta i n s a l e s practices and promoting off - label u ses. In addition, FCA lawsuits may e x pose manufacturers to fol l ow-on claims by private payo r s based on fraudulent marketing practices. This growth in litigation has increased the risk that a biopharmaceutical company will have to defend a f a lse claim action, pay s e tt l em e nt fines or r e s t itu t ion, as w e ll as c rim i nal and c i vil pen a lt i es, agr e e t o c omply with burdensome reporting and compliance obligations, and be exc l uded from M e d i c a re, M e d i ca i d, or ot h e r federal and state hea l thcare programs. If we or our future c oll a bora t ors do not law f ully promote our approved products, if any, we may become s ubject to such litigation and, if we do not successfully defend against such actions, those actions may have a material adve r s e effect on our bu s iness, financial condition, resul t s of o perations and prospects. Although an effective compliance program can mitigate the risk of investigation and pro s ecution for violations of these laws, t he risks cannot be entirely eliminated. Moreo v er, achieving and sustaining c ompl i an c e w i th a ppli c ab l e feder a l a nd state fraud laws may prove costly. Any action against u s for violation of these laws, even if we succ e ssfully defend against it, could cause us to incur significant legal expenses and div e rt our ma n a gement’s attention from the oper a tion of our business. Coverage and reimbursement may be limited or unavai l able in certain market segments for o u r product candidates, which could ma k e it difficult for us to sell our product candidates pro f itably. In both domestic and forei g n markets, sales of our product candid a tes, if approved, depend on the availability of coverage and adequate reimbursement from third-party payors. Such third-party payors include government health programs such as Medicare and M e dicaid, managed care providers, private health insu r e rs and other org a nizations. In addition, because our product candidates represent n e w approaches to the treatment of cancer, we cannot accurately estimate the potential r e venues from our product candidates. Patients who are provided medical treatment for their conditions g e nerally rely on third-party payo r s to reimburse all or part of the costs a s so c ia t ed w i th the i r t r ea t men t . Ob t a i ning c overage and adequate rei m bursement from g o vernmental healthcare programs, s u ch as Medicare and Med i caid, and commercial payors is critical to new product acceptance. Government authorities and third - party payors decide which drugs and treatments they will cover and the amount of reimbursemen t . Coverage decisions may depend upon clinical and economic standards that disf a vor new drug products when more est a blished or lower cost therapeutic a l tern a tiv e s are alr e ady ava i l a ble or s ubsequently become available. If rei m bursement is not available, or is available only to l im i ted l e vels, our product candidates may be competitively disadvantaged, a n d we, or our c o llaborators, may not be able to s u ccessfully commercialize our product candid a t e s. E ven if c over a ge is provided, the approved reimbursement amount may not be high enough to allow us, or our collaborators, to establish or maintain a m a rket share sufficient to realize a sufficient return on our or their investments. Alternatively, securing favorable r e imbursement terms m a y r e quire us to compromise pricing and prevent us from realizing an adequate margin over cost. Reimbursement by a third-party payor may depend upon a num b er of factors, including, but not limited to, the third-party p a yor’s determination that use of a product is: • a covered benefit under its health plan; • saf e , eff e c t ive and med i c a lly ne c e s s a ry; • a ppropriate for the specific patient; • c os t -eff e ct i ve; and • neither experimental nor investigati o nal. 97 Table of Contents Obtaining co v e rage and reimbursement approval of a product from a government or o t her third-party payor is a time - c onsuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our product candidates. Even if we o b tain coverage for a given product, the res u lting r e imbursement p a yment rates might not be adequate for us to achieve or sust a in profit a bil i ty or m a y require co-payments that patients find unacceptably high. Moreover, the factors noted above have continued to be the foc u s of p olicy and regulatory debate that has, thus far, shown the potential for movement towards permanent policy chang e s; th i s tr e nd is lik e ly t o c ontinu e , and may result in more or less favorable impacts on pricing. Patients are unlikely to use our p r o d uct cand i dates unless coverage is provided, and reimbu r se m e nt is a dequ a te to cover a significant portion of the cost of our product candidates. In the United States, no uniform policy of coverage and reimbursement for products exists among thi r d-party payors. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each p a yor separately, with no assurance that coverage and ade q uate reimbursement will be obtained. Prices p a id for a drug also vary d e pending on the class of trade. Prices charged to government c u stomers are subject to price c on t rols, inc l uding ceilings, and private institutions obtain discounts t h rough group purchasing organizations. Net prices for drugs may be further reduced b y man d atory discounts or rebates required by government hea l thcare programs and demanded by private payors. It is also not uncom m on for market conditio n s to warrant multiple disc o unts to d i fferent customers on the same unit, such as purcha s e discounts to institution a l care providers and reb a t e s to the he a l th pl a ns th a t pay them, which reduces the net r e a l iz a tion on t he origin a l s a le. In addition, federal programs impo s e penalties on manufacturers of drugs marketed under an NDA or BLA, in the form of mandatory additional rebates and/or discounts if commercial prices increase at a rate greater than the Consumer P r ice Index-U r b a n, and these rebates and/or discou n ts, which can be substantial, may impact our ab i li t y t o r a ise c om m erc i al pri c es. Regu l atory au t horities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medicat i ons, which could affect our ability or that of our collaborators to sell our product candidates profitably. These payors may not v i ew our products, if a n y, as cost-effecti v e, and cover a ge and reimbursement may n o t be available to our customers, or those of our collaborators, or may not be sufficient to allow our products, if any, to be marketed on a competit i ve basis. Cost control initiatives could cause us, or our collaborators, to decrease, discount, or rebate a portion of the p r ice we, or they, might establish for products, which could result in lower than anticipated p r oduct revenues. If the realized prices for our product candidates, if any, decrease or if governmental and other third-party p a yors do not provide adequate coverage or reimbursement, our p r ospects f or revenues a nd profitability will suffer. Moreover, the recent and o n going series of congressional hearings relating to drug pricing has presented heigh t ened attention to the biopharmaceutical i nd u st r y, creating the po t e n t ial for poli t ic a l and public pr e s sure, whi l e the pot e nti a l for resulting legisla t ive or policy changes pr e s e nts un c ert a inty. Assuming cove r a ge is approved, the resulting reimbursement payment rat e s might n o t be adequate. If payors subject our p r o duct candidates to maximum payment amounts or impose limitations that make it difficult to obtain reimbursement, providers may choose to use therapies which are less expensive when compared to our product candidates. Additionally, if payors require h i gh c o payments, benefic i aries may decline p rescriptions and seek alternative therapies. We may need to conduct post-marketing studies in order to de m onstrate the cost-effectiveness of any fut u re products to the satisfacti o n of hospitals and other target customers and their third-party p a yors. Such studies might require us to commit a s i gnificant amou n t of management time and finan c ial and other res o u r ces. Our future p r od u cts might not ultimately be consid e red cost- e ffec t iv e . Ad e quate third-party coverage and reimbursement might not be ava i lab l e to enab l e us to ma i nta i n pr i ce l e vels suff i ci e nt to r e a l ize a n a ppropria t e r e tu r n on investment in prod u ct development. Third-party payors, whether domestic or fo r eign, or governmental or comme r cial, are developing increasingly sophisticated meth o ds of controlling healthcare costs. In addition, third-party payors are requiring higher levels of evidence of the benefits and clinical o u tcomes of new technologies and are challenging the prices charged. We, and our collaborators, c a nnot be sure that coverage w i ll be available for any prod u ct candidate that we, or they, commercia l ize a nd, if a va i lab l e, th a t the re i mburs e ment rates will be adequate. Further, t h e net reimbursement for drug products may be subject to additional r e ductions if there are changes to laws that presently restrict imports of drugs fr o m countries where they may be sold at low e r pri c es t han in the Un ite d Sta t es. An in a bil i ty to pro m ptly obt a in coverage and adequate payment rates from bo t h government-funded and private payors for any of our product candidates for which we obtain marketing approval could have a material adverse effe c t on our operating results, our ability to raise capit a l needed to commercialize products, and our overall financial condition. 98 Table of Contents There have been, and likely will continue to be, legislative and regulatory proposals at the federal and s t ate levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in t h e future. The continuing efforts of the government, insurance companies, managed care organizations and other p a yors of healthcare s e rvices to contain o r reduce costs of hea l thc a re and / or i m pose price controls m a y adversely affect: • t he demand for our product candidates, if we obtain regulatory approval; • our ability to set a price that we b e lieve is f a ir for our product candidates; • our ability to generate revenues and achieve or maintain profitability; • t he level of taxes that we are required to pay; and • t he ava i lab i li t y of c a pit a l. Any reduction in r e imbursement fr o m Medicare or other gove r nment programs may result in a similar reduct i on in payments from p r ivate payors, which may adversely affect our future pro f itabil i ty. A particular challenge for our product candidates arises from the fact that they will prima r ily be used in an inpatient setting. Inpatient rei m bursement generally relies o n s t ringent packaging rules that may m e an that th e re is no s e par a t e payment for our product candidates. Additionally, d a ta used t o set t he p a ym e nt r a t e s for i npat i ent a d missions is usually several years old and would n ot take into account all of the additional therapy costs associated w i th the administration of our product candidates. If special rules are not created for reimbursement for imm u notherapy t r eatments such as our product candidates, hosp i tals might not receive enough rei m bursement to c over their costs of treatment, which will have a negative effect on the i r adoption of our product candidates. We are subject to new legislati o n, regulatory propo s als, and healthcare payor initiatives that may increase our costs of compl i ance, and adversely affect our ability to market our product candidates, obta i n collaborators, a n d raise capital. In the United States and some foreign j u risdictions, there have been a n u mber of legislative and regula t ory changes and propos e d c h anges regarding the healthcare system that could p r event or delay marketing approval of our product cand i dates, restrict or regulate post-approval activities, and affect our ability, or the ability of our c o llaborators, to profitably sell any products for which we obta i n marketing approval. We expect that c urrent l a ws, as w e ll as other healthcare reform measures that may be adopted in the f u ture, may result in more rigorous co v e rage criteria and in additional downward press u r e on the price that we, or our collabora t ors, may receive for any approved products. Since enactment of the ACA in 2010, in both the United States and ce r tain foreign jurisdictions, there have been a number of l e gislative and regulatory changes to the health care sys t em that could impact our ability to sell our product candidates profitably. In August 2011, the Budget Control Act of 2 0 11, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, t a sk e d w i th recommending a targeted defi c it reducti o n including implementation of aggregate reductions of Medicare payments to providers up to 2% per fiscal year, whi c h went into effect on April 1, 2013 and will remain in effect until 2030, with the exception of a temporary suspension implemented under various COVID ‑ 19 relief legislation from May 1, 2020 through the end of 2021, un l ess additional Congressional action is taken. In J a nuary 2013, the American Taxpayer Relief Act of 2012, or ATRA, was approved which, among other things, reduced Medicare p a yments to several provi d e rs, w i th primary foc u s on the hospit a l outpatient setting and ancillary services, including hospitals, imaging centers and can c er t re a tm e nt cen t e rs, and inc r eased the st a tute of li m it at ions period for the government to recover ove r payments to providers from three to five years. Since its enactment, various portions of the ACA have been subject to judicial and constitutional challenges. In particular, on D e c e mber 14, 2018, the U.S. District Court for the N o r thern District of Texas struck down the ACA, deemi n g it unconstitutional giv e n that Congress repealed the individual mandate in 2017; on July 9, 2019, the U.S. Court of Appeals for the Fifth Circuit heard arguments on appeal in this matter. On December 18, 2019, the Fifth Circuit r u led that the ACA’s individual mand a te is unconstitutional gi v e n t hat the T a x A c t e l i min a ted the t a x p e nal t y a s soc i a t ed with the individual mandate. In concluding that the individual mand a te is unconstitutional, the ques t ion remains whether, or how much of, the rest of the ACA i s severable from that constitutional defect. The Fifth C i rcuit further r e manded the case to the U.S. Dis t rict Court for the Northern District of Tex a s to further analyze whether the other provisions of the ACA are severable as they currently exist under the law. The Supreme Court of the United States held oral arguments on the Fifth Circuit Court case in November 2020 and is expected to issue a decision later in 2021. Although the U.S. Supreme Court has not yet ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, among other directives. It is unclear how this Supreme Court decision, future litigation, and healthcare measures promulgated by the Biden administration will impact the ACA, our business, financial condition and results of operations. We will c ontinue to ev a lua t e the eff e ct th a t the ACA and its possible repeal and replacement has on our business. Complying with any new legislat i on or reversing changes imp l emented under the ACA could be time-intensive and expensive, resulting in a mater i al adverse effect on our business. 99 Table of Contents Additional federal and state healthca r e reform measures may be adopted in the future that may result in more r igorous coverage crit e ria, in c re a s e d regulatory burdens and operating costs, decreased revenues from our bioph a rmaceutical product candidates, decreased potential r eturns from our development efforts, and additional downward pressure on the pri c e that we re c e ive for any a pproved drug. Any reduction in rei m bursement from Medicare or other governm e nt healthcare programs m a y result in a similar reduction in pay m ents from private payors. The implem e ntation of c o st containment measures or o t her healthcare reforms may prevent us from being able to gene r a te rev e nues, a tt a in prof i t a bil i ty or c ommercialize our prod u ct candidates. Legislative and regulatory proposals may also be made to expand post-approval requirements and restrict s a les and promotional a ctivities for drugs. We cannot be sure whether add i tional legislati v e changes will be enacted, or whether t h e FDA regulations, guid a nce, or interpretations will be changed, or what the impact of such c h anges on the m a rketing approvals of our produ c t candidates, if any, may b e . In addition, increased s c rutiny by Congress of the FDA’s approval process may si g nificantly delay or prevent marketing approval, as w e ll as subject us to more stringent prod u ct labeling and post-marketing testing and other requirements. In addition, there ha v e been increasing legislative efforts and enforcement interest in the United States with respect to drug pricing practices, including Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives, some of which resulted in lawsuits against the HHS challenging various aspects of the rules. In January 2021, the Biden administration issued a “regulatory freeze” memorandum that directs department and agency heads to review new or pending rules of the prior administration. The impact of these lawsuits as well as legislative, executive, and administrative actions of the Biden administration on us and the pharmaceutical industry as a whole remains unclear. At the sta t e level, legislatures have increasingly passed legislation and implemented regulations designed to control p h armaceutical and biological product pricing, including price or patient reimbursem e nt constraints, dis c ounts, restrictions on certain product access and marketing cost discl o sure and transparency measures, an d , in some cases, designed to encou r age importation from other countries and bulk purc h asing . We are unable to predict the future course of federal or state healthcare l e g i s l at i on in the Uni t ed States directed at broaden i ng the availability of healthcare and containing or lowering the cost of h e a l thc a re. T he ACA and any further changes in t h e law or regulatory framewo r k that reduce our revenues or increase our costs could also have a material and a d verse effect on our business, financial con d ition and results o f operations. Go v e r n m e n ts o u tside t h e Un i ted S t ates tend t o i mpose s t r i ct pri c e co n trols, whi c h may ad v e r s e ly aff e ct our r e v e n u e s , if an y . In international markets, reimbu r sement and health care pa y m ent systems vary significantly by country, and many countries have i ns t itu t e d price ceilings o n specific products and therapies. I n some countries, p a rticularly the countries of t h e EU, the pricing of prescript i on pharmaceuticals is subject to governmental contr o l. In these countries, pricing negotiations with governmental authorities can take considerable time aft e r the r e c e ipt of m a rk e ting approval for a product. To obtain coverage and reimbursement or pricing approval in s o me countries, we may be required to conduct a c l ini c al tr i a l th a t compares the cost-effectiveness of our product candidate to other avail a ble therapies. There can be no assurance that our prod u ct candidates will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be ava i lable, or that the third- p arty payors’ reimbursement p o licies will not adversely affect our ability to sell our product c a ndidates pro f itably. If r e imbu r sement of our product cand i dates is unavailable or limited in scope or amount, or if pricing is set at unsatis f actory l e vels, our business c ould be harmed, possibly materially. 100 Table of Contents Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper ac t i v it i es, in c luding non c omp l ian c e with r e gu la tory standards a n d requirements. We are exposed to the risk of employee fraud or other illegal activity by our employee s , independent contractors, consultants, commercial partners and vendors. Misconduct by these parties could inc l ude intentional, reckless and/or negli g ent conduct that fails to: comply with t h e laws of the F DA and other similar foreign regulatory bodies, provide true, complete and accurate information to the FDA and other similar foreign r egulatory bodies, comply with manufacturing standards we have established, comply with h e alt h care fraud and abuse laws in the Un i t e d S ta t es a nd si m il a r foreign f r audulent misconduct laws, or report f i nancial i n f ormation or data accu r ately or to disclose unauthorized activities to us. I f we obtain FDA approval of any of our prod u ct candidates and begin comm e rcializing those product candidates in the United States, our potential exposure under such l aws will in c re a se sig n ificantly, and o u r costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing a nd education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business a r rangements in the healthcare industry, are subje c t t o extensive laws designed to prevent fraud, kickb a cks, self-dealing and other abusive pra c ti c es. Th e s e l a ws and regulations may restrict or prohibit a wide range of pricing, discounting, mar k eting and promotion, structuring and commission(s), certain customer incentive programs and other bu s iness arrangements generally. Activities subject to these laws also involve the improper use of information obta i ned in the course of patient rec r uit m ent for c l i nic a l tri a ls. It is not always possible to identify a nd deter misconduct or other imp r oper activities by our employ e es or third parties that we engage for our business o p erations, including independent contractors, consultants, commercial collaborators, principal investigators, CROs, suppliers and vendors, and the precautions we take to detect and prevent inappropriate conduct may not be e ffective in cont r o lli n g unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial c o sts. It is possible that governmental and enforcement authorities will con c lude that our, or our employee s ’, consultants’, coll a borators’, contractors’, or vendors’ bus i ness practices may not comply with current or fut u r e statutes, regulations or case law interpret i ng a ppli c able fr a ud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, a nd we are not successful in defending oursel v es or asserting our rights, those actions could have a si g nificant impact on our business, including the imposit i on of civil, criminal and administrative penalties, d a mages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other fed e ral healthcare programs, contr a ctual damages, reputational ha r m, diminished profits and future earnings, compliance agreeme n ts, withdrawal of product approvals, and c u rtailme n t of our oper a tions, among other th i ngs, any of which could adversely affect our ability to oper a te our business and our results of operations. In addition, the approval and commer c ialization of any of our prod u ct candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mention e d above, among other foreign laws. R i s k s R e lat e d to I n te l le c tual P r o p er t y If we are unable to obtain, mai n tain, protect and enfor c e patent protection and other proprietary rights for our product candi d ates and technologies, we may n ot be able to c omp e t e e ffectively or oper a te profitably. Our success is dependent in l a rge p a rt on our obtaining, maint a ining, protecting and enforcing patents and other proprietary r i ghts in the Uni t ed St a t e s and other countries with respect to our product candidates and technology and on our ability to avoid i n fringing the intellectual property and other proprietary rights of oth e rs. Certain of our intel l ectual property rights are licensed from other entities, and as such the pr e paration and prosecution of any such patents and patent applic a tions was not performed by us or under our control. Furthermore, patent law relating to the sco p e o f c l a i m s in the biotechnology field in which we oper a te is still evolving and, consequently, patent posi t ions in our industry may not be as st r ong as in other more well-established fields. The patent positions of biotechnology compani e s can be highly uncertain and involve complex legal and fact u al questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biotechnology pa t ents has emerged to date. 101 Table of Contents The issuance of a patent is not conclusive as to its validity or enfor c e a bil i ty a nd i t is unc e rt a in how much protection, if an y , will be provided by our patents, including if they are challenged in court or in other proceedings, such as re-examinations or o p positions, which may be brought in the United St a t e s or for e ign jurisdi c tions to c ha l l e nge t h e validity of a patent. A third party may challenge the validity or enforceability of a p a tent a fter i t s issuance. It is possible th a t a c ompe t itor m a y suc c essfu l ly cha l l e nge our patents or that a challenge wi l l result in li m it i ng t h e ir cov er age. Moreover, the cost of litigation to uphold the validity of patents and to prevent infringement can be subst a ntial. If the outcome of litigation is a d verse to us, t h ird parties may be able to use our patented invention wi t hout payment to us. Moreover, it is possible that competi t ors may infringe our patents or successfully avoid the patented technology through design innovation. To stop t h ese activities, we may need to file a law s uit. These lawsuits are exp e nsive and would consume time and other resou r ces, even if we were suc c essful in stopping the violation of our p a tent rights. In addition, there is a r i sk that a court would decide that our patents are not valid and that we do not have the right to stop the other party from using the inventions. The r e is a l so the risk tha t , even if the validity of our patents were upheld, a c o urt would refuse to stop t h e other party on the grounds that its activities are not c o vered by, t h at is, do not infringe, our patents. Should third pa r ties file patent applications, or be issued p a tents claiming technology also used or claimed by our licensor(s) or by us in any future patent application, we may be requ i red to p a rti c ip a te in int e rference proceedings in the U.S. Patent a nd T rade m ark Off i ce ( “ U S P T O”) t o d e ter m ine priority of invention for those patents or patent applications t h at a re sub j e c t t o t h e f i rs t -to- i nvent l a w in the Un i t e d S ta t e s , or may be required to participate in derivation proceed i ngs in the USPTO f or those paten t s or patent a p plications that are subject to the f irst-inve n tor-to-f i le l a w in the Unit e d S tate s . We may be r e qu i red to p a rti c ip a te in su c h i nterference or derivation p r oceedings inv o lving our issued patents and pend i ng applications. We may be required to cease us i ng the technology or to license rights from prevailing t h ird parties as a result of an unfavorable out c ome in an int e rfer e nce proceeding or derivation proceeding. A prevailing p a rty in that case may not offer us a li c ense on c omm e rc i a l l y a cc e pt a ble t e r m s or at a l l. Ev e n i f we were able to obtain a license, it could b e non-exclusive, thereby giving our c o mpetitors and other third parties access to the same technologies licensed to us, and it could require us to m a ke subst a nti a l li c ensing and royalty payments. Any of the foregoing could have a material a dverse effect on our b u siness, financi a l condition, results of op e rations and prospects. If any of our owned or in-lice n sed patent applications do not issue as patents in any jurisdi c tion, we may not be able to compete e f fec t i v el y . Changes in either the patent laws or the i r interpretation in the United States and other c ountries may diminish our ability to protect our inventions, obtain, m a int a in, a nd e nfor c e our int e l l e c tual property rights and, more generally, could affect the v a lue of our in t e l l e c tual property or narrow the scope of our owned and lice n sed paten t s. W ith respe c t to bo t h i n-li c e n sed and owned intellectual property, we can n ot predict whether the patent applications we and our licensors are currently pursuing will issue as patents in any particular j u risdiction or whether the claims of any i ssued patents will provide sufficient protection from competitors or other third pa r ties. The patent prosecution process is expensive, time-consuming, and complex, and we may not be a ble to fil e , pros e c u t e, m a int a in, e nforc e , or l i c e nse all necessary or desir a ble patent applications at a reasonable cost or in a t i m e ly m a nn e r. It is also possible t hat we w i ll fa i l t o id e nt i fy patentable aspects of our research and development output in time to obtain patent protection. Althou g h we enter into nondisclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of o ur research and development outp u t, such as our emplo y ees, corporate collaborato r s, outside scientific collabo r ators, CROs, c ontract manufactu r ers, consultants, advisors, and other third parties, any of t h ese par t ies may bre a ch the agr e em e nts a nd disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, o ur ability to obtain and maintain valid and enforceable pate n ts depends on whether the differences bet w een our inventions and the prior art allow our inventions to be patentable over the prior a r t. Furthermore, publications of discoveries in the s c i e ntif i c li t era t ure oft e n l a g behind the actual discoveries, and patent a ppli c at i ons in the Unit e d States and other jurisdicti o ns are typically not p u blished until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors w e re the first to make t he inventions claimed in any o f our o wned or licensed patents or pending pat e nt applications, or that we or our licensors were the first to file for patent protection of such inventions. If the scope of any pate n t protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our abili t y t o pre v e n t our c omp e ti to r s f r o m c o m m e r c i a l i z i n g s i mi la r o r id e n t i c al t ec hn ology and product candidates would be adversely affected. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subje c t of m uch l it i ga t ion i n r e cent y e ars. As a res u lt, t he issu a nce, s c ope, va l idi t y, enfor c eab i li t y, and com m er c ial value of our patent rights are highly uncertain. Our owned or in-licensed p e nding and future patent appli c ations may not res u lt in patents being issued which protect our Anktiva, hAd5, aldoxorubicin or other product candidates or other t e chnologies or which effective l y prevent others from commerc i alizing competit i ve technologies and product candidates. 102 Table of Contents Moreover, the coverage claimed in a patent applicati o n can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issu a nce. E ven if pat e nt appl i ca t ions we license or own currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competit o rs or other third p a rties from c o mpeting w i th us, or otherwise provide us with any co m pet i tive a dvant a ge. Any patents that we own or in - license may be challenged, na r ro w ed, circumvented, or invalidated by third parties. Consequently, we do not know whether our Anktiva , hAd5 or other product candidates or other technologies will be protectable or remain protected by valid and enforc e able p a ten t s. Our competitors or other third parties may be able to circumvent our patents by developing similar or alterna t ive technologies or p roducts in a non-infringing manner which could materially adversely affect our business, financial condition, results of operations and growth prospects. The issuance of a patent is not conclusive as to its in v e nto r ship, scope, validity, or enforceability, and our p a tents may be c hallenged in the courts or patent o f fices in the United States and abroad. We or our licens o rs may be subject to a third-p a rty preissuance submission of p rior art to the USPTO, or become involved in opposition, derivation, revoc a tion, reexaminat i on, post-grant and int e r pa r t e s review, or interference pro c eedings or ot h e r similar proceedings challenging our owned or licensed patent rights. An ad v e rse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our owned or in-licensed pat e nt rights, allow third par t i e s to c o m m e r c i a lize our Anktiva, hAd5 or other prod u ct candidates or other techno l ogies and compete directly with us, without payment to us, or result in our inability to ma n uf a c t ure or co m mer c i a li z e prod u cts without infringing third-party patent rights. Moreover, we, or o ne of our licensors, may have to participate in inter f erence proceedings declared by the USPTO to determine priority of i nvention or in post-grant challenge proceed i ngs, s u ch as oppositions in a fo r e ign patent office, that challenge our or our licensor’s priority of invention or other features of patentabi l ity with respect to our owned or in-licensed patents and patent applications. Such challenges may result in loss of patent rights, loss of exclusivity, or in patent c l aims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from usi n g or commercializing similar or identical technology and products, or limit the dura t ion of the patent protection of our Anktiva, hAd5 or other product c a n didates and other te c hnologies. Such proceedings also may result in s ubstantial cost and req u ire significant time from our scientists and management, even if t he e ven t ual out c ome is f a vorab l e t o u s . If we or our collaborators are unsuccessf u l in any such proceeding or other priority or inventorship dispute, we may be required to obtain and maintain licenses from third parties, including parties involved in any such interference proceedings or other priority or invento r ship disputes. Such licenses may not be available on commercially reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may n e ed to cease the dev e lopment, manufacture, and commercialization of one or more of the product candidates we may develo p . The loss of exc l usivity or the narrowing of our own e d and licensed patent claims could limit our ability to stop others from using or comme r cializing similar or identical technology and products. In addition, given the amount of time required for the development, testing, and regulatory r e view of new product candidates, p atents protecting such prod u ct candidates might e xpire before or shortly after s u ch product candidates are commercia l ized. As a result, our intellectual property may not provide us with sufficient rights to exclude others f r o m commercializing p r oducts similar or identical to ours. Some of our owned and in-licensed patents and patent appli c ations are, and may in the future be, co-owned with third parties. I n addition, certain of our licensors co-own the patents and p a tent a ppli c at i ons we in-l i cense with oth e r th i rd parties with whom we do not have a direct r elationship. Our exclusive rights to certain of these patents and p a tent applications are de p endent, in part, on inter-insti t utional or other operating a g r e ements b e t w e e n the joint owners of such patents and patent applications, who are not par t ies to our l i cense agr e e m ents. If our licensors do not have ex c lusive co n t rol of the grant of licenses under any such third-party co-ow n ers’ interest in such patents or patent applications or we are otherwise unable to s e cure such e xc l us i ve rights, such co-owners may be able to license their rights to other third parties, including our c o mpetitors, and our competit o rs could market competing prod u cts and technology. In addition, we may need the cooperation of any such co- o wners of our patents in order to enforce such patents against third parties, and such cooperat i on may not be p r o vided to us. Any of the foregoing could have a material a dverse effect on our comp e titive positi o n, b u siness, financial conditions, results of operations and growth prospects. 103 Table of Contents We may be i n v olv e d i n lawsu i ts to prote c t or enforce our patents or other intellectual property or the patents or o t h e r i n t e l lectual property of our licensors, which could be expensive, t i m e -consum i ng a n d u n s u c ce ssf u l . Competitors and other third par t ies may infringe, misappropriate or otherwise v i olate our patents or o t her int e ll e c t ual proper t y or the patents or other intellectual property of our licensors. In addition, our patents or the patents of our lic e nsors also may become involved in i n ventorship, priority or validity disputes. To counter i n fringement or other una u t horized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infrin g ement proceeding, a court may decide that one or more of our p a tents is not valid or is u n enforceable or may refuse to stop the other party from using the t e chnology at issue on the grounds that our patents do not cover the technology in ques t ion. An adverse result in any litigation or defense proceeding could put one or more of o ur o w ed or licensed paten t s at risk of being invalidated, held unen f o r ceable, or interpreted narrowly, and could put our patent applica t ions at risk of not iss u ing. Defense of these cl a im s , reg a rdl e ss of th ei r merit, would involve subst a nti a l li t iga t ion e xpense a nd would be a substantial diver s ion of employee resources from our business. Furthermore, beca u se of the substantial amount of discovery required in connection w i th intellectual proper t y litigation, there is a risk that some of our confidential information could be compromised by disclosure dur i ng this type of litigation. Even if resolv e d in our f a vor, li t ig a tion or other legal proceed i ngs relating to intellectual prop e rty claims may cause us to i ncur significant expenses and could distract our personnel from their norm a l responsibilities. I n addit i on, there could be public announcements of the resul t s of hearings, m o tions, or other interim proceedings or dev e lop m ents, a nd if secur i ti e s an a lysts or investors per c eive t hese results to be negative, it c o uld have a substantial adverse eff e ct on the pri c e of our common stock. Such litigation or proceedings c o uld substan t ially increase our operating los s es and reduce the resources ava i l a ble for d e ve l op m ent a c t i vit i es or any future s a l e s, marketing, or distribution ac t ivities. We may not have s u f f icient financial or other resources to conduct such litigation or proce e dings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can b e cause of their greater finan c ial resources and more mature a n d developed intellectual property portfoli o s. Un c e rt a in t ies r e sult i ng from the in i ti a t i on and continuation of patent litigation or o t her proceedings could have a m a ter i al a d verse effect on our ability to comp e te in the m a rke t p l a c e. Issued patents covering our t e chnology and product candidates could be found invalid or u n e n for c eab l e if c ha l l e ng e d in c ourt or before administrative bodies in the United States or abroad. If we or one of our licensors initiate legal proceedings against a third party to enforce a patent covering one of our product candidates or o t her technologies, the defendant could counterclaim that t h e patent is invalid and / or unenforceable or that we infringe their paten t s. In patent litigation in the United States, defendant counte r claims alleging invalidity and/or unenforceability are commonplace, and there are numerous gro u nds upon which a third party can assert invalidity or unenforceability of a pate n t . Groun d s for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablemen t . Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or o t her applicable body, or made a misleading statement, during prosecution. T h ird parties may also raise similar claims be f ore administrative bodies in the United States or abro a d, ev e n outside t he cont e xt of l i tig a tion. Such m e chan i s m s include re-examination, post grant review, int e r par t e s review, interference proce e dings, derivation proceedings, and equivalent procee d ings in foreign jurisdictions (e.g., opposition proceedings). The cost to us of any litigati o n or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial. Some of o u r competitors may be better a b le t o sus t ain the c os t s of such li t ig a tion or ot h e r proceeding b e cause t h ey have su b stantially greater resources. Such proceedings could result in revocati o n or cancellation of, or amendment to, our patents in such a way that they no longer cover our product candidates or technologies. The outcome following legal assertions of invalidity and unenforceability is unpredi c table. With respect to the v alidity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our licensor, our or our licensor’s patent counsel and the patent exa m iner were unaw a re during prosecution. If a third party were to prevail on a legal ass e rtion of invalidity and/or unenforceability, we would lose at least part, and perha p s all, of the patent protection on our p r o duct candidates. Such a loss of patent protection c o uld have a material a dve r s e impact on our business, financial co n dition, results of o p erations and prospects. 104 Table of Contents T h e u se of o u r t e c h no l ogy a n d product candidates could pote n t ia l ly confli c t with the rights of others, and third-party claims of intellectual property in f r ingement, misappropriat i on or other violation against us, our licensors or our collaborators may prevent or delay the deve l opment and com m ercia l ization of our product candidates a n d technologies. Our com m er c ial suc c ess dep e nds in part on ou r , our lice n sors’ and our collaborators’ ability to avoid infringing, misappropriating and otherwise violating the patents and other intellectu a l property rights of third parties. There is a substantial amount of complex litiga t ion involving patents and other intellectual property rights in the biopharmaceutic a l industry. Our potential competitors or other parties may have, develop or acquire patent or other intellectual property rights that they could assert again s t us. If they do so, then we may be required to alter our product candidates, pay lic e nsing fees or cease our development and comme r cialization activiti e s with respect to the applicable product candidates or technologies. If our product candidates conflict with patent or other intellectual property rights of others, such parti e s could bring legal act i ons against us or our collaborators, licensees, suppliers or customers, claim i ng damages and seeking to enjoin manufacturing, use and marketing of the affected products. Although we have conducted fr e edom - to-operate, or FTO, analyses of the patent landscape with respect to our lead product candi d ates and continue to u n dertake FTO analyses of our manufacturing processes, our Anktiva product candidate, and contemplated future processes and pr o ducts, because patent applications do not p ublish for 18 months, and because the claims o f patent applicat i ons can change ov e r ti m e, no F T O analysis can be considered exhaustive. We may not be aware of patents that have already been issued and that a competitor or other third party m i ght a s sert are infringed by our c u r rent or future product c a ndidates or technologies. It is also possible that we could be found to have infringed patents owned by third parties of which we are aware, but which we do not believe are relevant to our product candidates or technologies. In addition, because patent applications can take many years to i s su e , th e re m a y be curr e ntly pending patent a ppli c a t ions th a t may l a ter result i n issued p atents that our product candidates or technologies may i n f r inge. Furthermore, patent and other intellectu a l property rights in biotechnology remains an evolving area with many risks and uncertainties. As such, we may not be able to ensure that we can market our product candidates without conflict with the rights of others. If intellectual property-related leg a l ac t ions a s s e r t ed aga i nst us a re su c c e s sful, i n a ddit i on to any pot e nti a l l i a bil i ty for d amages (including treble damages and attorneys’ fees for willful i n fringement), we could be enjoined from, or required to obtain a license to continue, manufacturing, promoting the use of or marketing the affected p r o d ucts. We may n ot prevail in any legal a c tion and a required license under the applicable patent or other int e ll e ctu a l proper t y m a y not be available on acceptable terms or at a ll. E ven if we were a ble to obta i n a l i c e ns e , it cou l d be non-exclusive, thereby giving our competitors and other t h ird parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We also cou l d be required to redesign our infringing p r o ducts, which may be impossible or require substantial time and monetary expenditure. Defense of i n f ringement claims, regardless of their merit, wou l d involve substantial litigation expense and would be a substan t ial diversion of management and other employee re s ources from our business, and may i m pact our reputation. Some of our competitors may be able to su s t a in the c osts of litigation or administrative proceedings more effectively than we can because of greater fin a ncial resources. In addition, t here could be public announcements of the results of hearings, m o tions, or other interim proceedings or dev e lopments, and if securities analysts or investors per c e i v e th e s e results to be negative, it could have a substantial adve r s e effect on the price of our common s t ock. The occurrence of any of t he foregoing could have a material adve r s e effect on our bu s iness, financial condition, resul t s of o perations and prospects. Obtaining and maintaining our patent prote c tion depends on compliance with various procedural, do c ument submission, fee paymen t , and other requirements imposed by govern m ent patent agencies, and our patent protection could be red u ced or eliminated for non-compliance with th e se r e qu i r e m e n t s. Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on pat e nts and patent applications are due to be p a id to t he USPTO and foreign patent agencies in several stages over the lifetime of a patent. The USPTO and various fore i gn governmental pat e nt agen c i e s require compliance with sever a l procedural, documentary, fee payment and other similar provisions during the pat e nt application p r ocess. In certain circumstances, we rely on our licensors to pay these fees and take the ne c e ss a ry ac t ions t o co m ply w i th t hese requi r e m e nts. Wh i le an inadvertent lapse can in many cases be cured by payment of a late f e e or by o t her me a ns in a c cord a n c e with the app l ic a ble rul e s, there a re s i tua t ions in which n o ncompliance can result in ab a ndonment or lapse of the patent or patent applica t ion, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance e v ents that cou l d result in abandonment or lapse of a patent or patent applica t ion inclu d e, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to e n ter the market with similar or identical products or technology, which would have a mat e rial a dverse imp a ct on our business, financial condition, results of operations and prospects. 105 Table of Contents Changes in United States patent law could diminish the value of patents in general, t h e r e by i m pairing our ability to protect our product candidates. As is the case with other i m munotherapy and biopharmaceutical companies, our success is dependent on intellec t ual property, particularly patents. Obtaining and enforcing patents in the b i opharmaceutical industry invol v e both technological and legal complexity, and is ther e fore costly, time-consuming and inherently uncertain. In a ddit i on, the Unit e d S t a tes h a s r e cen t ly ena c ted and is currently implementing wide-ranging patent reform legislation. Assuming that other requir e m e nts for pat e nt a bil i ty a re m e t, prior to M a rch 2013, i n t he Un i ted S t at e s, the first t o invent the claimed invention was entitled to t h e p a t e nt, while outside t he Un i ted S t a t es, the first to file a p a tent a ppli c at i on was e nt i tl e d to t he patent. After March 2013, u n der the Leahy-Smith America Inv e nts Act, or the America Invents Act, enacted in September 2011, the United States transitioned to a first-to-file system in which, assuming that other requir e men t s for p a t e ntab i li t y a re m e t , the first inventor to file a patent application w i ll be en t it l ed t o t he p a t e nt on an invention regardless of whether a third party was the first to invent the claimed inve n t ion. A third party that files a pat e nt application in the USPTO after March 2013, but before us could the r efore be awarded a patent covering an invention of ours even if we had made the inve n tion before it was made by such third party. This will require us to be co g nizant of the time from invention to filing of a patent application. Since patent appli ca t ions in the United States a n d most other countries a r e con f idential for a period of time after filing or until issuance, we cannot be cert a in that we or our licensors were the first to either file any patent ap p l ication r e lated to our product candidates or other technologies or invent any of t he inventions c l aimed in our or o u r licensor’s patents or patent applications. The Ame r ica I nvents Act also includes a n u mber of significant changes that affect the way patent applications will be pro s e c ut e d a nd a l so m a y a ffect patent litig a t i on. These in c lude a l lowing thi r d-party submission of p r ior art to the USPTO during patent p r osecution and additional proced u r es to attack the validity of a p a tent by USPTO-administered post - g r ant proceedings, i ncluding post-grant review, int e r pa r t e s review, a n d derivation proceedings. There f ore, the America Invents Act and its imp l ementation could increase the uncertainties and costs surrounding the prosecution of our owned or in-licensed patent appli c ations and the enforcement or defense of our owned o r in-licensed issued patents, all of which c ould have a material adverse effect on our business, financial condition, res u lts of operations, and prosp e c ts. Additionally, recent U . S. Supreme Court rulings have narr o wed the scope of patent pro t ec t ion ava i lab l e in cer t a in c i rcu m s t anc e s and weak e ned the rights of patent owners in cer t ain situations. I n addition to i n creasing uncertainty with regard to our ability to obtain pate n ts in the futur e , this comb i nat i on of even t s has cre a t e d unc e rt a inty with respe c t t o the value of patents, once ob t ained. Depending on decisio n s by Congress, the federal courts, and the USPTO, t h e laws and regulations governing patents could change in unpredictable ways that would weaken our abi l ity to obtain new patents or to enforce our exist i ng patents and patents that we m i ght obtain in the fut u re. While we do not believe that any of the patents ow n e d or licensed by us will be found invalid based on the foregoing, we cannot predict how future decisions by Congress, the federal c o urts or the USPTO may impact the value of our patents. Our rights to develop and comme r cialize our product cand i dates and technologies are s u b j ec t , in part, to the t e r m s and condit i o ns of l i c e n s es granted to us by others. We will rely on licenses to cer t ain patent rights and proprietary technology from third parties t h at are important or necessary to the developme n t of aldoxorubicin and products enabled by our yeast, inclu d ing T armogen, technologies. For example, in July 2017, we entered into a n exc l us i ve li c ense agreement with CytRx Corporation, or CytRx, pursuant to which we r e c e ived an ex c lusive li c e n s e to c e rtain of CytRx’s int e ll e c t u al property relating to aldoxorubicin. I n January 2020 we e n tered into an exclusive license agreement w i th GlobeImmune, Inc., or GlobeImmune, pursuant to which we obtained a n e xc l us i ve l i c e nse to c e r t ain of GlobeImmune’s intel l e c tual prop e rty r e l a ting to the i r T armogen platform to c o mplem e nt our proprietary yeast technology. I n August 2020, we entered into an exclusive license agreement with ios B io Ltd., formerly named Stabilitech Bi o pharma Ltd., or iosBio, pursuant to which iosBio granted us an exclusive license to c e rt a in of iosBio’s i nt e llectual property rights relating t o the SARS-CoV-2 and successor vaccine candidates (and, in connection with such license, we granted iosBio a non-exclusive license relating to its adenovirus constructs for the prevention and treatment of s h ingles and other infec t ious disease ta r g ets to be mutua l ly agreed by the parties in good fai t h). License agreements may not prov i de exclusive r ights to use certain licensed i n tellectual property and technology in all releva n t fiel d s of use and in all territories in which we may wish to dev e lop or commercialize our technology and produ c t candidates in the f uture. As a result, we may not be able to prevent competitors or other third parties from developi n g and commercializing competitive products that a l so utilizes technology that we have in-l i cens e d. 106 Table of Contents In addition, subject to the terms of any s u ch license agreements, we do n ot have the right to control the preparation, filing, prosecution and maintenance, and we may not have the right to control the enforcement, and defense of patents and patent appli c ations covering the technology that we l i cense from third parties. We cannot be cer t ain that our in-licensed or out - licensed patents and patent applications that are controlled by our licensors or licensees will be prepa r ed, filed, prosecuted, maintained, enforced, a n d defended in a manner con s istent with the best interests of our b usiness. If our licensors or li c e ns e es f a il to pros e c ut e , m a int a in, e nforce, and defend such patents, or lose rig h ts to those patents or patent application s , the rights we have licensed may be reduced or eliminated, our right to develop and commercialize A nktiva and any of our product candidates that are subject of such licensed rights could be adversely affec t ed, and we may not be able to prevent competitors from making, using and s e lling competing products. I n addition, even where we have the right to control patent prosecution of patents and patent applications we have licensed to and from third parties, we may still be adversely affected or prejudiced by actions or inact i o ns of our licensees, our licensors and the i r counsel that took place prior to the date upon which we assumed control over patent prosecution. Furthermore, our owned and in-li c ensed patents may be su b j ect to a reservation of rights by one or more third parties. For example, certain of our in-licensed intellectual property was funded in part by the U.S. government. As a res u lt, t h e U.S. government m a y have certain rig h t s to s u c h in t e l l e c tu al property. When new technologies are deve l oped with U.S. government f unding, the U.S. gover n ment generally obtains certain righ t s in any resulting patents, including a non-exclusive license au t horizing the U.S. gover n ment to use the invention or to have others use the invention on its behalf. The U.S. government’s righ t s may also permit it to disclose the funded inventions and technology to third parties and to exercise m arch-in rights to use or allow third parties to use the technology we have licensed that was developed using U.S. government funding. The U.S. government may ex e rcise i t s march-in rights if it determines that action is necessary because we fail to achieve practical a pplication of the government-funded technology, or because ac t ion is ne c e ssary to a ll e vi a te he a lth or saf e ty ne e ds, t o m e et requirements of fed e ral regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufact u re products embodying s u ch inventions in the Unit e d Stat e s in c e rt a in circumstances if this requir e ment is not waived. Any exercise by the U.S. government of such rights or by any third party of its reserved rights could have a material adverse effect on our competitive positi o n, business, financial cond i tion, results of operations and growth prosp e c t s . If we fail to comp l y with our obl i gations i n t h e agr e em e n t s u n der wh i c h we l i c e n s e i n tellectual property r i ghts from third par t ies or otherwise experience disruptions to our business r e lat i o n s h ips with o u r lic e n s ors, we co u l d lo s e l ic e n s e righ t s t h at are important to our b u s i n e s s . We have en t e r e d in t o l ic e nse a gre e men t s with third par t ies and may need to obtain additional lice n ses from others to advance our research or allow commercialization of our product c a ndidates. It is possible that we may be unable to obtain additional licen s es at a reasonable cost or on reasonable terms, if at all. In that event, we may be r e quired to expend sign i ficant time and resources to redesign our technology, product candidates, or the methods for manufacturing them or to deve l op or license replace m ent technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or com m ercialize the aff e cted product candidates or continue to utilize our existing technology, which could harm our business, financial condition, results of operations and growth prospects significan t ly. We cannot provide any assurances that third-party p a tents do not exist which might be enforced aga i nst our current technology, manufacturing methods, p r o duct candid a tes, or future methods or products resulting in either an injunct i on prohibiting our man u f acture or fut u r e sales, or, with respect to our future sale s , an obligation on our part to pay royalties and/or other forms of compensation to third parti e s, which could be significant. In addition, each of our license agreements, and we expect our future agreements, will im p ose various development, diligence, c ommercialization, and other obligatio n s on us. Certain of our license agreements also r e quire us to meet development ti m el i nes, or t o e xerc i se c omm er cially reasonable efforts to develop and commercialize licensed product s , in order to maintain the licenses. In spite o f our efforts, our licensors mig h t conclude that we have ma t e ri a l l y bre a ch e d our oblig a tions und e r such l i c e nse ag r ee m e n ts a nd might ther e fore t e rmin a te the lic e nse a gr e ements, th e reby removing or limiting our ability to develop and com m ercialize products and t e chnology covered by these license agr e ements. If these in-licenses are t e rmin a t e d, or if the u n derlying patents fail to provide the int e nded exclusivity, competitors or other third parties would have t h e freedom to seek regulatory approval of, and to market, products identical to ours and we may be required to cease our development and commerciali z ation of certain of our product candidates or of Anktiva. Any of the foregoing could have a material adver s e effect on our comp e titive position, business, financial conditions, results of o p erations and growth prospects. Moreover, disputes may arise regar d ing intellectual property subject to a licensing agr e ement, including: • t he scope of rights granted un d er the license a g r e em e nt and o t her int e rpre t a t i on-re l a t e d i s sues; • t he extent to which our technology and p r ocesses infringe on intellectual property of the licensor that is not subject to the l i censing agr e em e nt; 107 Table of Contents • t he sublicensing of patent a nd other rights under our collaborative development relationships; • our diligence obligations under the license agreement and what activ i ties satisfy those diligence obligations; • t he inventorship a n d ownership of inventions and know-how resulting from the joint c r eati o n or use of intellect u a l property by our licensors and us a nd our pa r tners; and • t he priority of invent i on of patented technology. In addition, the agreements und e r which we curre n t ly license i n tellectual property or technology from third parties are complex, and certain provisions in such agr e e m ents m a y be susc e ptib l e to m ult i ple in t e rpr e ta t i ons. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant i n tellectual property or technology, or increase what we b elieve to be our financial or other obligations under t h e relevant agreement, either of which could have a material adverse eff e ct on our business, financial condition, results of o p erations and growth prospects. Moreover, if disputes over intellectual property that we have l i censed prevent or impair our a b i li t y to m a int a in our current l ic e ns i ng arrangements on com m erc i a l ly a c c e pt a ble t e rms, we m a y be unable to successfully develop and commerci a li z e the aff e c t ed p r odu c t c a ndida t e s, wh i ch could have a material adve r s e effect on our busi n ess, financial conditions, results of operations and growth prospects. We have l i mi t e d for e ign int e l l ec t ual proper t y rights and may not be able to protect o u r intellectual property rights t h roug h out the world. We have limited int e llectual property rights outside the United States. Filing, prosecuting and def e nding patents on product c a ndidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the Unit e d S t a tes can be l e ss extensive than those in the Uni t ed States. In addition, the laws of some foreign countries do not protect int e llectual property rights to the s a me e xt e nt a s feder a l and s t ate l a ws in the Unit e d St a te s . Consequently, we may not be able to p r event third parties from p r acticing our inv e ntions in all countries o u tside the United States, or from selling or importing products made using our inventions in and into t h e United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise in f ringing products to territories w h ere we have patent protection, but enforcement is not as strong as that i n the Unit e d Stat e s. The s e prod u cts may compete with our product candid a tes and our patents or other intellectual property rights may not be effective or suff i ci e nt to pr e vent th e m from c omp e ting. Many companies ha v e encountered significant problems in protecting and defending intellectual property rights in foreign juris d ictions. The legal systems of certain countries, particularly certain developing c ount r ies, do not favor the enforcement of patents, trade secrets and other intellectual property protection, parti c ularly those relating to biopharma c eutical p r o d ucts, whi c h could make it diffic u lt for us to stop the infringement of our patents or marketing of competing products in vio l ation of our proprietary rights generally. Proceedings to enforce our patent rights i n foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent appli c ations at risk of not issuing and could provoke third parties to assert claims ag a inst us. We may not prevail in a ny l a wsu i ts t h a t we i nit i at e , and the damages or other r e medies awa r ded, if any, may not be c o m m er c ia l ly me a ningful. A c cordingly, our e f forts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. I n addition, many countries limit the enforceabili t y of patents against government agencies or gov e rnment contractors. In these countries, the patent owner may have li m it e d r e med i es, wh i c h could materially diminish the value of such patent. If we or any of our licensors is forced to grant a l i c e nse to th i rd pa r ti e s w i th respect to any patents relevant to our business, our competi t ive position may be impaired, and our business, financial conditi o n, results of operations and prospects may be a dversely affected. We may be subject to claims that our employees, consultants or i n depende n t co n trac t ors h ave wro n gfully used or disclosed trade s e cr e ts or oth e r confident i al i n forma t ion of third parti e s or claims asserti n g ownership of what we regard as our own intellectual property. We have r e c e ived conf i dent i al and proprietary information from third parties and their employees and con t ractors. In addition, we plan to employ and contract with individuals who were previously e m ployed at other biotechnology or pharmaceutical companies. We may be subject to c la i ms t hat we or o u r employees, consultants or ind e pendent contractors have inadver t ently or otherwise used or disclosed the trade secrets or o t her confidential information of these third parties o r our emp l oyees’ former e m ployers. Litigation may be necessary to defend against or pursue these c l ai m s . E ven if we are succ e ssful in resolv i ng th e s e c l a ims, l i tig a tion cou l d result in sub s t a nti a l c ost and be a distraction to our management and employees. 108 Table of Contents In addition, while it is our poli c y to require our empl o yees, c onsultants and independ e nt contractors who m a y be involved in the conception or development of intellectual prop e rty to execute agreements assigning such intell e ctual property to us, we may be unsuccessful i n executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment o f intellectual property rights may not be self-executing, or t h e a s s i gn m e nt agr e e m ents may be bre a ched, a nd we may be forced to bring claims against t h ird parties, or defend claims that they may bring against us, to determine the ownership of wh a t we r e gard as our int e ll e ctual property. Any of the f o r e going could have a material adve r s e effect on our bu s iness, financial condition, resul t s of o perations, and prospects. We may not be able to li c ense or acquire new or necessary i n tellectual property rights or t e chnology from t h i r d pa r ti e s. An element of our intellectual property s t rategy is to license intel l ectual property rights and t echnologies from third parties and/or our a f filiates. Other parties, including our competitors or our affiliates, may have p a tents and have filed and are l i kely filing pat e nt applications potentially relevant to our b u siness. In order to avoid infringing these patents, we may find it necessary or prud e nt to obtain licenses to such patents f r om such parties. In addition, w i th r e sp e c t to any pa t e nts we c o-own w i th other parties, including our affiliates, we may require l i c e nses to such co-owners’ in terest to such patents. The licensing or acquisition of intellectual property rights is a competitive area, and other mo r e established companies may pursue strategies to license or acquire third-party intellect u al property rights that we may consider attract i ve or necessary. These established companies may have a competitive advantage over us due t o t heir siz e , c a pit a l r es ources and greater clinical development and commercial i z a tion c a p a bi l it i es. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third party intelle c tual property rights on terms that would allow us to make an approp r iate return on our inv e stment or at all. No assurance can be given that we will be succ e s s ful in licensing any additional rights or technologies from t h ird parties and/or our af f iliates. Our inability to l i cense the rights and techno l ogies that we have identified, or th a t we m a y i n t he future id e ntify, c ould have a material a dverse impact on our ability to c o mplete the development of our product candidates or to develop additional product c a ndidates. Even if we were able to obtain a lice n se, it could be non-exclu s ive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. Failure to obtain any necessary rights or licenses may detriment a lly af f ect our planned development of o u r current or future additional product candidates and could increase the cost, and extend the timelines associated with our development, of such other products, and we may have to abandon development of the relevant program or product candidate. Any of the foregoing could have a material adverse e ffect on our business, financial co n dition, results of o p erations and prospects. If we do not ob t ain pa t ent t e rm ext e nsion and data exclusivity for any product ca n didat e s we may d e v e lop, our business may be m at e r i ally harmed. Depending upon the timing, duration and specifi c s of any FDA marketing approval of any product candidates we may develop, one o r more of our owned or in-licensed U.S. patents may be eligible for limited patent term extension under the D r u g Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Wa x m an Act. The Hatch-Waxman Act permits a patent term extension of up to five years as compensation for patent te r m lost d u r ing the FDA reg u latory review p r o c ess. A patent term extension cannot extend the remaining term of a patent beyond a total o f 14 years from the date of product approval, only one patent may be extended and only tho s e claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar e x tensions as compensation for patent term lost during r e gulatory re v i ew processes are also a va i lab l e in certain foreign countries and territories, such as in Europe under a Supplementary Patent Certificate. Howev e r, we may not be g ranted an extension in the United States and/or foreign countries and territories because of, for example, failing to exercise due diligence during t h e testing phase or regulatory review process, failing to apply within applicable d e adlines, failing to apply prior to e xpiration of relevant patents, or otherwise fa i ling to s a tisfy applicable requirements. Mor e over, the a ppli c ab l e ti m e period or the scope of patent protect i on afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is shorter t h an what we request, our competitors may obtain approval of competing prod u cts following our patent e x piration, and our busine s s, financial condition, results of operations and growth prospects co u ld be m a t e ri a lly harm e d. We may be subject to claims challenging the inv e n t orship of our patents a n d oth e r int e ll e c t ual propert y . We or our licensors may be subject to claims that fo r mer employees, collaborators or o t her third par t ies h a ve an int e rest in our owned or in-licensed patents, trade secrets, or other intellectual property as an inventor or co-inv e ntor. For example, we or our licensors may ha v e inventorship disputes a r ise from conflicting obligations of emplo y ees, consult a nts or others who are involved in developing our Anktiva product candidates or other technologies. Litigation may be necessary to defend against these and other c l aims challenging inventorship or our or our licensors’ ownership of our owned or in-licensed patents, trade secrets or oth e r intellectual property. If we or our licensors fail in defending any such claims, in addition to p a ying monetary dam a ges, we m a y lose v a lu a ble in t e l l ec t ual prope r ty rights, such as exclusive ownership of, or right to use, in t e l l e c tual prop e rty that is important to our Anktiva product candidates and oth e r technologies. Even if we are successful in defending against such claims, litigation could r e sult in sub s t a nti a l c osts and be a distraction to management and other employees. Any of the foregoing could have a material adverse e ffect on our b usin e ss, financial condition, results of operati o ns and growth prospects. 109 Table of Contents If we are unable to protect t h e confidentiality of o u r t r ade s e c r ets, o u r business and co m pe t it i ve pos i t i on wou l d be h ar m ed. In addition to seeking patents for Anktiva, hAd5 and yeast te c hn o logies and other p r oduct candidates and oth e r technologies, we a lso r e ly on tr a de s e cr e ts and confidentiality agreements to p r otect o u r unpatented know-how, technology, and other proprietary information and to mainta i n our c omp e ti t ive p o sition. Trade secrets and know-how can be difficult to protect. We expect our trade secrets and know-how to over time be dis s e m ina t ed w i thin the industry through independent deve l opment, the publication of journ a l articles des c ribing the methodology, and the movement of p ersonnel from academic to industry s c ientific positions. We seek to protect these trade secrets a nd other proprietary technology, in part, by entering into nondisclosure and confidentia l i t y agr e e m ents w i th parties who have access to them, such as our employees, corporate collaborators, outs i de s c ien t ific c oll a borators, CROs, CMOs, consultants, advisors, and other th i rd par t i e s. W e also ent e r i nto c onfid e nti a li t y and invention or pat e nt a s sign m ent agr e e m ents with our employees and consultants as well as t r ain our employees not to bring or use proprietary information or t e chnology from former employers to us or in their w o r k, and remind former empl o yees when they leave t h eir employment of their confidentiality obli g ations. We cannot guarantee that we have e nt e red into su c h agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Despite our efforts, any of these par t ies may bre a ch the agr e em e nts a nd disclose our proprietary i n formation, including our trade secrets, and we may not be able to obtain adequate rem e dies for such bre a ches. Enfor c ing a cl a im th a t a p a rty il l e g ally disclosed or misappropriated a t rade secr e t is d i fficu l t, expensive, and time-consuming, and the outcome is unpredictable. In addition, some c ourts inside and outside the Uni t ed States are less willing or u n willing to protect trade secrets. If any of our trade secrets w e re to be lawfully obtained o r independently developed by a c o mpetitor or other third party, we would have no rig h t to prevent them from using that technology or information to compete with us. If any of our t r ade secr e ts were t o be disclosed to or independently developed by a competitor or other third party, our com p etitive p osition would be materially and adversely harmed. If our trademarks and trade names are not ad e quately protected, t h en we may not be able to build name recognition in our marke t s of interest and o u r busi n e ss may be adversely affected. Our registered or unregistered trademarks or t r ade names may be challenged, infringed, circumvented or dec l ared generic or det e rmined to be infringing on other marks. We may not be able to pro t e c t our righ t s to these tr a dem a rks a nd tr a de names, which we need to build name reco g nition among p o tential partners or customers in our markets of interest. At times, competitors or other t h ird parties may adopt trade names or tr a de m arks sim i l a r to o u r s , t h ereby im p e ding our ability to build brand identity and possibly leading to mar k et confusion. In addition, there could be potential trade name or tradema r k infringement claims brought by owners of other registered t r ademarks or trademarks that incorporate variations of our registered or u n r e gistered trademarks or trade names. Over the long term, if we are unable to e s tablish n a me recognition based on our tradem a rks and trade names, th e n w e m a y not be able to c om p ete eff e ctively and our business may be adversely aff e cted. Our efforts to enforce or protect o u r proprietary rights related to trademarks, trade sec r ets, domain names, copyrights or other intellectual property m a y be ineffective and could resu l t in substan t i a l c os t s and diversion of resources and could adversely affect our business, financial condition, r e sults of operations and growth prospect s . Intellectual pr o perty rights do not necessarily address all potential threats. The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to m a i nta i n our comp e ti t ive advantage. For example: • others may be able to make p r o ducts t h at are similar to our product candidates or utilize similar technology but that are not covered by the claims of the patents that we license or may own; • we, or our current or future licensors or collaborators, might not have been the first to make the inven t ions covered by the i ssued patent or pending patent appl i cation that we license or own now or in the future; • we, or our current or future licensors or collaborators, might not have been the first to file p a tent a pplications covering c e rtain of our or their inventions; • others may independently deve l op similar or alternati v e technologies or duplicate any of our technologies without infringing our ow n e d or l i c en s e d in t e l l e c tual property rights; • i t is possible that our current or future pending owned or licensed patent applications will not le a d t o issued pat e nts; • i ssued patents that we hold r ights to may be held invalid or unenforceable, including as a result of legal challenges by our c ompetitors or other third parties; 110 Table of Contents • our competitors or other third pa r ties m i ght conduct research and development activities in countries where we do not have pa t ent rights and then use the information learned from s u ch activities to develop competitive products for sale in our major commercial mark e t s; • we may not develop additional proprietary technologies that are patenta b le; • t he patents of others m a y harm our business; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a p a tent covering such intellectual property. Should any of these events occur, they could have a material adverse ef f ect on our business, financial condition, results of operations a n d growth prospects. O n e of our i s s u ed U . S. pa t e n ts i s subject to a claim chall e ng i n g t h e i n v e n t or s h ip. On September 10, 2020, a legal complaint was filed in a California court where Institute for Cancer Research (d/b/a Fox Chase Cancer Center) argued that it has a co-ownership i n terest in U.S. Patent No. 10,456,420 a n d its underlying U.S. Patent Application No. 15/529, 8 48, as well a s in c e rta i n r e la t e d patent applications or issued p a ten t s th a t inc l ude cl a im e d subj e c t m a tt e r a ll e gedly invented by one of the claimant’s employee s . On September 30, 2020, we fil e d motion with the court asking that the c ompl a int be dismissed. We dis a gr e e t hat th i s c l aim for co-owner s hip has merit and intends to vigorously defend our posi t ion. All of t he exist i ng n a m e d inventors have assigned their righ t s in this p a t e nt to us. We will continue to have an u ndivided interest in the entire patent even if claimant succeeds in this suit. However, l it i gat i ng t his m a t t er could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a ma t erial adverse effect on o u r business, financial cond i tion, results of operations and growth prospects. Risks Related to Our Common Stock Dr. Soon-Shiong, o u r E xecutive C hairman and our principal stockholder, h a s signifi c ant interests in oth e r c ompanies w h i c h may c onfli c t w i th our i n t e r e sts. Our Executive C hairma n , Dr. Soon-Shiong, is the founder of NantWorks, L L C (“NantWorks”). The various NantWorks companies are currently exploring opportunities in the immunotherapy, oncology, infectious disease and inflammatory disease fields. In particular, we have agreements with a number of related parties that provide services, technology and equipment for use in their efforts to develop their product pipelines. Dr. Soon-Shiong holds a controlling interest, either directly or indirectly, in these entities. Consequently, Dr. Soon-Shiong’s interests may not be aligned with our other stockholders and he may from time to time be incentivized to take certain actions that benefit his other interests and that our other stockholders do not view as being in their interest as investors in our company. In addition, other companies affiliated with Dr. Soon-Shiong may compete with us for business opportunities or, in the future, develop products that are competitive with ours (including products in other therapeutic fields which we may target in the future). Moreover, even if they do not directly relate to us, actions taken by Dr. Soon-Shiong and the companies with which he is involved could impact us. We are also pursuing supply arrangements for various investigational agents controlled by affiliates to be used in their clinical trials. If Dr. Soon-Shiong w e re to cease his affiliation with us or NantWorks, these entities may be unwilling to continue these relationships with us on commercially reasonable terms, or at all, and as a result may impede our ability to control the supply chain for our combination therapies. These collaboration agreements do not typically specify how sales will be apportioned between the parties upon successful commercialization of the product. As a result, we cannot guarantee that we will receive a percentage of the revenues that is at least proportional to the costs that we will incur in commercializing the product candidate. We have entered into sh a red s e rvic e s agr e e m ents with NantWorks, pursuant to which NantWorks and its affiliates provide corporate, general and administrative and other support services to us. If Dr. Soon-Shiong was to cease his affiliation with us or with NantWorks, we may be unable to establish or maintain this relationship with NantWorks on a commercially reasonable basis, if at all. As a result, we could experience a lack of business continuity due to loss of historical and institutional knowledge and a lack of familiarity of new employees and/or new service providers with business processes, operating requirements, policies and procedures, and we may incur additional costs as new employees and/or service providers gain necessary experience. In addition, the loss of the services of NantWorks might significantly delay or prevent the development of our product ca n didates or achievement of other business objectives by diverting management’s attention to transition matters and identification of suitable replacements, if any, and could have a material adverse effect on our business and results of operations. 111 Table of Contents Dr. Soon-Shiong, through his voti n g co n t r ol of t h e compan y , has the ability to control actions that req u ire stockholder a p proval. Dr. Soon-Shiong, through his direct and indi r ect ownership of the company’s common stock, has voting control of the company. As of March 31, 2021 , Dr. So o n - S hiong and certain of his af f iliates beneficially own approximately 81.8% of the company’s common stock outstanding. A dditionally, an affilia t e of Dr. Soon-Shiong holds a warrant to pur c ha s e an additional 1,638,000 shares of the comp a ny’s common stock that will become exercisable if certain perfor m ance conditions are satisfie d . Dr. Soon-Shiong and his related party also h old approximately $279.5 million in the aggregate of contingent value rights (“C V Rs”) iss u ed to the fo r mer s t ockholders of Altor BioScience Corporation (succeeded by Altor BioScience LLC) (“Altor ” ) in connection with NantCell ’s acquisition of Altor. I f the u n derlying conditions for payment are met, the CVRs become paya b l e in cash or shares of the company’s common stock or any combination as the holder elects. Dr. Soon-Shiong and his related party have irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs. Dr. Soon-Shiong is in a position to con t rol the outcome of corporate actions that require, or may be accomplished by, sto c kholder approval, including amending the bylaws of the company, the elect i on or removal of directors and transactions involving a change of control. Dr. Soon-Shiong’s controlling ownership could limit the a b ility of the remaining stockholders of the company to influence corporate m a t t ers, and the interests of Dr. Soon-Shiong may not coincide with the company’s interests or the int e rests of its remaining stockholders. In a ddit i on, ent i ti e s affiliated with Dr. Soon-Shiong hold p r o m issory representing $297.5 million in indebtedness, including interest thereon, of the company as of March 31, 2021 . In addition, pursuant to the Nominating Agreement between us and Cambridge Equities, LP, or Cambridge, an entity that Dr. Soon-Shiong controls, Cambridge has the ability to designate one director to be nominated for election to our board of directors for as long as Cambridge continues to hold at least 20% of the issued and outstanding shares of our common stock. Dr. Soon-Shiong was selected by Cambridge to hold this board seat. Dr. Soon-Shiong and his affiliates will therefore have significant influence over management and significant control over matters requiring stockholder approval, including the annual election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, for the foreseeable future. This control will limit stockholders’ ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our common stock could be adversely affected. The market price of our common stock has been and may continue to be volatile, and investors may have difficulty selling their shares. Although our common stock is listed on The Nasdaq Global Select Market, the market for our shares has demonstrated varying levels of trading activity. You may not be able to sell your shares quickly or at the market price if trading in shares of our common stock is not active. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration. The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including: • the commencement, enrollment or results of the planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates; • any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; • adverse results or delays in clinical trials; • our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial; • adverse regulatory decisions, including failure to receive regulatory approval of our product candidates; • changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals; • our failure to commercialize our product candidates; • additions or departures of key scientific or management personnel; 112 Table of Contents • unanticipated serious safety concerns related to the use of our product candidates; • announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; • our ability to effectively manage our growth; • variations in our quarterly operating results; • our liquidity position and the amount and nature of any debt we may incur; • announcements that our revenue or income are below or that costs or losses are greater than analysts’ expectations; • publication of research reports about us or our industry, or immunotherapy in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts; • changes in the market valuations of similar companies; • sales of large blocks of our common stock; • fluctuations in stock market prices and volumes; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • significant lawsuits, including patent or stockholder litigation; • the perception of our clinical trial results by retail investors, which investors may be subject to the influence of information provided by third party investor websites and independent authors distributing information on the internet; • general economic slowdowns; • coordinated actions by independent third-party actors to affect the price of certain stocks, coordinated via the Internet and otherwise; and • other factors described in this “ Risk Factors ” section. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition. Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plan, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall. Sales of a substantial number of shares of our common stock in the public market could occur at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell substantial amounts of our common stock in the public market, the market price of our common stock could decline significantly. In addition, our Executive Chairman, Dr. Soon-Shiong, and his affiliates cur r ently beneficially own approximately 81.8% of our outstanding shares of common stock. Sales of stock by Dr. Soon-Shiong and his affiliates could have an adverse effect on the trading price of our common stock. Certain holders of our common stock are entitled to certain rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by our affiliates as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have an adverse effect on the market price of our common stock. In addition, we expect that additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating as a public company. To raise capital, we may sell common stock, including as part of the offering, issuance and sale by us of up to a maximum aggregate offering of $500.0 million of our common stock that may be issued and sold under an “at-the-market” sales agreement with Jefferies LLC, or the ATM, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, including through the ATM, convertible securities or other equity securities, investors may be materially diluted and new investors could gain rights, preferences and privileges senior to the holders of our common stock. 113 Table of Contents We have incurred and will continue to incur costs as a result of operating as a public company and our management has been and will be required to devote substantial time to compliance initiatives and corporate governance practices, including maintaining an effective system of internal control over financial reporting. As a public company listed in the U.S., and increasingly after we no longer qual i fy as a “smaller reporting company,” we have incurred and will continue to incur significant additional legal, accounting and other expenses as a result of operating as a public company. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including Sarbanes-Oxley and regulations implemented by the SEC and Nasdaq, may increase legal and financial compliance costs and make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to create a larger finance function with additional personnel to comply with evolving laws, regulations and standards, and this investment will result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us, and our business may be harmed. As a public company in the U.S., we may be required, pursuant to Section 404 of Sarbanes-Oxley, or Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. The controls and other procedures are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is disclosed accurately and is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. In addition, we are required to disclose any material weakn e sses identified by our management in our internal control over financial reporting, and, when we no longer qualify as a “ s maller reporting company,” w e will be required to provide a statement that our independent registered public accounting firm has issued an opinion on our internal control over f inancial reporting. To date, we have not engaged our independent registered public accounting firm to perform an audit of, and give an opinion on, our internal control over financial reporting. There can be no assurance that we will not discover deficiencies or a material weakness in our internal control over financial reporting or that our auditor will agree with management’s assessment of our internal control over financial reporting if or when our auditor conducts such audit and delivers an opinion. In the normal course of business our controls and procedures may become inadequate because of changes in conditions or the degree of compliance with these policies or procedures may deteriorate and material weaknesses in our internal control over financial reporting may be discovered. We may err in the design or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, there can be no absolute assurance that all control issues have been or will be detected. If we are unable, or are perceived as unable, to produce reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial information and operating results, which could result in a negative market reaction. To fully comply with Section 404, we will need to retain additional employees to supplement our current finance staff, and we may not be able to do so in a timely manner, or at all. In addition, in the process of evaluating our internal control over financial reporting, we expect that certain of our internal control practices will need to be updated to comply with the requirements of Section 404 and the regulations promulgated thereunder, and we may not be able to do so on a timely basis, or at all. In the event that we are not able to demonstrate compliance with Section 404 in a timely manner, or are unable to produce timely or accurate financial statements, we may be subject to sanctions or investigations by regulatory authorities, such as the SEC or Nasdaq, and investors may lose confidence in our operating results and the price of our common stock could decline. Furthermore, if we are unable to certify that our internal control over financial reporting is effective and in compliance with Section 404, we may be subject to sanctions or investigations by regulatory authorities, such as the SEC or stock exchanges, and investors could lose confidence in the accuracy and completeness of our financial reports, which could hurt our business, the price of our common stock and our ability to access the capital markets. Operating as a public company makes it more expensive for us to obtain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors, or as members of senior management. 114 Table of Contents If a restatement of our financial statements were to occur , our stock holders’ confidence in the c ompany’s financial reporting in the future may be affected , which could in turn have a material adverse effect on our business and stock price. If any material weaknesses in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements, and we could be required to restate our financial results. In addition, if we are unable to successfully remediate any future material weaknesses in our internal controls or if we are unable to produce accurate and timely financial statements, our stock price may be adversely affected, and we may be unable to maintain compliance with applicable stock exchange listing requirements. We have not paid cash dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock. We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. Because we are relying on the exemptions from corporate governance requirements as a result of being a “controlled company” within the meaning of the Nasdaq listing standards, you do not have the same protections afforded to stockholders of companies that are subject to such requirements. Our Executive Chairman, Dr. Patrick Soon-Shiong, and entities affiliated with him, control a majority of our common stock. As a result, we are a “controlled company” within the meaning of the Nasdaq listing standards. Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain Nasdaq corporate governance requirements, including (1) the requirement that a majority of the board of directors consist of independent directors, and (2) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. Accordingly, you do not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements. However, our board of directors is currently comprised of a majority of independent directors. We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors. Although we no longer qualify as an emerging g r owth company, we qualify as a “smaller r e porting company” during fiscal year 2021, which allows us to take advantage of many of the same e x emptions from disclosu r e requirements, including reduced dis c losure obligations regard i ng executive compensation in our periodic reports and proxy statements. These exemptions include: • being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s discussion and analysis of financial condition and results of operations” disclosure; • not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting; and • reduced disclosure obligations regarding executive compensation. Investors may find our common stock less a t t ra c tive a s a result of our re l i a nce on th ese exemptio n s. If some investors f ind our common stock less at t ra c tive a s a result, t here m a y be a l e ss a c tive tr a ding mark e t for our common stock and the m a rket price of o u r common stock may be reduced or more v o l a til e . We could be subject to additional income tax liabilities. We are a U.S.-based company subject to tax in the U.S. and certain foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities, and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes. 115 Table of Contents Our business may be materially affected by changes to fiscal and tax policies. Negative or unexpected tax consequences could adversely affect our results of operations. New tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our domestic and international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the Tax Cuts and Jobs Act of 2017, or TCJA, which was approved by Congress on December 20, 2017 significantly changed the U.S. Internal Revenue Code. Such changes include a reduction in the corporate tax rate and limitations on certain corporate deductions and credits, among other changes. We have generally accounted for such changes in accordance with our understanding of the TCJA and guidance available as of the date of this filing as described in more detail in our financial statements. The CARES Act, which was signed into law on March 27, 2020, further modified the TCJA and we will continue to monitor and assess the impact of the federal legislation on our business and the extent to which various states conform to the newly enacted federal tax law. In addition, adverse changes in the financial outlook of our operations or further changes in tax laws or regulations could lead to changes in our valuation allowances against deferred tax assets on our consolidated balance sheets, which could materially affect our results of operations. If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline. The trading market for our common stock will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. There can be no assurance that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our share price would likely decline. If one or more of these analysts’ cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline. We are not subject to the provisions of Section 203 of the Delaware General Corporation Law, which could negatively affect your investment. We elected in our amended and restated certificate of incorporation to not be subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns (or, in certain cases, within three years prior, did own) 15% or more of the corporation’s voting stock. Our decision not to be subject to Section 203 will allow, for example, our Executive C hairman (who, with members of his immediate family and entities affiliated with him, currently beneficially own, in the aggregate, approximately 81.8% of our common stock as of March 31, 2021) to transfer shares in excess of 15% of our voting stock to a third-party free of the restrictions imposed by Section 203. This may make us more vulnerable to takeovers that are completed without the approval of our board of directors and/or without giving us the ability to prohibit or delay such takeovers as effectively. Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management. Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders. These provisions include: • a requirement that special meetings of stockholders be called only by the board of directors, the president or the chief executive officer; • advance notice requirements for stockholder proposals and nominations for election to our board of directors; and • the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock. 116 Table of Contents These anti-takeover provisions and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline. Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us. Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements that we have entered into with our directors and officers provide that: • We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful. • We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law. • We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification. • We are not obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification. • The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons. • We may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents. To the extent that a claim for indemnification is brought by any of our directors or officers, it would reduce the amount of funds available for use in our business. 117 Table of Contents ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. (a) Recent Sales of Unregistered Securities None. (b) Issuer Purchases of Equity Securities None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable.