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Item 1. Business

2022-03-28 compared with 2021-03-25 · 276 added, 391 removed, 381 unchanged (64% of the section changed)

We are a biopharmaceutical company utilizing our proprietary human memory B cell platform to discover and develop first-in-class antibody therapeutics designed to change the way diseases are currently being treated.

We are a biopharmaceutical company utilizing a proprietary human memory B cell platform to discover and develop first-in-class antibody therapeutics designed to change the way diseases are currently being treated.

Our proprietary discovery engine identifies novel therapeutic antibodies and their targets by leveraging highly educated components of the immune system, memory B cells, from patients who have learned to fight off their disease.

B cells are key elements in the human immune system response because they produce specific, high-affinity antibodies that bind to pathogens or cancer cells and target them for destruction by other immune effector cells.

Memory B cells are the key elements in the human immune system response because they produce specific, high-affinity antibodies that bind to pathogens or cancer cells, and thus target them for destruction by other immune effector cells.

Our platform is different from those of other biotechnology companies because of our unbiased, broad, deep and efficient approach to identifying novel antibody-target pairs that may be useful in treating cancer and infectious diseases.

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Our primary focus areas are oncology and infectious disease.

Despite many elements that distinguish oncology from infectious diseases, we believe that our platform will enable the discovery of novel antibodies in both these therapeutic areas because of our interrogation of memory B cells from patients who have learned to fight off these diseases.

We anticipate screening for novel antibodies that bind viral or bacterial antigens may be simpler relative to oncology.

As an example, viral diseases, such as COVID-19, involve fewer potential target antigens represented in the much smaller viral genome, compared to possible oncology targets in humans.

To date, we have processed more than 150 cancer patient memory B cell samples and have generated and screened more than 300,000 hybridomas, or stable, immortalized forms of B cell clones that produce a single antibody for extended periods of time.

We have so far successfully identified approximately 1,300 individual antibodies, which we refer to as hits, that appear to bind to either a cancer cell or a tumor extract with high-affinity and specificity.

Using this approach, we have identified over 50 potentially novel cancer targets.

We believe that several of these antibody-target pairs could potentially form the basis of a therapeutic intervention or a diagnostic to detect such targets in a broader patient population.

One of these unique targets is interleukin-38, or IL-38, a novel immune checkpoint inhibitor, which is the current focus of our lead discovery program, IMM-ONC-01, which is in preclinical stage.

If our preclinical evaluation is successfully completed, we expect to file an Investigational New Drug, or IND, application with the U.S.

Food & Drug Administration, or FDA, in connection with this program in the second half of 2021.

Despite many elements that distinguish oncology from infectious diseases, the breadth of our platform enabled the discovery of novel antibodies in both of these therapeutic areas.

We are currently advancing two programs:

a three-antibody cocktail (IMM-BCP-01) for potential treatment and prophylaxis of SARS-CoV-2, and an antibody (IMM-ONC-01) against IL-38, a novel immune checkpoint, for the potential treatment of various solid tumors.

To date, we have processed memory B-cells isolated from hundreds of cancer patients and have generated several hundred thousand hybridomas, or stable, immortalized forms of B cell clones that produce a single antibody for extended periods of time.

We have successfully identified more than a thousand individual antibodies, which we refer to as hits, that appear to bind to either a cancer cell or a tumor extract with high-affinity and specificity.

To date, after assessing only a fraction of these hits (antibodies), we have identified over 70 potentially novel cancer targets.

We believe that several of these antibody-target pairs could potentially form the basis of a therapeutic hypothesis, resulting in an intervention or a diagnostic to detect such targets in a broader patient population.

One of these unique targets is interleukin 38, or IL-38, a novel immune checkpoint inhibitor.

An antibody directed at IL-38 is the current focus of our lead oncology program, IMM-ONC-01, which is in preclinical development stage.

We are also studying the expression of this novel checkpoint in various tumor types in order to select the most appropriate patient population to study in the clinic.

We plan to submit our IND application for the IMM-ONC-01 program with the FDA in the second half of 2022.

We believe that our platform is useful in uncovering new insights into cancer biology itself.

In analyzing more than 50 cancer targets that we have identified to date, we observed a “functional clustering” of targets, indicating that different tumor patients appear to mount an immune response directed towards specific processes in cancer biology.

We are leveraging these insights to guide the discovery of future oncology pipeline assets and to perhaps enable future strategic collaborations and additional value creation.

Our scientific founder, Scott Dessain, M.D., Ph.D., has used our platform to successfully interrogate the memory B cells of polio patients and has identified novel antibodies directed at that virus.

We are building on that proof of concept to advance a potential product for another virus, SARS-CoV-2, which causes COVID-19.

In collaboration with the United States Department of Defense, or DoD, we are pursuing an innovative therapeutic approach against the SARS-CoV-2 virus by seeking to identify effective anti-viral antibodies produced by the memory B cells from “super-responders.” These COVID- 19 convalescent patients have cleared their infections and have high levels of circulating, high-affinity anti-viral antibodies.

Our aim is to interrogate their memory B cells to identify and then reconstitute a mixture of likely four (but up to six) anti-viral antibodies as a “cocktail”, or IMM-BCP-01.

The IMM-BCP-01 program was initially focused on original variants of SARS-CoV-2.

However, in the interest of public health, our current efforts now also include testing of our antibodies against the emerging SARS-CoV-2 variants.

We expect to progress IMM-BCP-01 to an IND filing in the later part of the second quarter or in the early part of the third quarter of 2021.

In analyzing over 70 cancer targets that we have identified to date, we observed a “functional clustering” of targets, indicating that different tumor patients appear to mount an immune response directed towards specific processes in cancer biology, such as membrane dynamics and exosomes.

We are leveraging these insights to guide the discovery of future oncology pipeline assets and perhaps to enable future strategic collaborations and additional value creation.

In addition, the platform is able to identify antibodies that can serve as suitable candidates for other cancer treatment modalities, such as Antibody-Drug Conjugates (ADC) or T cell engagers.

We have advanced a product candidate that binds and inactivates SARS-CoV2, which causes COVID-19.

This program is aimed at advancing an innovative therapeutic approach against the SARS-CoV2 virus into the clinic.

We are conducting this program in collaboration with the DoD (U.S.

Department of Defense’s (DOD) Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (JPEO-CBRND) in collaboration with the Defense Health Agency (DHA).

(Contract number:

W911QY-20-9-0019).

We generated a library of nearly 400 antibodies from the memory B-cells of patient “super-responders” who successfully cleared their SARS-CoV-2 infection having high circulating levels of high-affinity anti-viral antibodies.

We have completed in-vitro pre-clinical evaluation of the activity of IMM-BCP-01 against multiple SARS-CoV-2 variants (including Alpha, Beta, Gamma, Delta, and Omicron) and submitted an IND application to the FDA in November 2021.

In March 2022, the FDA communicated that the clinical study can be initiated for our antibody cocktail for the treatment of SARS-CoV-2 following a brief clinical hold.

Key Attributes of Our Discovery Engine

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● Capture a large number (typically thousands) of patient-derived memory B cells and enrich and expand them using proprietary methods.

We then convert memory B cells into stable human hybridomas, which typically express an antibody in quantities necessary for broad screening.

● Interrogate each antibody produced by B cells against disease-related antigens, using function-based high-throughput screening approaches that include proprietary protein micro-array technologies that allow rapid screening of up to 20,000 antibodies in a single experiment.

In the case of infectious diseases, screening is performed against defined pathogen specific antigens and in the case of cancer, screening is performed against mixtures of disease related antigens.

We then convert memory B cells into stable human hybridomas, which typically express an antibody in quantities necessary for broad pre-clinical screening.

● Interrogate each antibody produced by the human memory B cell hybridomas against disease-related antigens, using function-based high-throughput screening approaches that include proprietary protein micro-array technologies that allow rapid screening of up to 20,000 antibodies in a single experiment.

In the case of infectious diseases, screening is performed against defined pathogen specific antigens and in the case of oncology, screening is performed against mixtures of cancer related antigens.

● Simultaneously identify relevant, potentially novel, target antigens that are prevalent in a broader patient population, which we refer to as “public antigens,” and antibodies that bind to them with high affinity.

Therefore, we believe our platform can yield antibodies that may have the potential for use as therapeutics and/or diagnostics across a broad therapeutic landscape, which could translate into advancing one to two antibodies into IND-enabling development studies per year.

● Utilize an unbiased approach that spotlights biological processes of disease relevance, guided by the human immune response.

● Strategically leverage unmodified immunoglobulins as therapeutics because we believe they are simpler to develop.

We will opportunistically leverage our platform in collaboration with other companies with complementary technologies and skillsets.

● Efficiently discover potential antibodies for possible therapeutic areas beyond oncology, including infectious diseases such as COVID-19.

● Utilize an unbiased approach that spotlights biological processes of disease relevance, guided by the memory B-cell response.

Further, identify antibodies that can be used in combination with other modalities resulting in novel therapeutics, such as Antibody-Drug Conjugates, Bi-specifics and T cell engagers.

Our Lead Discovery Programs

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Our lead oncology program is focused on IL-38, which we believe is a novel, tumor-derived immune checkpoint capable of promoting evasion of the immune system.

Antibodies directed at IL-38 were identified in a hybridoma library generated from the memory B cells of a patient with squamous head and neck cancer.

Data from cancer biopsy materials reveal that subsets of major solid tumors, including squamous cell cancers of the head and neck and of the lung, over-express IL-38.

This correlates with low levels of tumor-infiltrating T cells, a hallmark of immune suppression in these patients’ tumors.

Data obtained from our early preclinical testing indicate that blocking IL-38 function using an

inhibitory antibody appears to restore the immune response to the tumor and to result in anti-tumor activity in select animal models.

This approach may have therapeutic relevance as a single agent or as a combination with other agents.

We have selected a lead anti-IL-38 antibody for development, we have initiated activities towards manufacture at scale so as to conduct IND-enabling studies, and, if successful, we plan to file an IND application for this development candidate in the second half of 2021.

IL-38 was identified as the target of an antibody isolated from a hybridoma library generated from the memory B cells of a patient with squamous head and neck cancer.

Query of public and proprietary databases of cancer patient data suggest overexpression of IL-38, based on mRNA expression in multiple solid tumors.

Further, a correlation with low levels of tumor-infiltrating T cells, a hallmark of immune suppression in some of these patients’ tumors, was also observed suggesting a role for IL-38 as an immune checkpoint.

Data obtained from preclinical testing indicate that blocking IL-38 function using inhibitory antibodies increase the immune response to the tumor and result in anti-tumor activity in select animal models, suggesting that anti-IL-38 antibodies could have therapeutic utility as single agents or in combination with other therapeutic modalities.

Our recent analysis further confirms elevated IL-38 expression in samples of specific patient tumor subtypes, such as head and neck and gastroesophogeal, show high frequency of occurrence based on mRNA expression.

We believe that this information will help guide the selection of patient cohorts for clinical testing, thereby improving the probability of clinical success.

We plan to submit our IND application for the IMM-ONC-01 program with the FDA in the second half of 2022.

SARS-CoV-2 (IMM-BCP-01)

We are actively developing an antibody cocktail product candidate by identifying a combination of effective anti-viral antibodies produced by B cells from COVID-19 “super-responders.” The immune system employs multiple viral clearance mechanisms to fight SARS-CoV-2 infections and COVID-19.

Our research is focused on identifying the antibodies directed at multiple distinct viral antigens to which such antibodies can bind to most effectively, neutralize and clear the virus from circulation.

If successful, we expect that our antibody cocktail product candidate could be used both as a treatment for individuals who have contracted SARS-CoV-2 and as a prophylactic to offer protection against the virus for healthy individuals who are at risk of contracting SARS-CoV-2.

In accordance with our published research, unbiased interrogations of “super-responders” shows that more than half of the antibodies they make appear to be directed at SARS-CoV-2 antigens other than the spike protein.

We are actively developing an antibody cocktail, comprising a combination of three effective anti-viral antibodies derived from the B cells of COVID-19 “super-responders.” The immune system employs multiple viral clearance mechanisms to fight SARS-CoV-2 infection.

IMM-BCP-01 targets non-overlapping regions of the Spike protein of SARS-CoV-2 which include highly conserved, subdominant epitopes.

The cocktail promotes both ACE2 and non-ACE2 dependent neutralization and induces natural viral clearance mechanisms such as antibody dependent cellular cytotoxicity, complement activation and phagocytosis.

If successful, we expect that our antibody cocktail product candidate could be used both as a treatment for individuals who have contracted SARS-CoV-2 and as a prophylactic to offer protection against the virus for individuals who are at risk of contracting SARS-CoV-2.

We are conducting this program in collaboration with the DoD, which has asserted that this platform may be of strategic importance, due to its potential use in the current COVID-19 pandemic as well as in future viral outbreaks.

The IMM-BCP-01 program was initially focused on the original SARS-CoV-2 isolate and possible emerging variants.

In the interest of public health, our current efforts now include additional testing of our antibodies against the emerging variants that are primarily being driven by mutations in the spike protein of SARS-CoV-2 virus, such as the South African variant (B.1.351) and the UK variant (B.1.1.7).

We plan to identify an effective mixture of likely four (but up to six) antibodies based on preclinical testing and progress IMM-BCP-01 to an IND application in the later part of the second quarter or in the early part of the third quarter of 2021.

Our experienced management and leadership team has broad expertise in the field of discovering and developing therapeutics and includes highly capable, world-class immunologists and biologists.

Sources of Capital

Since 2015, we have raised over $95.8 million through private financings and the initial public offering of our common stock, which was completed on October 6, 2020 (IPO).

In 2020, we were also awarded a contract for up to $13.3 million in expense reimbursement from the DoD to support our IMM-BCP-01 program.

Our goal is to become a leading biopharmaceutical company focused on discovering and developing innovative antibody therapeutics for areas of high unmet medical need, with a focus on oncology and infectious diseases.

As part of our strategy, we intend to:

● Advance our lead oncology program, IMM-ONC-01, through IND-enabling studies and into clinical development.

IMM-ONC-01 is directed at a novel immuno-oncology target, IL-38, identified from the memory B cells of a cancer patient.

Our research data indicate that IL-38 binds to and inhibits immune cell subsets that may be critical for establishing an immunologically non-responsive tumor microenvironment.

Our early preclinical testing indicates that blocking IL-38 function with an antibody appears to restore the immune response to the tumor, resulting in anti-tumor activity.

We have selected a lead IL-38 antibody for development, initiated activities towards manufacturing at scale so as to conduct IND-enabling studies and, if successful, plan to file an IND application for this development candidate in the second half of 2021.

● Advance our lead infectious disease program, IMM-BCP-01, into clinical development.

We are actively developing our IMM-BCP-01 program, in collaboration with the DoD, by isolating antibodies directed at the

SARS-CoV-2 virus from “super-responders.” Through our research to date, we have isolated more than 400 antibodies that bind to several SARS-CoV-2 antigens.

We plan to identify an effective mixture of likely four (but up to six) antibodies based on preclinical testing and expect to progress IMM-BCP- 01 to an IND application in the later part of the second quarter or in the early part of the third quarter of 2021.

We anticipate this product may be useful as a treatment and a prophylactic against the original SARS-CoV-2 virus, and potentially some emerging variants of the virus.

● Continue to invest in our discovery engine to expand our pipeline.

The high output of antibody-target pairs resulting from our screening may provide us with additional insights into the immune response against cancer and infectious diseases.

The IMM-BCP-01 program is broadly focused on the emerging variants of SARS-CoV-2 .

We submitted an IND for the IMM-BCP-01 program to the FDA in November 2021.

In March 2022, the FDA communicated that the clinical study can be initiated for our antibody cocktail for the treatment of SARS-CoV-2 following a brief clinical hold.

Other Programs and Platforms

In addition to the already described lead discovery programs, we will continue to invest in our discovery engine to expand our pipeline.

The high output of antibody-target pairs resulting from our discovery engine may provide us with additional insights into the immune response against cancer and infectious diseases.

We intend to continue to invest in this platform, to evaluate novel antibody-target pairs and to develop a pipeline of antibody therapeutics as single agents or in combination with other therapeutics or technologies.

We anticipate advancing one to two programs into IND-enabling studies per year.

● Enter into additional strategic partnerships and collaborations to expand our opportunities and capabilities.

We anticipate the engine will enable us to advance one to two programs into IND-enabling studies per year.

We also intend to continue to enter into additional strategic partnerships and collaborations to expand our opportunities and capabilities.

We intend to continue to form strategic partnerships with government agencies and with other third parties to accelerate our research and development efforts, as exemplified by our other transaction authority for prototype agreement with the DoD related to COVID-19.

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We also intend to continue collaborating with various vendors, manufacturers, and other service providers to complement the capabilities needed to continue to develop and commercialize our products.

● Expand our intellectual property estate and infrastructure needed to discover and advance our products.

Additionally, we plan to expand our intellectual property estate and infrastructure needed to discover and advance our products.

We intend to expand our intellectual property estate related to our platform as well as to our product candidates.

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While our initial focus areas are in oncology and infectious disease, we may invest in intellectual property in other therapeutic areas as well.

Our Strengths

We have a differentiated discovery engine with strengths that enable the discovery of novel antibody-antigen pairs by using an approach that is:

● Unbiased — We interrogate the memory B cell response without bias or preconceived notions as to what constitutes therapeutically important targets.

● Broad — Using an automated platform, we capture antibodies directly from large, stable hybridoma libraries in quantities adequate to do functional testing, significantly augmenting the breadth at which we can interrogate the memory B cell response.

● Deep — Our ability to rapidly interrogate large antibody libraries against complex mixtures of thousands of antigens, thus generating millions of data points from each patient sample, enhances the depth at which we can probe for effective antibody-target pairs.

● Efficient — Our screening approach yields high affinity “hits,” enabling a high rate of success in identifying novel target-antibody pairs with a minimum of resource investment.

Our experienced management and leadership team has broad expertise in the field of discovering and developing therapeutics and includes highly capable, world-class immunologists and biologists.

The Challenges Faced by Existing Antibody Therapies for Cancer

Despite significant advances in cancer therapeutics over the past 30 years, particularly in the realm of biologics including therapeutic antibodies, the five-year survival rate in patients with advanced malignancies of the lung, liver, stomach, pancreas, and other organs is less than 10%.

We believe that a key issue undermining the wider effort to

improve cancer therapeutics is a limited understanding of the diversity and complexity of human tumors.

We believe that a key issue undermining the wider effort to improve cancer therapeutics is a limited understanding of the diversity and complexity of human tumors.

The discovery of new targets and novel therapeutics to neutralize them represent vitally important opportunities to help identify innovative and more effective cancer treatments.

We are guided in our efforts by those patients who have effectively mounted a defense against their disease, and we leverage the wisdom of their memory B cells to illuminate the best routes forward.

We are guided in our efforts by the immune responses generated by patients against their disease, and we leverage the wisdom of their memory B cells to illuminate the best routes forward.

Our Solution:

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Our discovery process begins with obtaining a patient’s lymph node, tumor or blood sample and then purifying and expanding the memory B cell population.

In oncology, patients sampled include those who have shown clinical signs of response to immunity enhancing therapies.

In oncology, patients sampled include those who are treatment naïve, treated with standard regimens, or have been treated with immunity enhancing therapies.

In infectious diseases, such as COVID-19, we include samples from patients who have successfully cleared the infection.

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Antibody Screening :

For oncology, we screen individual antibodies by assessing their binding to intact cancer cells or normal cells, or by assessing their binding to a large number (typically 100) of different extracts of authentic tumor samples and cancer cell lines (Figure 2).

Using our proprietary approach, we can screen up to 20,000 antibodies on a single array.

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Hybridomas producing antibodies that show both high-affinity binding, by typically binding at single digit nanomolar concentrations, and specific binding, by showing much higher binding to a subset of tumor cells compared to normal cells or to irrelevant viral proteins, are designated as screening “hits.” Hybridomas producing those hits can be sequenced, their immunoglobulin genes can be cloned into expression vectors, and the individual antibodies can be produced recombinantly.

Representation of screening data generated using intact cancer cells (left panel) and our proprietary protein microarray approach (right panel)

Antibody Validation:

Figure [ screening ].

Representation of screening paradigm Antibody Validation:

The next step in our process is to identify the specific antigen to which the antibody appears to bind with high affinity and specificity.

We use one of two complementary approaches for this activity:

the first method involves an assessment of antibody binding to known human proteins spotted on a protein microarray with high selectivity (for example, as shown in Figure 3, where a single antigen is identified).

the first method involves an assessment of antibody binding to known human proteins spotted on a protein microarray with high selectivity (for example, as shown in Figure [target selectivity ] , where a single antigen is identified).

If the target is not represented on the array or no specific binding is seen, we attempt to use the antibody to “pull out” the antigen from its source using immunoprecipitation, and then identify the antigen sequence using mass spectrometry.

Using these two approaches we are usually successful in identifying the antigen to which newly identified antibodies are binding.

Using these two approaches we are largely successful in identifying the antigen to which newly identified antibodies are binding.

We then conduct experiments to assess whether the binding of the antibody to the specific antigen can produce a change in the biology of a cancer cell expressing the target, which we refer to as target validation.

Additional tests, such as measurements of changes in cell growth, cell survival, cell migration, or internalization of the antigen after it has been bound by the antibody, are used to further assess the potential that the antibody could be of therapeutic interest.

An example of human protein microarray-based target identification

Figure [ target selectivity ] .

Examples of binding specificity of patient-derived antibodies determined using human protein microarray-based target identification

Engine Output :

So far, we have screened more than 300,000 hybridomas and identified 1,300 “hit” antibodies that bind to a cancer cell or a tumor extract with high affinity and specificity.

To date, while only a fraction of these hits has been assessed further, we have already identified from this fraction of available hits antibodies directed at more than 50

cancer targets.

We concomitantly identify the antibody, or the potential therapeutic, and its antigen target.

So far, we have screened several hundred thousand hybridomas and identified 2,400 “hit” antibodies that bind to a cancer cell or a tumor extract with high affinity and specificity.

To date, while only approximately one-third of these hits has been assessed further, we have already identified more than 70 cancer targets.

We concomitantly identify both the antibody, or the potential therapeutic, as well as its antigen target.

Furthermore, the antibody may also be used in a diagnostic test to determine if a patient’s disease is over-expressing the antigen it is directed at.

Our focus is on unmodified antibodies as therapeutic candidates which, we believe, enables a simpler development path.

In addition, we contemplate forming strategic partnerships with others who may seek to use our antibodies as the basis for more complex modalities, such as engineered T cells or ADCs.

For COVID we collected B cells from 30 super responder donors and identified over 400 antibodies specific for both spike and non-spike viral proteins.

Our antibody hits can be developed, unmodified, as potential therapeutics, or can be combined with other modalities such as antibody-drug conjugates, bi-specifics, T cell engagers.

We may form strategic partnerships with others who may seek to use our antibodies as the basis for such modalities.

For IMM-BCP-01, we collected B cells from 30 super responders and identified over 400 antibodies specific for both spike and non-spike viral proteins.

We anticipate the output from our discovery engine may potentially translate into one to two programs entering IND-enabling studies per year.

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Functional Clustering

Our platform enables us to identify clusters as informed by the patient memory B cell response to gain additional insights into the biology of cancer and may allow the identification of new targets.

The limited data available on each antigen we have identified to date have revealed a “functional clustering” of targets, or clusters of targets with functional similarities, which highlights those patients who mount a specific immune response.

We believe these functional clusters, as shown in the illustration in Figure 4, may provide critical clues to the important tumor-driven processes that must be attacked by the immune system to effectively eliminate the disease.

To date, the Immunome discovery engine has identified 71 antibodies from patient memory B cells directed at more than 50 innovative cancer targets.

These targets appear to cluster around six biological functions that might be of therapeutic importance in cancer.

As an example, when looking at clusters of targets with functional similarity, as shown in the above illustration, Target Cluster 1 contains several proteins that tumors appear to produce to modify their microenvironments.

Prominent among these are several structural and catalytic proteins that regulate the formation and the function of exosomes, small vesicles packed with material used by cancer cells to create a pro-growth, pro-survival and anti-immune tumor niche.

Our unbiased platform approach enables a broad interrogation of the patient memory B cell response to disease and may allow us to both gain additional insights into the underlying biology and identify sets of new targets.

Data available on each antigen we have identified to date have revealed a “functional clustering” of targets, or clusters of targets with functional similarities among patients who mount a specific immune response.

We believe these functional clusters, as shown in the illustration in Figure [ cluster diagram ], may provide critical clues to the important tumor-driven processes that the immune system appears to attack to effectively eliminate the disease.

Figure [ cluster diagram].

To date, the Immunome discovery engine has identified more than 70 innovative cancer targets based upon patient-derived antibody responses.

These targets appear to cluster around distinct biological functions that might be of therapeutic importance in cancer.

As an example, when looking at clusters of targets with functional similarity, as shown in the above illustration, one cluster contains several proteins associated with membrane dynamics.

Membrane dynamics are a critical part of how cells, including tumor cells, control vital processes such as cell movement and signaling.

Deregulation of those processes in cancer cells may be linked to hallmarks of cancer such as uncontrolled cell division and metastasis.

Prominent among the targets we identified are several structural and catalytic proteins that regulate the formation and the function of exosomes, small vesicles packed with material used by cancer cells to create a pro-growth, pro-survival and anti-immune tumor niche.

The tumor uses exosomes to change the functions of stromal cells, endothelial cells and immune effector cells, by taking control of those normal cells and using them to generate an environment in which cancer can thrive.

We are actively exploring the concept that antibodies directed at some of these exosomal components may have therapeutic utility.

Similarly, Target Cluster 3 presently contains two protein targets that may be classified as immune checkpoints serving as functional inhibitors of anti-tumor-immunity.

One of the generally regarded great advances in cancer biology in the past 20 years is related to checkpoint inhibition, or the observation that tumors co-opt the very same mechanisms that the immune system uses to down-regulate itself after a response.

A well-known checkpoint inhibitor is programmed death ligand 1, or PD-L1, a protein that normally binds to T cells and other immune effectors to “check” or turn down their activity after a physiological immune response has been completed.

When a tumor produces this same protein, it results in immune suppression.

Eliminating a tumor’s ability to down-regulate the immune system by targeting tumor-derived checkpoints enables patients’ immune systems to respond to and potentially clear their diseases.

Checkpoint inhibitors have rapidly become a mainstay in cancer treatment and are now part of the standards of care for multiple solid tumors, with a worldwide market predicted to reach $25 billion by 2022.

Most well-known among these are PD-L1 pathway-directed antibodies from Bristol-Myers Squibb Company, Merck & Co.

Inc., AstraZeneca plc, or AstraZeneca, and F.

Hoffmann-La Roche Ltd.

However, these immuno-therapeutics are effective in only a minority of patients with solid malignancies, suggesting that tumors may suppress immunity through multiple interdependent mechanisms, beyond the PD-L1 pathway.

Consistent with the two targets that have emerged in this cluster, our data appear to indicate that the B cells of cancer patients react to the proteins that tumors secrete to subvert immunity.

One such immune checkpoint, which was identified by our platform, is IL-38, a heretofore obscure member of the interleukin one, or IL-1, family of immune regulatory proteins.

We believe that an antibody directed at IL-38, if successful, could restore anti-tumor immunity when used alone or in combination with other checkpoint inhibitors.

In addition, some of these proteins function in normal cells to regulate the trafficking of proteins to and from the cell surface, suggesting that they may be rapidly internalized upon binding of an antibody.

We are actively exploring the concept that antibodies selective for these targets may have therapeutic utility as antibody-drug conjugates.

Our Multiple Product Development Opportunities in Cancer

We believe our approach to the discovery of novel antibodies enables the following therapeutic modalities:

Product Development

Importance and

Next Steps and

Immunoglobulins as Therapeutics

We plan to devote significant effort to identifying and developing simple or unmodified IgGs that, when bound to their antigens on tumor cells, may produce a therapeutic benefit

No additional technology required to modify the molecule further

Allows for speed to the clinic when compared to the modified antibody approach

We also believe that simple IgGs may provide an advantage in manufacturability

We will plan to continue to identify antibody-target pairs that provide direct anti-tumor effects and/or result in activation of the immune system to recognize and eliminate cancer cells

Unmodified Immunoglobulins:

This therapeutic modality exploits antibodies where binding to the target antigen modifies cellular processes in way that directly induces a therapeutic benefit.

This can occur when antibodies bind to antigens on tumor cells and disrupt cellular processes that are necessary for cancer cell growth and/or metastasis.

Alternatively, binding of an antibody to its antigen may result in activation of the patient immune system to recognize and eliminate cancer cells.

Antibody-Drug Conjugates (ADCs):

Some targets appear to have dense expression on the cell surface and, after the addition of an antibody, the antibody-target complex rapidly internalizes into the interior of the cell

This “high-flux” behavior may enable us to develop therapeutics when configured as ADCs

Certain target antigens have dense expression on the tumor cell surface as compared to normal tissues but binding of an antibody to that antigen does not induce a direct therapeutic effect.

An ADC is an antibody to which a “tumor killing” payload is attached.

The ideal ADC is comprised of a high-affinity and high-specificity antibody directed at a prevalent tumor antigen that is rapidly internalized post-binding

Internalization results in the release of the payload in quantities sufficient to kill the cell expressing the target

Our initial approach is to partner with companies that possess the expertise in ADC development, with whom we can evaluate the therapeutic utility of our antibodies as ADCs

Product Development

Importance and

Next Steps and

Engineered Patient-Derived Immunoglobulins

Some antibodies could be used to enhance the immune effector activities of T cells

One of these approaches takes T cells from a patient, transfects them with a unique antigen receptor derived in part from a tumor-directed antibody, and reintroduces the engineered cells back into the patient

Another approach (bispecific T cell engagers, or BiTEs) uses an engineered antibody or antibody fragment that can simultaneously bind a tumor and a T cell, driving the destruction of the tumor cell

The common feature of these more complex therapeutic approaches is an antibody or antibody-like protein that can bind to a tumor antigen while directing T cells to attack the tumor

If we are successful in identifying antibodies that offer potential utility in one or more of these approaches, we may choose to develop or partner them depending on the specific opportunity or business arrangement

If the antigen is rapidly internalized upon antibody binding the targeting selectivity of antibodies can be leveraged to deliver sufficient quantities of the “tumor killing” payload to kill the cancer cells.

This approach uses known “tumor killing” agents and does not rely upon unproven mechanisms for efficacy.

Bispecific Antibodies:

Patient-derived antibodies bind to a single antigen.

Antibodies can be engineered to engage two different target antigens.

These bispecific antibodies can bind to two different tumor cell antigens and may induce therapeutic effects through simultaneous modulation of two cellular processes.

Alternatively, bispecific antibodies can be engineered to bind to a tumor cell antigen and an antigen on the surface of an immune effector cell (e.g., T cell).

This class of bispecific antibody directs the immune effector cell to attack and destroy the tumor.

Our Lead Oncology Discovery Program

IMM-ONC-01 Overview:

Our lead oncology discovery program is focused on antibodies targeting IL-38, a lesser-known member of the IL-1 family of cytokines.

These conserved proteins, secreted by various cell types, regulate adaptive and innate immune responses.

Our lead oncology development program is focused on antibodies targeting IL-38, a lesser-known member of the IL-1 family of cytokines.

IL-38 binds to receptors found on immune cell subsets, such as macrophages, dendritic cells, gamma delta T cells (γδT cells), and regulatory T cells, each of which is critical for establishing an immuno-responsive tumor microenvironment.

Our analysis of data from The Cancer Genome Atlas, or TCGA, has revealed that there is an inverse relationship, as shown in Figure 5, between high IL-38 expression and presence of immune effector cell populations in multiple human tumors, as measured by expression of T cell- and macrophage-specific markers CD3 and CD68 (cluster of differentiation 3 and 68, respectively).

This relationship appears to be particularly prominent in major solid tumors such as prostate, colorectal and lung cancers where IL-38 is found to be expressed at higher levels in some biopsies from patients with these diseases.

Subsequent analyses of similar archival data have revealed that IL-38 expression is relatively high in squamous tumors of the head and neck and lung.

In addition to the TCGA expression data shown below (Figure 5), we also plan to assess the binding of the anti-IL-38 development candidate in authentic human biopsy material across multiple tumor types.

While published data already point to three major solid tumor types as potential disease targets, we believe a comprehensive assessment of IL-38 over-expression may reveal additional therapeutic opportunities and help us refine our clinical development plan.

Derivation and Development of IMM-ONC-01

Inverse relationship between high IL-38 expression and immune cell populations in tumors (TCGA analysis performed by Immunome)

Our analysis of data from The Cancer Genome Atlas, or TCGA, has demonstrated that IL-38 is over expressed at the RNA level in a subset of tumors of high unmet medical need as compared to normal tissue from the same organ site (Figure [ ONC-01 indications ]).

Furthermore, consistent with our hypothesis that IL-38 acts to suppress anti-tumor immunity, high IL-38 expression in tumors was inversely correlated with the presence of tumor-infiltrating immune effector cell populations (Figure [ TILS ].

We have expanded this analysis through use of a proprietary database to include assessment of mRNA expression in over 60 cancers and identified that IL-38 is not only over expressed, but also occurs at a significantly higher frequency in select tumor sub-types, such as gastroesophageal squamous carcinoma, squamous carcinoma of the head and neck, lung squamous cancer and squamous and basal carcinoma of the skin .

We are in the process of directly confirming this IL-38 overexpression in patient samples of these select sub-types to guide and streamline overall clinical development.

Figure [ ONC-01 indications ]:

IL-38 is overexpressed in cancers of high unmet medical need.

Figure [ TILs ]:

Inverse relationship between high IL-38 expression and immune cell populations in tumors

In the literature, a clinical study of 400 lung cancer patients’ analysis of biopsy materials revealed an association between high IL-38 expression levels and poor patient outcomes.

The same study found that the expression of IL-38 is often correlated with PD-L1 suggesting that these two checkpoints may well work as together to inhibit the immune response.

As shown in the illustration below in Figure 6, tumor-derived IL-38 appears to subvert the innate immune response and the formation of an inflamed microenvironment in the early part of the cancer immunity cycle.

Over-expression of IL-38 in certain solid tumors appears to decrease the ability of the patient’s immune system to respond to the malignancy.

(1) Crystal Structure:

Research Collaboratory for Structural Bioinformatics Protein Data Bank (rcsb.org):

Antibodies that antagonize the function of PD-L1 induce a therapeutic effect in patients who express PD-L1.

We believe targeting IL-38 with an antibody, in a similar fashion, may also induce a therapeutic response.

As shown in Figure 7, IL-38 appears to alter the gene signatures associated with inflammation in lipopolysaccharide (LPS, a bacterial cell wall component)-treated effector cells in vitro.

In this experiment, treatment with an anti-IL-38 antibody antagonized the effect of IL-38, further demonstrating the role of IL-38 in the inflammatory response.

IL-38 appears to down-regulate inflammatory responses of multiple immune cell types.

IL-38 -blocks (A) IL-36 induced production of IL-8 in PBMCS (van de Veerdonk et al, PNAS 2012;

3001), (B) Interferon gamma (IFNg) induction as a marker of dendritic cell activation (Wei et al J Cell Mol.

23(1):371) and (C) (Immunome internal data) Macrophage induction associated with LPS (lipopolysaccharide) stimulation.

Treating a macrophage-like cell line with an anti-IL-38 antibody reverses that effect.

Gene expression profiles were measured using Nanostring and analyzed using ClustViz (Metsalu and Vilo Nucleic Acids Research, 43(W1):W566-W570, 2015.

10.1093/nar/gkv468).

Data were visualized with gene expression heatmaps (each row represents a gene, red indicates overexpression and blue indicates downregulation).

To date, we have identified multiple antibodies with high specificity for binding to IL-38 but not for other closely related members of the same cytokine family, as shown in Figure 8.

We believe high specificity for the target will be beneficial in terms of the development of antibody-based therapeutics that are less likely to have off-target effects.

Binding of two of our antibodies (CD1-M3 and M8) is specific for IL-38 with orders of magnitude less binding to related family members.

(IL-1b, IL-36 and IFNγ) Antibody NZB-M8 bound to both IL-38 and interferon gamma (IFNγ) — a less attractive profile for a cancer therapeutic

The same antibody, CD1-M3 was able to block the activity of IL-38 in tissue culture experiments.

While CD1-M3 was optimized for high affinity binding to human IL-38 and binds with much less affinity to the mouse IL-38, its systemic dosing in tumor-bearing mice still resulted in a treatment-dependent increase in three effector cell populations important to the innate anti-tumor response:

γδT cells, dendritic cell precursors and macrophages, as shown in Figure 9.

De-repression of innate immunity after antibody treatment then resulted in stimulation of the adaptive response, as indicated by an increase in CD8+, or cytotoxic, T cells in the same tumors.

Reversal of IL-38 suppression of γδT cells in a mouse melanoma (left), or in dendritic cell precursors (middle) and macrophages (right) in a human lung tumor xenograft grown in T cell-deficient mice, after 2 weekly doses (10 mg/kg) with an anti-IL-38 antibody (CD1-M3 (anti-huIL38 antibody);

samples taken 24 h after the second dose)

As depicted in the illustration below in Figure [ therapeutic hypothesis ], tumor-derived IL-38 is hypothesized to suppresses the innate immune response and the recruitment of immune effector cells into the tumor microenvironment in the early part of the cancer immunity cycle.

We hypothesize that an antagonistic anti-IL-38 antibody will block the immune suppressive function of IL-38, leading to an enhanced immune cell infiltration into the tumor.

This in turn may lead to a more robust anti-tumor immune response.

Figure [ therapeutic hypothesis ].

Targeting IL-38 with IMM-ONC-01 is anticipated to block IL-38 function and induce recruitment of immune effector cells

Just as antibodies that antagonize the function of PD-L1 induce a therapeutic effect in patients who express PD-L1.

We believe targeting IL-38 with an antibody that blocks IL-38 function, in a similar fashion, may also induce a therapeutic response.

Immunome’s lead anti IL-38 antibody directly competes for binding of IL-38 to its putative receptors, IL-1RAPL1 and IL-36R, in vitro in a concentration dependent manner (Figure [ receptor competition ]).

Figure [ receptor competition ].

IMM-ONC-01 blocks ability of IL-38 to bind to its putative receptors IL1RAPL1 and IL-36R

The ability to competitively inhibit IL-38 binding to its receptors correlates with blocking IL-38 function in vitro .

Using an in vitro macrophage model system, IL- 38 was shown to abrogate macrophage activation, as measured by IL-6 production, upon lipopolysaccharide (LPS, a bacterial cell wall component)-stimulation.

Treatment with an antagonistic anti-IL-38 antibody blocked the effect of IL-38, resulting in significant re-activation of IL-6 production and further demonstrating the role of IL-38 in the inflammatory response.

Re-awakening of the immune system in this manner appears to generate corresponding in vivo efficacy in a mouse model bearing B16F10, a tumor that is known to produce IL-38.

The data in Figure 10 demonstrates the anti-tumor effect of our anti-huIL38 antibody (CD1-M3) in a mouse model.).

In this experiment, a mouse anti-CTLA4 antibody was used as a positive control.

Treating with CD1-M3 appears to induce an anti-tumor response in IL-38 expressing mouse B16F10 tumor model.

Data for positive control (anti-CTLA4 antibody) are also shown.

Additional studies have confirmed the in vivo efficacy of anti-huIL38 antibody (CD1-M3) in a second tumor model (EMT6 breast cancer).

Again, the observed efficacy was comparable to the available immune-oncology agent an in this model (anti-mPDL1), despite the lower binding affinity of CD1-M3 to the mouse IL-38.

In that EMT6 model, anti-IL-38 treated mice that cleared their EMT6 xenografts were resistant to subsequent engraftment, revealing the possible establishment of durable immune memory in those animals.

Our lead antibody has advanced into development, with IND filing expected in the second half of 2021.

The data in Figure [ B16 efficacy ] demonstrates the anti-tumor effect of a murine version of our anti-huIL38 antibody in a mouse model.

Figure [ B16 efficacy ] Treating with anti-IL-38 antibody appears to induce an anti-tumor response in IL-38 expressing mouse B16F10 tumor model.

Additional studies have confirmed the in vivo efficacy of a murine version of our anti-huIL38 antibody in a second tumor model (EMT6 breast cancer).

In the EMT6 model, approximately 40% of anti-IL-38 treated mice cleared their EMT6 xenografts.

When rechallenged the mice that had successfully cleared the initial tumor xenograft were resistant to

subsequent engraftment (Figure [ EMT6 efficacy ], left panel) which led to an increase in overall survival (Figure [ EMT6 efficacy ], right panel).

These data reveal the possible establishment of durable immune memory in those animals.

Figure [ EMT6 efficacy ].

Treating with anti-IL-38 antibody appears to induce long-term anti-tumor memory response in the EMT6 mouse model of breast cancer.

IMM-ONC-01, our lead antibody, has progressed into development with an IND submission expected in the second half of 2022.

Our Lead Infectious Disease Discovery Program (IMM-BCP-01)

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The human immune system elicits multiple mechanisms of action, capable of working in concert with one another, to clear viral infections, such as those caused by SARS-CoV-2, the virus that has led to the COVID-19 pandemic.

These mechanisms may include viral neutralization, viral clearance via phagocytosis, and viral destruction through mobilization of the complement cascade, and can be driven, at least in part, by mounting antibody responses against multiple viral proteins.

Based on existing literature, we hypothesize that the SARS-CoV-2 virus, and especially the spike protein, will likely mutate and that antibodies directed at the mutable portions of the spike protein may be ineffective against mutations involving their binding sites.

We believe that our discovery engine has the potential to rapidly immortalize convalescent patients’ B cells and screen the antibodies produced by them against a broad set of known SARS-CoV-2 antigens similar to the way in which we screen antibodies for application in oncology.

Our approach, as depicted in Figure 11, relies on our ability to identify several potent anti-viral antibodies from the memory B-cells of super responders (patients who have successfully mounted an immune response against COVID, and cleared the disease).

In our work funded, in part, through other transaction authority (OTA) with the U.S.

Department of Defense's Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (JPEO-CBRND), we used Immunome’s discovery engine to identify more than 400 antibodies from “super-responders” that bind to distinct SARS-CoV- 2 viral antigens, including multiple domains of spike protein, nucleocapsid, membrane, and open reading frame (ORF) encoded proteins.

We believe that our research demonstrates that unbiased interrogations of those “super-responder” antibodies shows that more than half of these antibodies appear to be directed at SARS-CoV- 2 antigens other than the spike protein.

Of the viral proteins we assessed, nucleocapsid (N), and open reading frame (ORF) proteins, ORF8 and ORF10, represent the most prevalent non-spike targets.

Each of these proteins plays a specific role in the life cycle of the virus and targeting them has the potential to induce distinct and effective viral clearance mechanism.

We believe that an approach employing antibodies to multiple viral antigens will be important to mount an effective clearance of the virus and to achieving anti-viral activity.

We are evaluating the efficacy of individual and mixtures of antibodies in order to develop an antibody cocktail product that we believe will possess broad anti-viral activity.

This future product could potentially treat infected patients, including those infected with potential variants of SARS-CoV-2.

As patients’ antibody responses to infectious agents, including viruses, mature over time, they are often characterized by the conversion of early, less specific, Immunoglobulin M, or IgM, responses to the later IgG and Immunoglobulin A, or IgA, antibodies that are capable of binding with high affinity and selectivity to target proteins.

In our research work, we discovered that patients did, in fact, generate both IgG and IgA antibodies to a range of SARS-CoV-2 proteins.

Interestingly, we also isolated SARS-CoV-2 specific IgM antibodies that exhibit the hallmarks of being matured against the virus.

In our work funded, in part, through another transaction authority (OTA;

contract number W911QY-20-9-0019) with the DoD’s Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (JPEO-CBRND) in collaboration with the Defense Health Agency, we used Immunome’s discovery engine (Figure [ platform ]), to identify a three-antibody cocktail (IMM-BCP-01) for the treatment of SARS-CoV-2 infection.

The three antibodies comprising IMM-BCP-01 (IMM20184, IMM20190 and IMM20253) were down selected from amongst more than 400 antibodies isolated from the memory B cells of super responders (patients who exhibited rapid seroconversion to IgG and very high anti-SARS-CoV-2 antibody titers).

Selection criteria included, amongst other characteristics, intrinsic and combinatorial anti-viral mechanisms of action.

Antibodies were selected based upon both viral neutralization and viral clearance (e.g., phagocytosis, antibody dependent cellular cytotoxicity, and mobilization of the complement cascade) properties.

Figure platform .

Our proposed approach to developing antibody cocktail (IMM-BCP-01)

We are actively testing the functionality and potency of these antibodies to identify a suitable mixture of likely four (but up to six) antibodies which bind to multiple viral antigens.

As we hypothesized, a single antibody, or even multiple antibodies directed at mutable portions of the spike protein, may have a somewhat limited utility in terms of effective, rapid viral clearance and that the emergence of mutated viruses with altered spike protein may generate resistance to those therapies.

Consistent with our original hypothesis that prompted us to design our research as we did, we now observe that multiple variants of the SARS-CoV-2 virus have emerged, with some of them containing mutations within

the spike protein that appear to limit the efficacy of both vaccine- and antibody-based strategies to combat the virus.

We believe our antibody cocktail could elicit anti-viral effect by targeting multiple viral antigens and that this diversity of action may potentially decrease the likelihood of treatment resistance to any one antibody, as seen with some of the emerging variants.

Further, certain of our anti-spike antibodies isolated from super responders appear to bind to conserved epitopes between various strains of SARS-CoV-2 as well as between SARS-CoV-2 and SARS-CoV-1.

The conservation of those epitopes between different viruses suggests those epitopes may be required for functional activity and therefore may be resistant to mutation as new SARS-CoV-2 variants continue to emerge.

Our pseudovirus assay testing revealed that antibodies targeting those conserved epitopes were able to neutralize emerging variants of SARS-CoV-2, such as the South African B.1.351 and U.K.

B.1.1.7 variants, suggesting their potential role in combating the currently emerging, and possibly future, variants.

If successful and we progress to clinical studies and if clinical studies show our antibodies to be safe and effective, our IMM-BCP-01 program could lead to a treatment for COVID-19 patients, as well as a prophylaxis to protect healthy individuals who may be at risk of contracting the SARS-CoV-2 virus.

We expect to progress IMM-BCP-01 to an IND application in the later part of the second quarter or in the early part of the third quarter of 2021for testing in COVID-19 patients.

It is generally believed that passive immunity-based treatment for COVID-19 using monoclonal antibodies offers a potential therapeutic approach and may be an important aspect of fighting the pandemic.

Unlike approaches that focus on antibodies directed solely at the SARS-CoV-2 spike protein, especially towards mutable epitopes, we believe our approach of combining antibodies directed at both spike (including the conserved epitopes) and potentially other viral proteins offers a superior therapeutic approach to the treatment of COVID-19, including the potential to address emerging variants.

The individual antibodies comprising IMM-BCP-01 each bind to unique, non-overlapping epitopes on the receptor binding domain (RBD) of the SARS-CoV-2 spike (S) protein.

Each antibody elicits intrinsic anti-viral properties that when combined exhibit combinatorial viral neutralization and clearance properties against a breadth of SARS-CoV-2 variants in vitro and in vivo , including an array of US Center for Disease Control Variants of Concern (VoC) and Variants of Interest (VoI).

SARS-CoV-2 spike protein mediates binding to a cellular receptor, human angiotensin-converting enzyme 2 (ACE2), and fusion of viral and host plasma membranes.

Consistent with the epitopes to which they bind on the spike protein, IMM20184 and IMM20190 neutralize, or prevent viral fusion with host cells, in an ACE2-dependent manner.

Binding of these antibodies to their epitopes on S directly compete for binding of ACE2 to the RBD (Figure [ ACE2 competition ]) .

In contrast, IMM20253 does not compete for ACE2 binding.

The combination of these three antibodies (IMM-BCP-01) is more effective than any individual component antibody at competing for ACE2 binding.

Figure [ ACE2 competition ]:

IMM-BCP-01 includes ACE2 competitive (IMM20183 and IMM20253) and non-competitive (IMM20253) antibodies.

IMM20184 and IMM20253 bind to epitopes that are conserved across a wide range of variants of SARS-CoV-2 observed to date.

IMM20184 binds to an epitope on the inner face of the RBD that not only allows for direct competition of ACE2 binding but also promotes avid binding between two S proteins within the same spike trimer.

IMM20253 binds to an epitope on the outer face of the RBD that is conserved across other betacoronaviruses including SARS-CoV-1.

Binding of IMM20253 to the RBD does not compete for ACE2 binding, it rather appears to induce a non-ACE2 dependent conformational change in S that makes it more susceptible to protease inactivation.

IMM20253, to our knowledge, is the only antibody under development for treating COVID-19 that utilizes this mechanism of action to neutralize SARS-CoV-2.

Initial in vitro characterization of IMM-BCP-01 involved pseudo virus neutralization experiments.

Commercially available pseudo virus that express the spike protein from the original SARS-CoV-2 (WA1/2020) virus or various CDC VoI and VoC were used to infect cells expressing the human ACE2 receptor (hACE2-293T) in the presence or absence of IMM-BCP-01 or subsets of its constituent antibodies.

IMM-BCP-01 (1:1:1 mixture of IMM20184 / IMM20190 / IMM20253) potently neutralized all variants tested in a concentration-dependent manner (Figure [ neutralization ].

Consistent with the epitope conservation, neutralization by a combination of IMM20184 and IMM20253 was unaffected across all variants tested to date.

Figure [ neutralization ]:

IMM-BCP-01 broadly neutralizes SARS-CoV-2 variants

Neutralization activities observed in pseudo virus assays were confirmed in a series of live virus experiments, using both spot reduction and plaque forming assay protocols with multiple SARS-CoV-2 variants.

IMM-BCP-01 and the two-antibody cocktail of IMM20184/IMM20253 neutralized live virus in vitro with IC50 values that were either equivalent or more potent in both assays as compared to the IC50 values obtained against pseudo virus.

Comparative assessment of the pseudo virus, and two forms of live virus (spot reduction and plaque assays) suggest IMM-BCP-01 neutralizes all variants tested and that the potency against Beta and Gamma variants was more sensitive to the testing methodology.

Each of the antibodies that comprise IMM-BCP-01 was isolated from patients as IgG1 molecules.

These data, along with the growing body of evidence suggesting that effector function is required for optimal in vivo activity of anti-SARS-CoV-2 antibodies (Chen RE, 2021) (Ravetch J, 2021), led us to construct IMM20184, IMM20190, and IMM20253 with canonical IgG1 Fc domains.

No mutations were introduced into the Fc domain that would be predicted to disrupt complement fixation, decrease binding affinity for Fc gamma receptors, or increase half-life of the molecules.

IMM-BCP-01, and its constituent antibodies, were evaluated for elicitation of non-neutralizing, Fc-mediated responses.

The activation of the classical complement pathway (CP) by IMM20184, IMM20190, and IMM20253 antibodies, and combinations thereof, was evaluated using an adapted CP activation assay ( Nikitin, 2019).

Under the conditions, we detected increasing levels of C4 deposition which correlated with increasing concentrations of IMM20190 and, to a lesser extent, IMM20253 (Figure [ complement fixation ].

IMM20184 did not differ from isotype control at all concentrations tested.

Although the IMM20184 and IMM20253 antibodies appear less potent than IMM20190 in this assay, the importance of those two antibodies to the IMM-BCP-01 mixture is observed when tested as a two-antibody cocktail.

In a surprising finding, the IMM20184/IMM20253 two antibody cocktail elicited a combinatorial effect, resulting in saturating levels of complement fixation that were not achieved by either individual component antibody when tested at up to 2-logs higher concentrations.

A similar, but even more pronounced, effect was observed with IMM-BCP-01.

The combinatorial effects on concentration-dependent deposition of C4 by the IMM20184/IMM20253 and IMM-BCP-01 cocktails suggest that opsonization of the SARS-CoV-2 Trimer with antibodies targeting multiple epitopes across different faces of the RBD is far superior for C4 deposition than targeting a single epitope and reaches saturation at concentrations nearly a thousand-fold lower than the most potent single antibody.

Figure [ complement fixation ]:

Comparative Complement Fixation of Individual and Combinations of the IMM-BCP-01 Antibody Components

Similarly, all three human IgG1 antibodies induced phagocytosis of Trimer-coated beads in a concentration-dependent manner relative to an isotype control (Figure [ phagocytosis ], with IMM20253 and IMM20190 exhibiting higher rates of phagocytosis than IMM20184.

Even a low concentration of IMM20253 (approximately 15 pM) was sufficient to potently induce phagocytosis.

This potent induction of phagocytosis by IMM20253 antibody may be attributed to its epitope location on the outer surface of the “Up” conformation of the Trimer.

Figure [ phagocytosis ]:

Comparative Phagocytosis of Individual Components and the IMM-BCP-01 Antibodies

IMM-BCP-01 was evaluated for efficacy by measuring the impact of dosing on viral titers in the lungs of Syrian hamsters infected with three different SARS-CoV-2 variants.

Dosing of IMM-BCP-01 resulted in statistically significant decreases in viral titers relative to the vehicle-treated controls for all three variants (Figure [ in vivo efficacy ].

A dose response was observed against the WA1/2020 variant with viral clearance ranging from over 2-log with the 0.1 mg group to at least 4-log with the 0.3 mg dose group.

A dose response was observed against the Alpha variant of approximately 1.5-log with the 0.1 mg dose group and approximately a 3.5-log clearance with the 0.5 mg dose group.

Finally, a dose response was also observed against the Beta variant with viral clearance ranging from approximately 1.5-log with the 0.1 mg group to approximately 2.5-log with the 0.5 mg dose group.

Figure [ in vivo efficacy ]:

In Vivo Efficacy of IMM-BCP-01 Against the WA1/2020, Alpha, and Beta Variants

Based on preclinical efficacy observed in the hamsters and corroborative safety data generated in animal testing and tissue cross-reactivity, a cocktail composition and dose were arrived at for the Phase 1b safety testing in patients.

Strategic Collaborations and License Agreements

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To maximize the value of our platform we may, from time to time, contemplate and enter into various forms of collaborative agreements with third parties, including other companies, government agencies, academic institutions and non-profit groups.

The collaborations and licensing agreements entered into by us to date are described in greater detail below.

The material collaborations and licensing agreements entered into by us to date are described in greater detail below.

IMM-BCP-01 Collaboration with the DoD

In July 2020, we entered into other transaction authority for prototype agreement with the DoD, or the DoD Agreement, to research and develop an antibody cocktail product candidate for the potential treatment and prophylaxis of SARS-CoV-2 infections, including COVID-19.

We were awarded up to $13.3 million in expense reimbursement to use our proprietary technology to interrogate memory B cells from patients who have successfully recovered from the SARS-CoV-2 infection.

This project aligns our capabilities with the DoD’s mission to respond to the COVID-19 pandemic and to provide medical countermeasures for warfighters and the nation against future biological and chemical agents of concern.

According to a government press release related to this agreement, if successful, our technology could also provide the DoD with a method to quickly respond to other novel outbreaks.

Through this effort, we are working to develop a combination of antibodies that are effective against the virus because they promote multiple, distinct viral clearance mechanisms.

Ultimately, we plan to manufacture a successful product at industrial scale to make it available to a broad population of patients and at-risk individuals.

If we successfully identify IMM-BCP-01 product candidate, we plan to initiate clinical testing in the third quarter of 2021.

We believe our strategic partnership with the DoD could enable us to leverage our technology in additional therapeutic applications, such as in a rapid response to a future viral pandemic.

Pursuant to the DoD Agreement, ownership of any invention developed under the agreement follows inventorship under U.S.

The Bayh-Dole Act does not apply to the DoD Agreement, and, as such, title to inventions will accrue to the inventor-organization.

In addition, we own all study data generated under the DoD Agreement, whether generated by us or the DoD.

In connection with the DoD Agreement, we also obtained the right to negotiate a commercial license covering DoD’s interest in any invention solely owned by DoD and developed under the agreement.

In July 2020, the Company entered into an Other Transaction Authority for Prototype Agreement, or the OTA Agreement, with the DoD to fund the Company’s efforts in developing an antibody cocktail therapeutic to treat COVID-19.

The amount of funding available to the Company under this expense reimbursement contract was $13.3 million.

In May 2021, the Company and the DoD amended the OTA Agreement, pursuant to which the DoD award was increased from $13.3 million to $17.6 million.

Pursuant to the OTA Agreement, ownership of any invention developed under the agreement follows inventorship under U.S.

The Bayh-Dole Act does not apply to the OTA Agreement, and, as such, title to inventions will accrue to the inventor-organization.

In addition, we own all study data generated under the OTA Agreement, whether generated by us or the DoD.

We also obtained the right to negotiate a commercial license covering DoD’s interest in any invention solely owned by DoD and developed under the agreement.

Our rights to inventions and data are subject to standard government-retained rights.

Under the DoD Agreement, we are required to use commercially reasonable efforts to complete specified research activities for the prototype project based on the estimated cost for such prototype.

In connection with the DoD Agreement, we are eligible to receive up to $13.3 million in the aggregate from DoD, subject to continued compliance with the terms of the DoD Agreement and future pricing requirements.

We are required to use commercially reasonable efforts to complete specified research activities for the prototype project based on the estimated cost for such prototype.

We are eligible to receive up to $17.6 million in the aggregate from DoD, subject to continued compliance with the terms of the OTA Agreement and future pricing requirements.

We are not obligated to pay any royalties or other future consideration under this agreement.

The DoD Agreement extends through final payment which is anticipated to be one year after the effective date, subject to completion of the prototype project as determined by a DoD official in accordance with key technical goals established for the project or results that justify completion.

The OTA Agreement extends through final payment, subject to completion of the prototype project as determined by a DoD official in accordance with key technical goals established for the project or results that justify completion.

The DoD may terminate the agreement in its entirety for convenience or in whole or in part for our material breach of the agreement.

Even if fully funded, the $13.3 million would not be sufficient to fund our full research and development efforts through commercialization, and we may need to utilize our own funds or find alternate sources of capital to continue these efforts.

Even if fully funded, the $17.6 million would not be sufficient to fund our full planned research and development phase 1B.

Therefore, we have used and will continue to use our own funds to support completion activities as part of the contract.

Arrayjet License Agreement

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The foregoing license grant includes a limited right to grant nonexclusive sublicenses.

The Arrayjet Agreement was subsequently amended in July 2020 to modify certain sublicensing payment provisions of the agreement.

Under the Arrayjet Agreement, as amended, we are required to diligently use the licensed rights to develop screening of human derived hybridomas and antibodies or derivatives thereof against cell lysate libraries where antigen(s) of interest are unknown within the licensed field in the territory and, where marketable products are developed, to use reasonable commercial judgment to diligently develop, seek any necessary regulatory approval for, manufacture, market, and sell products in each licensed field and territory.

In connection with the Arrayjet Agreement, we are required to make annual license payments in the low six figures to maintain such exclusivity.

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We have the right to terminate the Arrayjet Agreement upon specified written notice stating reasons for termination.

Arrayjet may terminate the agreement for our failure to meet certain diligence milestones, payment default, or failure to provide certain reports and information.

Either party may terminate the agreement for the other’s material breach or insolvency.

MIT-Whitehead Patent License Agreement

Arrayjet may terminate the Arrayjet Agreement for our failure to meet certain diligence milestones, payment default, or failure to provide certain reports and information.

Either party may terminate the Arrayjet Agreement for the other’s material breach or insolvency.

Whitehead Patent License Agreement

In June 2009, we entered into an exclusive patent license agreement, or the Whitehead Agreement, with the Whitehead Institute for Biomedical Research, or Whitehead, and the Massachusetts Institute of Technology, or MIT, as licensing agent for Whitehead, pursuant to which we obtained from MIT and Whitehead a royalty-bearing exclusive license under certain patent rights of Whitehead and a royalty-bearing non-exclusive license under certain biological and chemical material of Whitehead that relate to our antibody screening platform, in each case to develop, manufacture, use, and commercialize licensed products and to develop and perform licensed processes and perform licensed services for all purposes in the United States.

The foregoing license grant included the right to grant sublicenses with certain restrictions.

The Whitehead Agreement was subsequently amended in December 2009, March 2013, August 2017 and

Since August 2017, MIT ceased to be the licensing agent for Whitehead and is no longer a party to the Whitehead Agreement.

Under the Whitehead Agreement, as amended, we are required to use diligent efforts to develop licensed products or licensed processes and to introduce licensed product or licensed processes into the commercial market and, thereafter, make licensed products and licensed processes reasonably available to the public.

We are also obligated to achieve certain specified diligence milestones.

In connection with the Whitehead Agreement, we are required to make an annual license maintenance payment in the high five figures, which amount may be credited against royalties payable in the same calendar year.

Pursuant to the Whitehead Agreement, we are obligated to pay Whitehead up to $725,000 in the aggregate for certain development, regulatory and commercial milestones and up to $275,000 for each product or derivative that we discover using the licensed product or processes or Discovered Products.

We are also obligated to pay Whitehead a low single digit royalty on net sales of licensed products and licensed processes when sold as a therapeutic or diagnostic product, a mid-single digit royalty on net sales of such licensed products or processes when sold as a research reagent, and a less than one percent royalty on net sales of Discovered Products when sold as a therapeutic or diagnostic product.

Our obligation to pay royalties on net sales of licensed products and licensed processes is limited to such products and processes the manufacture, use, sale, and/or import of which, absent the license granted under the Whitehead Agreement, would infringe a claim of a licensed patent.

Our obligation to pay royalties on net sales of Discovered Products is limited to a period of seven years from the first commercial sale of each Discovered Product.

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Whitehead may terminate the Whitehead Agreement in the event of our uncured material breach or insolvency.

Additionally, Whitehead may terminate the agreement if we or any of our affiliates or sublicensees challenges the validity, patentability, enforceability or non-infringement of the licensed patents.

Additionally, Whitehead may terminate the Whitehead Agreement if we or any of our affiliates or sublicensees challenges the validity, patentability, enforceability or non-infringement of the licensed patents.

TJU License Agreement

In June 2012, we entered into an exclusive license agreement, or the TJU Agreement, with Thomas Jefferson University, or TJU, pursuant to which we obtained from TJU a worldwide, royalty-bearing exclusive license under certain patent rights, know-how, and materials of TJU that relate to our antibody screening platform, in each case to research, develop, manufacture, use, commercialize, and improve licensed products and to practice licensed processes for all purposes.

The foregoing license grant included the right to grant sublicenses with certain restrictions.

The TJU Agreement was subsequently amended in October 2017 and July 2020.

Under the TJU Agreement, we are required to use commercially reasonable diligent efforts to introduce licensed products and/or licensed processes into the commercial market and must endeavor to keep them reasonably available to the public.

In connection with the TJU Agreement, we are currently required to make an annual license maintenance payment in the low five figures, which amount may be credited against royalties payable in the same calendar year.

certain patent rights, know-how, and materials of TJU that relate to our antibody screening platform, in each case to research, develop, manufacture, use, commercialize, and improve licensed products and to practice licensed processes for all purposes.

We are currently required to make an annual license maintenance payment in the low five figures, which amount may be credited against royalties payable in the same calendar year.

We are also obligated to pay TJU $950,000 in the aggregate for certain development, regulatory and commercial milestones for licensed products.

We are obligated to pay TJU a low single digit royalty on net sales of licensed products and licensed processes.

Our obligation to pay royalties on net sales of licensed products and licensed processes is limited to net sales generated in countries in which a valid claim under licensed patent exists, and after expiration of the licensed patents, a lower royalty applies.

The royalty rate is subject to certain specified reductions.

Royalties are payable under the agreement until expiration of the TJU Agreement.

Royalties are payable until expiration of the TJU Agreement.

We are also obligated to pay TJU a high first decile percentage of any non-royalty sublicensing income received by us, subject to certain specified reductions.

The TJU Agreement expires upon expiration of the last valid claim under the licensed patents.

We have the right to terminate the TJU Agreement upon specified prior written notice to TJU.

TJU may terminate the agreement in the event that we fail to cure a payment default within a specified period of time, we fail to procure and maintain insurance as required under the agreement, TJU determines in good faith that we have failed to use commercially reasonable efforts to develop and commercialize licensed products or licensed processes at any time after 5 years from the effective date of the agreement, we become insolvent, an audit by TJU shows an underpayment by us of the lesser of 5% and $50,000 for any 12 month period, we are convicted or plead nolo-contendere to a felony relating to the manufacture, use or sale of licensed products or licensed processes, or we fail to cure any other material default within a specified period of time.

pH Pharma Antibody-Drug Conjugate Research Collaboration

In October 2019, we entered into a collaboration and license agreement, which was amended in August 2020, or the pH Pharma Agreement, to develop and commercialize multiple ADCs in oncology with pH Pharma, a privately held clinical-stage biopharmaceutical company advancing therapeutic candidates for oncology, ophthalmology and non-alcoholic steatohepatitis, or NASH.

Pursuant to the pH Pharma Agreement, we agreed to collaborate with pH Pharma in the research of ADCs using our proprietary antibodies and pH Pharma’s linkers and drugs, all in accordance with a mutually agreed upon research plan.

There were no ADCs developed under the research plan, and the pH Pharma Agreement expired in January 2021 in accordance with its terms.

Manufacturing

We produce our lead antibodies at the laboratory scale necessary for early research and development activities and some preclinical assessments.

For later stage preclinical assessment, such as IND-enabling studies and safety assessment, of product candidates, we use third-party manufacturers to produce our antibodies and any other necessary intermediates or reagents.

We recently engaged Abzena as our contract development and manufacturing organization for both of our IMM-BCP-01 and IMM-ONC- 01 programs.

We do not have, and we do not currently plan to acquire or develop the infrastructure, facilities or capabilities to manufacture any intermediate, bulk drug substance or finished drug product conforming to current Good Manufacturing Practices (cGMP) for use in human clinical trials or to commercialize.

We intend to continue to utilize third-party manufacturers to produce, package, label, test and release bulk drug substance and drug product for clinical testing and for future commercial use, as needed.

For later stage preclinical assessment, such as IND-enabling studies and safety assessment, of product candidates, and early-stage clinical assessment, we use third-party manufacturers to produce our antibodies and any other necessary intermediates or reagents.

We do not have, and we do not currently plan to acquire or develop the infrastructure, facilities or capabilities to conduct these manufacturing activities ourselves.

We intend to continue to utilize third-party manufacturers to produce, package, label, test and release product for clinical testing and for future commercial use, as needed.

We expect to continue to rely on such third parties to manufacture our products for the foreseeable future.

Our expected future contractual manufacturing organizations will each have successful track records of producing clinical and commercial products for other companies under applicable compliance regulations, such as cGMP compliance in case of the FDA, and will have previously been inspected by regulatory authorities for compliance with cGMP standards.

As noted above, we have selected Abzena as our manufacturer of the antibodies for IND-enabling toxicology and clinical supplies in IMM-ONC-01 and IMM-BCP-01.

We plan to continue to work with such third parties located in United States or from time to time, located outside of the United States.

We are aware of several companies that are developing antibodies for the treatment of cancer and infectious diseases.

We are aware of several companies that are developing antibody treatments for the therapeutic areas of cancer and infectious diseases, specifically COVID-19.

Many of these companies are well-capitalized and, in contrast to us, have significant clinical experience, and may include our potential future strategic partners.

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OncoReponse, Inc.

In addition, we expect to compete with large, multinational pharmaceutical companies that discover, develop and commercialize antibodies and other therapeutics for use in treating

cancer such as AstraZeneca;

In addition, we expect to compete with large, multinational pharmaceutical companies that discover, develop and commercialize antibodies and other therapeutics for use in treating cancer such as AstraZeneca;

Bristol-Myers Squibb Company;

Genentech, Inc.

Hoffmann La Roche AG.

(a member of Roche group);

and Johnson & Johnson.

If any future product candidates identified through our current lead programs are eventually approved for sale, they will likely compete with a range of treatments that are either in development or currently marketed for use in those same disease indications.

In the area of infectious diseases, specifically our COVID19 efforts, our key competitors include other companies developing antibody-based therapeutics such as Regeneron, Glaxo SmithKline plc.

and Vir Biotechnology (in collaboration), SAb Biotherapeutics, Inc., Sorrento Therapeutics, Inc., Amgen Inc.

and Adaptive (in collaboration), Eli Lilly and AbCellera (in collaboration), and AstraZeneca.

and Vir Biotechnology (in collaboration), Sorrento Therapeutics, Inc., Adagio;

Eli Lilly and AbCellera (in collaboration), and AstraZeneca.

Further, we expect the future market potential and need for our antibody cocktail product will be negatively influenced should any of the numerous vaccine products, by companies including Moderna, Inc.;

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We believe our current layered patent estate, together with our efforts to develop and patent next generation technologies, provides us with substantial intellectual property protection.

We have filed or will file for patent protection in the United States and internationally for our lead antibodies and the targets to which they bind, as well as for process improvements.

As of February 25, 2021, we own national phase patent applications in 11 countries or regional patent jurisdictions, including the United States, based on a Patent Cooperation Treaty, or PCT, application filed in 2019, 3 pending PCT applications and 6 pending US provisional patent applications with claims directed to the composition of matter and methods of use for antibodies, including IMM-ONC-01 and IMM-BCP-01, targeting identified antigens.

As of March 1, 2022, we owned 65 pending national phase patent applications in the U.S and abroad, two pending PCT applications, and 7 pending U.S.

provisional patent applications.

Our portfolio includes claims directed to the composition of matter and methods of use for antibodies, including IMM-ONC-01 and IMM-BCP-01.

Patent applications claiming the benefit of these PCT applications, if issued, are expected to expire between 2039 and 2042.

Patent applications claiming priority to and the benefit of these provisional applications, if issued, are expected to expire between 2040 and 2042.

Patents claiming priority to and the benefit of these provisional applications, if issued, are expected to expire in 2042.

However, we recognize that the area of patent and other intellectual property rights in biotechnology is an evolving one with many risks and uncertainties, which may affect those rights.

Our commercial success will depend in part upon obtaining and maintaining patent protection and trade secret protection of our current and future product candidates and the methods used to develop and manufacture them, as well as successfully defending these patents against third-party challenges and operating without infringing on the proprietary rights of others.

Our commercial success will depend in significant part upon obtaining and maintaining patent protection and trade secret protection of our current and future product candidates and the methods used to develop and manufacture them, as well as successfully defending these patents against third-party challenges and operating without infringing on the proprietary rights of others.

Our ability to stop third parties from making, using, selling, offering to sell or importing our products depends on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

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In the United States, a patent’s term may potentially be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the USPTO in examining and granting a patent taking into account delays on the part of the patentee or may be shortened if a patent is terminally disclaimed over an earlier expiring patent.

In the United States, the patent term of a patent that covers an FDA-approved

drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process.

In the United States, the patent term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process.

The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent.

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In the future, if and when our products receive FDA approval, we expect to apply for patent term extensions on patents covering those products.

We expect to seek patent term extensions to any of our issued patents in any jurisdiction where these are available, however there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions.

We expect to seek patent term extensions to all of our issued patents in any jurisdiction where these are available, however there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions.

In some instances, we file provisional patent applications directly in the USPTO.

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In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted or further altered even after patent issuance.

Consequently, we may not obtain or maintain adequate patent

protection for any of our future product candidates or for our technology platform.

Consequently, we may not obtain or maintain adequate patent protection for any of our future product candidates or for our technology platform.

We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient proprietary protection from competitors.

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Thus, we may not be able to meaningfully protect our trade secrets.

It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us.

It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and

other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us.

These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances.

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The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources.

The process required by the FDA before biologic product candidates may be marketed in the United States generally involves the following:

● completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices regulation;

● submission to the FDA of an IND, which must become effective before clinical trials may begin and must be updated annually or when significant changes are made;

● approval by an independent Institutional Review Board, or IRB, or ethics committee at each treatment site before the trial is commenced;

● performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed biologic product candidate for its intended purpose;

● preparation of and submission to the FDA of a BLA after completion of all pivotal clinical trials;

● satisfactory completion of an FDA advisory committee review, if applicable;

● a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;

● satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological product’s continued safety, purity and potency, and of selected clinical investigation sites to assess compliance with Good Clinical Practices, or GCP;

● FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States.

Preclinical and Clinical Development

The data required to support a BLA is generated in two distinct development stages:

The data required to support a Biologics License Application (BLA) is generated in two distinct development stages:

preclinical and clinical.

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An IND is a request for authorization from the FDA to administer an investigational new drug product to humans.

The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies.

An IND must become effective before human clinical trials may begin.

The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial.

The central focus

of an IND submission is on the general investigational plan and the protocol(s) for clinical studies.

The FDA has 30 days after submission to raise safety concerns or questions about the proposed clinical trial.

In such a case, the IND may be placed on clinical hold and the IND sponsor, and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin.

Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

Submission of an IND therefore may not result in FDA authorization to begin a clinical trial.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study.

Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated.

A separate submission to the existing IND must be made for each successive clinical trial

conducted during product development and for any subsequent protocol amendments.

A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments.

Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site and must monitor the study until completed.

Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives.

Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.

Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the biologic, findings from animal or in vitro testing that suggest a significant risk for human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

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For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

● Phase 1 — The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition.

These studies are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.

● Phase 2 — The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks.

● Phase 1/Phase 1b — The investigational product is initially introduced into healthy human subjects (Phase 1) or directly into patients with the target disease or condition (Phase 1b) for certain therapies, in either case to assess safety.

In addition, these studies may be designed to test dosage tolerance, absorption, metabolism and distribution of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.

● Phase 2 — The investigational product is administered to a patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to assess adverse events and potential side effects.

Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

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The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product, or for biologics, the safety, purity and potency.

Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

Additionally, appropriate packaging must be selected and tested, and stability

studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

BLA Submission and Review

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications.

The BLA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling,

among other things.

The submission of a BLA requires payment of a substantial application user fee to FDA, unless a waiver or exemption applies, and the sponsor of an approved BLA is also subject to an annual program fee.

Once a BLA has been submitted, the FDA’s goal is to review standard applications within ten months after it accepts the application for filing, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing.

In both standard and priority reviews, the review process is often significantly extended by FDA requests for additional information or clarification.

Once a BLA has been submitted, the FDA’s goal is to review standard applications within ten months after accepting the application for filing, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing.

In both standard and priority reviews, the FDA extends the review process based on requests for additional information or clarification.

The FDA reviews a BLA to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the product’s continued safety, purity and potency.

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Before approving a BLA, the FDA will typically inspect the facility or facilities where the product is manufactured.

The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.

The FDA will not approve an application unless it determines that the manufacturing processes and facilities comply with cGMP requirements and adequate to assure consistent production of the product within required specifications.

Additionally, before approving a BLA, the FDA will typically inspect one or more treatment sites to assure compliance with GCP.

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The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed.

If the FDA grants regulatory approval of a product, such approval will be for particular indications and may entail limitations on the indicated uses for which such product may be marketed.

For example, the FDA may approve the BLA with a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks.

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The sponsor of a fast-track product has opportunities for frequent interactions with the review team during product development and, once a BLA is submitted, the product may be eligible for priority review.

the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.

A fast track product may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA.

A product intended to treat a serious or life-threatening disease or condition may also be eligible for breakthrough therapy designation to expedite its development and review.

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Fast track designation, breakthrough therapy designation, priority review, and accelerated approval do not change the standards for approval but may expedite the development or approval process.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United States, or 200,000 or more individuals in the United States for which there is no reasonable expectation that the cost of developing and making available in the United States a drug or biologic for this type of disease or condition will be recovered from sales in the United States for that drug or biologic.

Orphan drug designation must be requested before submitting a BLA.

After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

The orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review or approval process.

If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusive approval (or exclusivity), which means that the FDA may not approve any other applications, including a full BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity.

Orphan drug exclusivity does not prevent FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a different disease or condition.

Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application fee.

A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.

In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Pediatric Trials

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The FDCA requires that a sponsor who is planning to submit a marketing application for a drug or biologic product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, or PSP, within sixty days of an end-of-Phase 2 meeting or as may be agreed between the sponsor and FDA.

The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information.

The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to

conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information.

The FDA and the sponsor must reach agreement on the PSP.

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or imposition of distribution restrictions or other restrictions under a REMS program.

Other potential consequences include, among other things:

● restrictions on the marketing or manufacturing of a product, complete withdrawal of the product from the market or product recalls;

● fines, warning letters or holds on post-approval clinical studies;

● refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product approvals;

● product seizure or detention, or refusal of the FDA to permit the import or export of products;

● consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;

● mandated modification of promotional materials and labeling and the issuance of corrective information;

● the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product;

● injunctions or the imposition of civil or criminal penalties.

The FDA closely regulates the marketing, labeling, advertising and promotion of biologics.

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The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars.

Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical study or studies.

and a clinical study or studies.

Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.

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Pediatric exclusivity, if granted, adds six months to existing exclusivity periods and patent terms.

This six-month exclusivity, which runs from

the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.

This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.

The BPCIA is complex and continues to be interpreted and implemented by the FDA.

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The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor.

Further, courts have found that if “one purpose” of remuneration is to induce referrals, the federal Anti-Kickback statute is violated.

Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute.

Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.

Instead, the legality of the arrangement will be evaluated on a case-by-case basis based

on a cumulative review of all of its facts and circumstances.

Our practices, including our arrangements with physicians, may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor.

Additionally, the intent standard under the federal Anti-Kickback Statute was amended by the ACA to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Further, courts have found that if “one purpose” of remuneration is to induce referrals, the federal Anti-Kickback statute is violated.

In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA.

The federal false claims and civil monetary penalty laws, including the FCA, which can be enforced by private citizens through civil qui tam actions, prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal healthcare programs, including Medicare and Medicaid, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.

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For instance, historically, pharmaceutical and other healthcare companies have been, and continue to be, prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.

A violation of the Anti-Kickback Statute makes any claim submitted as a result of the violation of the Anti-Kickback Statute, a false claim under the FCA.

Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, off-label, and thus generally non-reimbursable, uses.

HIPAA created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

Like the federal Anti-Kickback Statute, the ACA amended the intent standard for certain healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Like the federal Anti-Kickback Statute, under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Also, many states have similar, and typically more prohibitive, fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

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In addition, many state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways, are often not pre-empted by HIPAA, and may have a more prohibitive effect than HIPAA, thus complicating compliance efforts.

In addition, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as average sales price and best price.

Further, these prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.

It is difficult to predict how Medicare coverage and reimbursement policies will be applied to our products in the future and coverage and reimbursement under different federal healthcare programs are not always consistent.

Medicare reimbursement rates may also reflect budgetary constraints placed on the Medicare program.

Additionally, the federal Physician Payments Sunshine Act, or the Sunshine Act, within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) report annually to CMS information related to certain payments or other transfers of value made or distributed to physicians, as broadly defined by such law, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, and to report annually certain ownership and investment interests held by physicians and their immediate family members.

Beginning in 2022, applicable manufacturers also will be required to report such information regarding payments and transfers of value provided, as well as ownership and investment interests held, during the previous year to certain other healthcare professionals, including physician assistants and nurse practitioners.

In addition, many states also govern the reporting of payments or other transfers of value, many of which differ from each other in significant ways, are often not pre-empted, and may have a more prohibitive effect than the Sunshine Act, thus further complicating compliance efforts.

In addition, many states also govern the reporting of payments or

other transfers of value, many of which differ from each other in significant ways, are often not pre-empted, and may have a more prohibitive effect than the Sunshine Act, thus further complicating compliance efforts.

In order to distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state.

Some states also impose requirements on manufacturers and distributors to establish the

pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain.

Some states also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain.

Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices.

19 unchanged sentences

We cannot be sure that reimbursement will be available for any product that we commercialize and, if coverage and reimbursement are available, we cannot be sure that the level of reimbursement will be adequate.

Coverage may also be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory

Coverage may also be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory authorities.

Limited coverage and less than adequate reimbursement may reduce the demand for, or the price of, any product for which we obtain regulatory approval.

10 unchanged sentences

If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product candidate that we successfully develop.

Certain of our products, once approved, may be administered by a physician.

Many pharmaceutical manufacturers must calculate and report certain price reporting metrics, such as average sales price and best price, to the government, such as average sales price and best price.

These prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where drugs may be sold at lower prices than in the United States.

Further, certain of our products, once approved, may be administered by a physician.

Under currently applicable U.S.

10 unchanged sentences

The downward pressure on health care costs has become intense.

As a result, increasingly high barriers are being erected to the entry of new products.

As a result, increasingly high barriers are being erected to the entry of new

In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.

4 unchanged sentences

Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Healthcare Reform

In the United States and some jurisdictions outside the United States, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect the ability to profitably sell product candidates for which marketing approval is obtained.

Potential Healthcare Reform

In the United States and some jurisdictions outside the United States, there have been, and continue to be, proposed legislative and regulatory changes to the current healthcare systems that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect the ability to profitably sell product candidates for which marketing approval is obtained.

Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access.

In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

For example, the ACA has substantially changed healthcare financing and delivery by both governmental and private insurers.

Among the ACA provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above, are the following:

● an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs that began in 2011;

● an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to 23.1% and 13% of the average manufacturer;

● price for most branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs at 100% of the average manufacturer price;

● a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (and 70% starting on January 1, 2019 pursuant to the Bipartisan Budget Act of 2018, or BBA) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;

● extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

● expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability;

● expansion of the entities eligible for discounts under the 340B Drug Discount Program;

● a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

● expansion of healthcare fraud and abuse laws, including the FCA and the federal Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;

● a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected;

● requirements to report certain financial arrangements with physicians and teaching hospitals;

● a requirement to annually report certain information regarding drug samples that manufacturers and distributors provide to physicians;

● establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending;

● a licensure framework for follow on biologic products.

Some of the provisions of the ACA have yet to be implemented, and there have been legal and political challenges to certain aspects of the ACA.

Since January 2017, President Trump has signed two executive orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA.

Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA.

While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have been signed into law.

In December 2017, the Tax Cuts and Jobs Act of 2017 was enacted which repeals, effective January 1, 2019, the tax penalty for an individual’s failure to maintain ACA-mandated health insurance, commonly referred to as the “individual mandate.” On December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act, which repealed effective January 1, 2020, the Cadillac tax, and the medical device excise tax and, effective January 1, 2021, also eliminates the health insurer tax.

Further, the BBA among other things, amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” More recently, in July 2018, CMS published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment.

Since then, the ACA risk adjustment program payment parameters have been updated annually.

In addition, CMS published a final rule that would give states greater flexibility, starting in 2020, in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.

Other legislative changes have been proposed and adopted since the ACA was enacted.

In August 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect beginning on April 1, 2013 and, due to subsequent legislative amendments to the statute will stay in effect through 2030 unless additional Congressional action is taken.

However, pursuant to the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, the 2% Medicare sequester reductions have been suspended from May 1, 2020 through December 31, 2020 due to the COVID-19 pandemic.

In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.

Specifically, there have been several recent U.S.

Congressional inquiries and proposed and enacted 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’s budget proposal for fiscal year includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs.

On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases.

Additionally, the Trump administration previously released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers.

HHS has solicited feedback on some of these measures and implemented others under its existing authority.

For example, in September 2018, CMS issued a final rule to allow Medicare Advantage Plans the option to use step therapy for Part B drugs beginning January 1, 2019.

This final rule codified CMS’s policy change that was effective January 1, 2019.

On July 24, 2020, President Trump signed four Executive Orders aimed at lowering drug prices.

The Executive Orders direct the Secretary of HHS to:

(1) eliminate protection under an Anti-Kickback Statute safe harbor for certain retrospective price reductions provided by drug manufacturers to sponsors of Medicare Part D plans or pharmacy benefit

managers that are not applied at the point-of-sale;

(2) allow the importation of certain drugs from other countries through individual waivers, permit the re-importation of insulin products, and prioritize finalization of FDA’s December 2019 proposed rule to permit the importation of drugs from Canada;

(3) ensure that payment by the Medicare program for certain Medicare Part B drugs is not higher than the payment by other comparable countries (depending on whether pharmaceutical manufacturers agree to other measures);

and (4) allow certain low-income individuals receiving insulin and epinephrine purchased by a Federally Qualified Health Center, or FQHC, as part of the 340B drug program to purchase those drugs at the discounted price paid by the FQHC.

Although a number of these, and other proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

At the states level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures.

Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, or the Right to Try Act, was signed into law.

The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval.

Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program.

There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.

The Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act, or the FCPA, prohibits any U.S.

individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business.

The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives that impact both the regulatory approval process for new products as well as the terms under which government and third-party payors will contract with and reimburse manufacturers.

For example, several government payor programs, such as Medicare and Medicaid, require manufacturers to enter into rebate agreements as a condition to approving manufacturer’s products for reimbursement by Federal Healthcare Programs.

In March 2010, the ACA was signed into law and substantially changed the way healthcare is financed by both governmental and private insurers in the United States.

The ACA contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement adjustments, and fraud and abuse changes.

Additionally, the ACA, among other things, included incentives to programs that increase the federal government’s comparative effectiveness research.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future.

Other legislative changes have been proposed and adopted in the United States since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers.

The Coronavirus Aid, Relief and Economic Stability Act (the “CARES Act”), which was signed into law on March 27, 2020, suspended the reductions from May 1, 2020, through March 31, 2022, and extended the sequester through 2031.

Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years regarding these matters.

This has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.

Individual states in the United States have also become increasingly active in implementing regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures and, in some cases, mechanisms to encourage importation from other countries.

Furthermore, there has been increased interest by third party payors and governmental authorities in reference pricing systems and publication of discounts and list prices.

We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product.

It is possible that additional governmental action is taken to address the COVID-19 pandemic.

Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors.

The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.

Such reforms could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates.

Additional Regulation

13 unchanged sentences

We offer a competitive total rewards package, updated in 2021 based on market research.

During 2020, we also adjusted our practices and processes to best support employees in a pandemic environment.

During 2020 and 2021, we also adjusted our practices and processes to support employees in a pandemic environment.

We incentivize high performers through an annual bonus program based on our performance for which all employees are eligible.

We also offer equity incentive plans, the purpose of which are to attract, retain and reward personnel through the granting of stock-based compensation awards in order to increase stockholder value and the success of our company by motivating team members to perform to the best of their abilities and achieve our objectives.

We currently lease 11,000 square feet of office and laboratory space in Exton, Pennsylvania under a lease that expires on August 31, 2022.

We currently lease 11,000 square feet of office and laboratory space in Exton, Pennsylvania under a lease that expires on March 31, 2024.

We believe the leased space is sufficient to meet our immediate facility needs, and that any additional space we may require will be available on commercially reasonable terms.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business