Item 1. Business
Item 1. Business
Overview
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. 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. Unlike other approaches that use deep sequencing of B cells to identify dominant clones that are common within and across patients, and which assume those clones are therapeutically relevant, we do not assume that any such genomic dominance is necessarily the hallmark of therapeutic utility.
Our primary focus areas are oncology and infectious disease. 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 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.
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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
Our discovery engine discovers innovative antibody-target pairs using an unbiased, broad, deep and efficient approach, as we are able to:
● 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 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 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
Oncology (IMM-ONC-01)
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. 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.
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SARS-CoV-2 (IMM-BCP-01)
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 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 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. The unique insights we obtain may also enable strategic partnerships with other entities, including pharmaceutical and biotechnology companies. 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.
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. We may in-license or acquire complementary intellectual property as needed or required, and we may continue to build our know-how and trade secrets. We may pursue both therapeutic and diagnostic applications of our antibodies through composition of matter and/or method of use patents. While our initial focus areas are in oncology and infectious disease, we may invest in intellectual property in other therapeutic areas as well.
Management
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. 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 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.
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Our Solution: Immunome’s Discovery Engine
The below graphic in Figure 1 demonstrates the key components of our approach and discovery process using our proprietary discovery engine.
Figure 1. Key components of our discovery engine
Patient Sampling : 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 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.
Patient Response : We fuse and immortalize thousands of these patient-derived memory B cells using proprietary methods, capturing them as hybridomas that typically express an individual antibody in quantities sufficient for extensive screening.
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 [ Screening ]). Using our proprietary approach, we can screen up to 20,000 antibodies on a single array. For infectious diseases, such as COVID-19, we screen against defined sets of antigens expressed by the infectious agent. 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.
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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 [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 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.
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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 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 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.
A Key Output from Our Discovery Platform: Functional Clustering
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.
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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. 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:
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.
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Antibody-Drug Conjugates (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. 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 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 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.
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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 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.
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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 [ 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
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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)
IMM-BCP-01 Overview: 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. 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)
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).
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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.
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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.
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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.
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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
We believe that our technology has broad utility and could enable the formation of attractive strategic partnerships to capture product opportunities on which we may not otherwise wish to capitalize. 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 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, 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. patent law. 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.
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 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 $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.
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Arrayjet License Agreement
In June 2019, we entered into an exclusive license agreement, or the Arrayjet Agreement, with Arrayjet Limited, or Arrayjet, pursuant to which we obtained a royalty-bearing, exclusive license under certain licensed patents and know-how for all purposes, including to research, develop, make, have made, use, sell, offer for sale, market, and otherwise commercialize products in the United States, the United Kingdom, China, Germany, and Japan, for the screening of human derived hybridomas and antibodies or derivatives thereof against cell lysate libraries where the antigen(s) of interest are unknown in the antibody therapy field. We also obtained a right to license certain new intellectual property rights owned or acquired by Arrayjet during the term, subject to the negotiation of mutually agreeable license terms. The foregoing license grant includes a limited right to grant nonexclusive sublicenses. In connection with the Arrayjet Agreement, we are required to make annual license payments in the low six figures to maintain such exclusivity. In the event we independently undertake certain development activities, we are also obligated to pay annual license fees in the mid six figures and annual sublicensing fees in the low six figures, and we are obligated to pay a low single digit percentage of other sublicensing revenue received. During the term, we are obligated to pay Arrayjet a low single digit royalty on net sales of products by us and a low single digit to low teens royalty on net sales of products by sublicensees.
We have the right to terminate the Arrayjet Agreement upon specified written notice stating reasons for termination. 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. 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 Discovered Products is limited to a period of seven years from the first commercial sale of each Discovered Product. We are obligated to pay Whitehead a high single digit royalty on service income received in connection with the provision of licensed services the provision of which, absent the license granted under the Whitehead Agreement, would infringe a claim of a licensed patent. We are obligated to pay Whitehead a high first decile percentage of certain payments received from sublicensees, subject to certain reductions to single-digit percentages, and we are obligated to pay Whitehead a mid-teen percentage royalty on certain payments received from non-sublicensee corporate partners.
We have the right to terminate the Whitehead Agreement upon specified prior written notice to Whitehead. Whitehead may terminate the Whitehead Agreement in the event of our uncured material breach or insolvency. 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
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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. The royalty rate is subject to certain specified reductions. 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.
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, 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.
Competition
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. In addition, these companies compete with us in recruiting scientific and managerial talent. Our success will partially depend on our ability to obtain, maintain, enforce and defend patents and other intellectual property rights with respect to our antibodies that are proven to be safer and/or more effective or are less expensive than competing products. Our commercial opportunity and success will be reduced or eliminated if competing products that are safer, more effective, or less expensive than the antibodies we develop or if such products become available in the future.
In oncology, we expect to compete with antibody, biologic and other therapeutic platforms and development companies who are also pursuing similar antibody-based discovery approaches, including, but not limited to, companies such as AbCellera Biologics, Inc.; Adaptive Biotechnologies Corporation, or Adaptive; AIMM Therapeutics B.V.; Atreca, Inc.; IGM Biociences, Inc.; 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; Amgen; Bristol-Myers Squibb Company; Genentech, Inc. (a member of Roche group); Merck & Co. Inc.; 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), 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.; Pfizer Inc. and BioNTech SE (in collaboration), AstraZeneca and Johnson and Johnson, continue to be safe and efficacious against COVID-19 and emerging variants of the virus.
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Intellectual Property
Intellectual property is of vital importance in our field and in biotechnology generally. We seek to protect and enhance proprietary technology, inventions, and improvements that are commercially important to the development of our business by seeking, maintaining, and defending patent rights, whether developed internally, acquired or licensed from third parties. We will also seek to rely on regulatory protection afforded through orphan drug designations, inclusion in expedited development and review, data exclusivity, market exclusivity and patent term extensions where available.
We utilize various types of intellectual property assets to provide multiple layers of protection. For example, we seek a variety of patents to protect our inventions including, for example, compositions of matter and uses in treatment and diagnostic and methods for novel antibodies, including methods of treatment for diseases expressing novel targets. 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.
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. 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 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. We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents, or any patents granted to us in the future will be commercially useful in protecting our product candidates, discovery programs and processes. For this and more comprehensive risks related to our intellectual property, please see the section titled “Risk Factors — Risks Related to Our Intellectual Property.”
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, including the United States, the patent term is 20 years from the earliest date of filing a non-provisional patent application. 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. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to an approved drug may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug. 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 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.
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In some instances, we file provisional patent applications directly in the USPTO. Provisional patent applications were designed to provide a lower-cost first patent filing in the United States. Corresponding non-provisional patent applications must be filed not later than 12 months after the provisional application filing date. The corresponding non-provisional application benefits in that the priority date(s) of the patent application is/are the earlier provisional application filing date(s), and the patent term of the finally issued patent is calculated from the later non-provisional application filing date. This system allows us to obtain an early priority date, obtain a later start to the patent term and to delay prosecution costs, which may be useful in the event that we decide not to pursue examination in a subsequent non-provisional application. While we intend, as appropriate, to timely file non-provisional patent applications relating to our provisional patent applications, we cannot predict whether any such non-provisional patent applications will result in the issuance of patents that provide us with any competitive advantage.
We intend to file U.S. non-provisional applications and/or international Patent Cooperation Treaty, or PCT, applications that claim the benefit of the priority date of earlier filed provisional or non-provisional applications, when applicable. The PCT system allows for a single PCT application to be filed within 12 months of the priority filing date of a corresponding priority patent application, such as a U.S. provisional or non-provisional application, and to designate all of the 153 PCT contracting states in which national phase patent applications can later be pursued based on the PCT application. The PCT International Searching Authority performs a patentability search and issues a non-binding patentability opinion which can be used to evaluate the chances of success for the national applications in foreign countries prior to having to incur the filing fees. Although a PCT application does not issue as a patent, it allows the applicant to establish a patent application filing date in any of the member states and then seek patents through later-filed national-phase applications. No later than either 30 or 31 months from the first priority date of the PCT application, separate national phase patent applications can be pursued in any of the PCT member states, depending on the deadline set by individual contracting states. National phase entry can generally be accomplished through direct national filing or, in some cases, through a regional patent organization, such as the European Patent Organization. The PCT system delays application filing expenses, allows a limited evaluation of the chances of success for national/regional patent applications and allows for substantial savings in comparison to having filed individual countries rather than a PCT application in the event that no national phase applications are filed.
For all patent applications, we determine claiming strategy on a case-by-case basis. Advice of counsel and our business model and needs are always considered. We file patents containing claims for protection of all useful applications of our proprietary technologies and any products, as well as all new applications and/or uses we discover for existing technologies and products, assuming these are strategically valuable. We may periodically reassess the number and type of patent applications, as well as the pending and issued patent claims to ensure that coverage and value are obtained for our processes, and compositions, given existing patent law and court decisions. Further, claims may be modified during patent prosecution to meet our intellectual property and business needs.
We recognize that the ability to obtain patent protection and the degree of such protection depends on a number of factors, including the extent of the prior art, the novelty and non-obviousness of the invention, and the ability to satisfy subject matter, written description, and enablement requirements of the various patent jurisdictions. 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. 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. Any patents that we hold may be challenged, circumvented or invalidated by third parties.
In addition to patent protection, we also rely on trademark registration, trade secrets, know how, other proprietary information and/or continuing technological innovation to develop and maintain our competitive position. We seek to protect and maintain the confidentiality of proprietary information to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. 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
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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. Our agreements with employees also provide that all inventions conceived by the employee in the course of employment with us or from the employee’s use of our confidential information are our exclusive property. However, such confidentiality agreements and invention assignment agreements can be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting trade secrets, know-how and inventions.
The patent positions of biotechnology companies like ours are generally uncertain and involve complex legal, scientific and factual questions. Our commercial success will also depend in part on not infringing upon the proprietary rights of third parties. It is uncertain whether the issuance of any third-party patent would require us to alter our development or commercial strategies, or our products or processes, obtain licenses or cease certain activities. Our breach of any license agreements or our failure to obtain a license to proprietary rights required to develop or commercialize our future products may have a material adverse impact on us. If third parties prepare and file patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference or derivation proceedings in the USPTO to determine priority of invention.
When available to expand market exclusivity, our strategy is to obtain, or license additional intellectual property related to current or contemplated development platforms, core elements of technology and/or product candidates.
For more information regarding the risks related to our intellectual property, see the section titled “Risk Factors — Risks Related to Our Intellectual Property.”
Government Regulation
The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biologics such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates.
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations and biologics under the FDCA, the Public Health Service Act, or PHSA, and their implementing regulations. Both drugs and biologics also are subject to other federal, state and local statutes and regulations. 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.
Preclinical and Clinical Development
The data required to support a Biologics License Application (BLA) is generated in two distinct development stages: preclinical and clinical. Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies. The sponsor must submit the results of the preclinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, as well as other information, to the FDA as part of the IND.
Prior to beginning the first clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus
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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 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. 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 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. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.
For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.
● 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.
● Phase 3 — The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval.
In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may be made a condition to approval of the BLA. Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for products. Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. 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
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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 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. The FDA may convene an advisory committee to provide clinical insight on application review questions. 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 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. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response letter will describe all of the deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the Complete Response letter without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling. In issuing the Complete Response letter, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification. 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 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. A REMS is a safety strategy to manage a known or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase 4 post a-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization and may limit further marketing of the product based on the results of these post-marketing studies.
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Expedited Development and Review Programs
The FDA offers a number of expedited development and review programs for qualifying product candidates. The fast-track program is intended to expedite or facilitate the process for reviewing new products that meet certain criteria. Specifically, new products are eligible for fast-track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast track designation applies to the combination of the product and the specific indication for which it is being studied. 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. 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. A product can receive breakthrough therapy designation if preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast-track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product, including involvement of senior managers.
Any marketing application for a biologic submitted to the FDA for approval, including a product with a fast-track designation and/or breakthrough therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as priority review and accelerated approval. A product is eligible for priority review if it has the potential to provide a significant improvement in the treatment, diagnosis or prevention of a serious disease or condition compared to marketed products. For products containing new molecular entities, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date (compared with ten months under standard review).
Additionally, products studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled post-marketing clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. It is possible that at the time of a BLA submission, our product candidates may not be eligible for accelerated approval, or the FDA could determine that accelerated approval is not warranted.
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.
Pediatric Trials
Under the Pediatric Research Equity Act, or PREA, a BLA or supplement to a BLA must contain data to assess the safety and efficacy of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. 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
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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. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials, and/or other clinical development programs. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of data or full or partial waivers.
Post-Approval Requirements
Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to monitoring and record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user fee requirements, under which FDA assesses an annual program fee for each product identified in an approved BLA. Biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program.
The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.
Biosimilars and Reference Product Exclusivity
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-approved reference biological product. To date, a number of biosimilars have been licensed under the BPCIA, and numerous biosimilars have been approved in Europe. 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,
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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. Complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.
A biological product can also obtain pediatric market exclusivity in the United States. 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.
The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors and customers may be subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services, or HHS, (such as the Office of Inspector General and the Health Resources and Service Administration), the Department of Justice, or the DOJ, and individual U.S. Attorney offices within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs may have to comply with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy and security provisions of the Health Insurance Portability and Accountability Act, or HIPAA, and similar state laws, each as amended, as applicable.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The federal Anti-Kickback Statute has been interpreted to apply to arrangements between therapeutic product manufacturers on one hand and prescribers and purchasers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. 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
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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.
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. A claim includes “any request or demand” for money or property presented to the U.S. government. 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, 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. Additionally, to the extent that our product is sold in a foreign country, we may be subject to similar foreign laws.
We may be subject to data privacy and security regulations by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, impose requirements relating to the privacy, security and transmission of individually identifiable health information on certain healthcare providers, healthcare clearinghouses, and health plans, known as covered entities, as well as independent contractors, or agents of covered entities that create, receive or obtain individually identifiable health information in connection with providing a service on behalf of a covered entity, known as a business associates. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil actions. 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.
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
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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. 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. All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.
Ensuring business arrangements with third parties comply with applicable healthcare laws and regulations is a costly endeavor. If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other current or future governmental regulations that apply to us, we may be subject to penalties, including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, additional reporting obligations and integrity oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The complex compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance or reporting requirements increases the possibility that a health care company may run afoul of one or more of the requirements.
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we may obtain regulatory approval. In the United States and in foreign markets, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage and establish adequate reimbursement levels for such products. In the United States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. Coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States, and commercial payors are critical to new product acceptance.
Third-party payors decide which therapeutics they will pay for and establish reimbursement levels. In the United States, the principal decisions about reimbursement for new medicines are typically made by CMS. CMS decides whether and to what extent our products will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a therapeutic is:
● a covered benefit under its health plan;
● safe, effective and medically necessary;
● appropriate for the specific patient;
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● cost-effective; and
● neither experimental nor investigational.
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 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.
Third-party payors are increasingly challenging the price, examining the medical necessity, and reviewing the cost-effectiveness of medical products, therapies, and services, in addition to questioning their safety and efficacy. Obtaining reimbursement for our products may be particularly difficult because of the higher prices often associated with branded drugs and drugs administered under the supervision of a physician. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. Obtaining coverage and reimbursement approval of a product from a third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our product on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. A third-party payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Additionally, in the United States there is no uniform policy among third-party payors for coverage or reimbursement. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies, but also have their own methods and approval processes. Therefore, one third-party payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party payor reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. 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.
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. law, certain products not usually self-administered (including injectable drugs) may be eligible for coverage under Medicare through Medicare Part B. Medicare Part B is part of original Medicare, the federal health care program that provides health care benefits to the aged and disabled, and covers outpatient services and supplies, including certain pharmaceutical products, that are medically necessary to treat a beneficiary’s health condition. As a condition of receiving Medicare Part B reimbursement for a manufacturer’s eligible drugs or biologicals, the manufacturer is required to participate in other government healthcare programs, including the Medicaid Drug Rebate Program and the 340B Drug Pricing Program. The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Under the 340B Drug Pricing Program, the manufacturer must extend discounts to entities that participate in the program.
Different pricing and reimbursement schemes exist in other countries. In the European Union, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices for medicines but monitor and control company profits. The downward pressure on health care costs has become intense. As a result, increasingly high barriers are being erected to the entry of new
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products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide coverage and adequate reimbursement. In addition, emphasis on managed care, the increasing influence of health maintenance organizations, and additional legislative changes in the United States has increased, and we expect will continue to increase, the pressure on healthcare pricing. The downward pressure on the rise in healthcare costs has become very intense. Coverage policies and third-party reimbursement rates may change at any time. 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.
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 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.
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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
In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.
We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances. We may incur significant costs to comply with such laws and regulations now or in the future.
Employees and Human Capital Resources
As of December 31, 2021, we had 39 full-time employees, including 27 who hold advanced degrees. Of these employees, 27 were engaged in research and development activities and 12 were engaged in general and administrative activities. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, training, incentivizing and integrating our existing and new employees, advisors and consultants. We offer a competitive total rewards package, updated in 2021 based on market research. 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.
Facilities
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.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.