10-K
1
maze-10k-2024.htm
10-K
10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________
Commission File Number: 001-42490
MAZE THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware
82-2635018
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
171 Oyster Point Blvd., Suite 300
South San Francisco, California 94080
(Address of principal executive offices, including zip code)
(650) 850-5070
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock - par value $0.001 per share
MAZE
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☐ NO ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☐ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒
The registrant did not have a public float on the last business day of its most recently completed second fiscal quarter because there was no public market for the registrant’s common equity as of such date.
As of March 25, 2025, the registrant had 43,796,057 shares of common stock outstanding.
MAZE THERAPEUTICS, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Page Numbers
PART I
4
Item 1.
Business
4
Item 1A.
Risk Factors
42
Item 1B.
Unresolved Staff Comments
93
Item 1C.
Cybersecurity
93
Item 2.
Properties
94
Item 3.
Legal Proceedings
94
Item 4.
Mine Safety Disclosures
94
PART II
95
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities
95
Item 6.
[Reserved]
96
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
97
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
109
Item 8.
Financial Statements and Supplementary Data
110
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
139
Item 9A.
Controls and Procedures
139
Item 9B.
Other Information
139
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
139
PART III
140
Item 10.
Directors, Executive Officers and Corporate Governance
140
Item 11.
Executive Compensation
148
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
162
Item 13.
Certain Relationships and Related Transactions, and Director Independence
166
Item 14.
Principal Accountant Fees and Services
168
PART IV
169
Item 15.
Exhibits and Financial Statement Schedules
169
Item 16.
Form 10-K Summary
171
SIGNATURE PAGE
172
Special note regarding forward-looking statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Section 27A of the Securities Act of 1933, as amended, or the Securities Act. In some cases, you can identify forward-looking statements by terms such as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these words. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk factors” and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. The forward-looking statements in this Annual Report on Form 10-K include, among other things, statements about:
• the timing of our preclinical studies and clinical trials for our therapeutic candidates, including statements regarding the anticipated timing of initiation and completion of studies or trials, the period during which the results of the trials will become available and our development plans;
• the characteristics, safety, tolerability and efficacy of MZE829, MZE782 or any other therapeutic candidates we may develop;
• our ability to develop, obtain and maintain regulatory approval for our therapeutic candidates or any other therapeutic candidates we may develop, including the timing of and costs involved;
• estimates of our addressable market and market growth, including our estimates regarding the patient populations and market opportunities for our therapeutic candidates;
• our expectations regarding demand for, and market acceptance of, our therapeutic candidates in any of the indications in which we plan to develop them, and any other therapeutic candidates we may develop;
• our ability to use our Compass platform to identify new therapeutic targets and advance such targets into clinical development and validate such targets across multiple indications;
• our ability to maintain and expand access to human genetics data;
• our ability to compete effectively with existing competitors and new market entrants;
• the potential effects of extensive government regulations in the United States and foreign countries relating to our industry;
• our ability to obtain, maintain, protect and enforce intellectual property and proprietary rights;
• our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights and proprietary technology of third parties;
• our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements, including our ability to comply with our financial obligations pursuant to the terms of such agreements;
• the timing and likelihood of the achievement of milestones pursuant to our existing collaboration and licensing agreements;
• our reliance on and performance of third parties, including our clinical research organizations, or CROs, contract manufacturing organizations, or CMOs, suppliers and manufacturers;
• our ability to expand our pipeline of therapeutic candidates;
• our ability to attract and retain key management and technical personnel;
• general economic, industry and market conditions, including fluctuating interest, inflation and tariff rates, uncertainty with respect to the federal debt ceiling and budget and the related potential for government shutdowns, uncertainty with respect to healthcare policies and regulation, instability in the global banking system, volatile market conditions, supply chain delays, and the ongoing labor shortage;
• the impact of natural disasters, terrorist activity, pandemics, regional conflicts around the world and the global responses thereto and other events beyond our control on any of the above or any other aspect of our business operations;
• our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act; and
• our expectations regarding expenses, future revenue, capital requirements, and our needs for additional financing.
The forward-looking statements made in this Annual Report on Form 10-K relate only to events or information as of the date on which the statements are made in this Annual Report on Form 10-K. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Annual Report on Form 10-K to conform these statements to actual results or to changes in our expectations, except as required by law.
You should read this Annual Report on Form 10-K and the documents that we reference herein and have filed with the SEC as exhibits to this Annual Report on Form 10-K with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
2
Summary of Risk Factors
Our business is subject to a number of risks and uncertainties, including those highlighted in the section titled “Risk Factors”. Some of these risks include:
• We are a clinical-stage biopharmaceutical company with a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability. Since our inception, we have incurred significant operating losses and have not generated any product revenue. We expect to incur continued losses for the foreseeable future and may never achieve or maintain profitability.
• We will require substantial additional capital to finance our operations and achieve our goals. If we are unable to raise capital when needed or on terms acceptable to us, we may be forced to delay, reduce or eliminate our research or product development programs, any future commercialization efforts or other operations.
• We are early in our development efforts and highly dependent on the success of our lead programs. If we are unable to commercialize our therapeutic candidates or experience significant delays in doing so, our business will be materially harmed.
• Preclinical and clinical drug development is a lengthy and expensive process, with uncertain timelines and outcomes. If preclinical studies or clinical trials of our therapeutic candidates are prolonged or delayed, we may be unable to obtain required regulatory approvals, and therefore be unable to commercialize our therapeutic candidates or any of our future therapeutic candidates on a timely basis or at all.
• We may not be successful in applying our Compass platform to identify targets with therapeutic potential or to discover and develop safe, effective or commercially viable therapeutic candidates.
• Certain of the diseases we, or which our partners, seek to treat have low prevalence and/or have available therapies, and it may be difficult for us or our partners to identify patients with these diseases or face competition in the recruitment of these limited groups of patients, which may lead to difficulties in enrolling clinical trials.
• Our Compass platform relies on access to high quality data repositories with paired genetic and clinical data and loss of such access, or the inability to use such data, could have a material adverse effect on our business, financial condition, results of operations and prospects.
• We have entered, and may in the future enter, into strategic collaborations, transactions and licensing partnerships for research, development or commercialization of our programs, including our first therapeutic candidate MZE001, and we may not be able to realize the full value of these partnerships or our partnered programs.
• We face significant competition in an environment of rapid technological change and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies or technologies that are more advanced or effective than ours, which may harm our business and financial condition, and our ability to successfully market or commercialize our therapeutic candidates.
• Our success depends in part on our and our partners’ ability to obtain, maintain, enforce and protect our intellectual property and proprietary rights. It is difficult and costly to protect our intellectual property rights and technologies, and we may not be able to ensure their protection. If we are unable to adequately protect our technologies or obtain and maintain patent protection for our technologies and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies and products similar or identical to ours, and our ability to successfully commercialize our technologies and products may be impaired.
• If we are sued for infringing, misappropriating or otherwise violating intellectual property or proprietary rights of third parties, such litigation or disputes could be costly and time-consuming and could prevent or delay us from developing or commercializing our therapeutic candidates.
3
P ART I
Item 1. Bu siness
Overview
We are a clinical-stage biopharmaceutical company harnessing the power of human genetics to develop novel, small molecule precision medicines for patients living with renal, cardiovascular and related metabolic, or CVRM, diseases, including obesity. We are advancing a pipeline using our Compass platform, which allows us to identify and characterize genetic variants in disease and then link those variants to the biological pathways that drive disease in specific patient groups through a process we refer to as variant functionalization. Our Compass platform has been purpose-built to inform all phases of our drug discovery and development process through clinical trial design. We are currently advancing two wholly-owned lead programs, MZE829 and MZE782, each of which represents a novel precision medicine-based approach for chronic kidney disease, or CKD. Our goal is to bring novel precision medicines to patients with CVRM diseases, which is where we believe we can maximize our impact on human health.
CKD is a serious, progressive condition that affects approximately 37 million patients in the United States, where it is expected to be the fifth most prevalent chronic disease by 2040. Current treatments for CKD consider patients as falling into clinical categories and focus on slowing the progression of disease, but do not target the underlying genetic drivers of disease. Our lead programs are designed to phenocopy, or mimic, the protective effects of certain genetic variants that are associated with reduced disease burden and improved kidney function in distinct groups of CKD patients.
Our most advanced lead program, MZE829, is an oral, small molecule inhibitor of apolipoprotein L1, or APOL1, for the treatment of patients with APOL1 kidney disease, or AKD, which is estimated to affect over one million patients in the United States alone. Although the link between APOL1 variants and renal dysfunction has been known for over a decade, we have identified a new protective variant that underpins our therapeutic approach for MZE829 and may ultimately allow us to address a broader population of AKD than has previously been possible in the clinical setting. In October 2024, we reported results for our Phase 1 clinical trial of MZE829, in which we enrolled 111 healthy patients who received either single or multiple ascending doses of 20 mg to 480 mg of MZE829 administered daily. Treatment was well tolerated with no severe adverse events or serious adverse events reported in patients treated with single doses up to 480 mg and multiple doses of up to 350 mg daily for seven days. Dose-proportional pharmacokinetics, or PK, was observed with low variability (10-40%) across doses. We initiated a Phase 2 trial of MZE829 in November 2024, dosed our first patient in February 2025 and expect to report proof of concept data in the first quarter of 2026.
Our second lead program, MZE782, is an oral, small molecule inhibitor of the solute transporter SLC6A19, a novel CKD target, with the potential to address approximately five million of the CKD patients in the United States with inadequate responses to currently available CKD therapies. Beyond its use as a potential standalone therapy, MZE782 may also provide a significant benefit to patients in combination with standard of care, including as a complementary treatment to current approved regimens or as an alternative option for those patients who do not adequately respond to today’s standard of care. We initiated a Phase 1 clinical trial of MZE782 in September 2024 and expect to provide initial data from this trial in the second half of 2025.
In addition to CKD, we believe MZE782 may provide benefit to patients suffering from the genetically defined metabolic disease, phenylketonuria, or PKU. Following our ongoing Phase 1 trial of MZE782 in CKD, we plan to conduct a parallel Phase 2 clinical trial to explore MZE782 as a potential treatment of PKU.
Our Compass platform supports end-to-end variant identification and functionalization capabilities as well as advanced research tools and methodologies for drug development. We believe the process of variant functionalization, or understanding how genetic variants function to affect the course of disease, is a foundational aspect of precision medicine and one of the core capabilities that sets us apart from others in the field.
Our programs
Our Compass platform is the foundation for all our programs. Compass has generated three clinical stage programs in the past five years: MZE829 and MZE782, which we wholly own, and MZE001, which we partnered. In addition to these clinical stage programs, Compass has generated research programs that are being developed by us or by other biotechnology companies through exclusive licensing or spin-out arrangements.
4
Our clinical pipeline
Our wholly owned clinical pipeline consists of small molecule precision medicines for patients living with common diseases. We are focused on CVRM diseases, including obesity. MZE829 and MZE782 are our lead programs. In areas outside of our CVRM focus, we have an additional program in development, MZE001 in Pompe disease, through a partnership arrangement with Shionogi & Co., Ltd., or Shionogi.
Figure 1: Our clinical pipeline
Our research and partnered programs
In addition to our clinical pipeline, we have several earlier stage research programs. These include wholly owned small molecule programs within our CVRM core focus. Beyond our wholly owned portfolio, we have additional partnered programs, including ATXN2 and UNC13A, which are being developed for multiple diseases and amyotrophic lateral sclerosis, or ALS, respectively. ATXN2 and UNC13A are being developed by Neurocrine Biosciences, Inc. and Trace Neuroscience, Inc., respectively. Additionally, we formed a spin-out company, Broadwing, Bio, Inc., or Broadwing, to develop therapeutic candidates, including ANGPTL7, for treatment of ophthalmic diseases.
Our lead programs
Our most advanced lead program, MZE829, is an oral, small molecule inhibitor of APOL1 for the treatment of patients with AKD, a subset of CKD, including those with focal segmental glomerulosclerosis, or FSGS, estimated to affect over one million patients in the United States alone. Although the link between APOL1 variants and renal dysfunction has been known for over a decade, we have identified a new protective variant of the APOL1 gene, N264K. MZE829 is designed to phenocopy N264K and mimic its protective characteristics. Through our preclinical work in AKD, we have demonstrated MZE829’s potential as a disease modifying treatment for patients suffering from this disease. Preclinical in vivo studies demonstrated MZE829’s significant potency in a model of APOL1-induced kidney injury, suggesting the ability to address a broader population of AKD than has previously been possible in the clinical setting. Additionally, MZE829 has demonstrated the potential to stop or reverse critical features of kidney disease, specifically the breakdown of the kidney’s filtering system and loss of protein in urine, or proteinuria. In October 2024, we reported results for our Phase 1 clinical trial of MZE829, in which we enrolled 111 healthy patients who received either single or multiple ascending doses of 20 mg to 480 mg of MZE829 administered daily. Treatment was well tolerated with no severe adverse events or serious adverse events reported in patients with single doses up to 480 mg and multiple doses of up to 350 mg daily for seven days. Dose-proportional PK was observed with low variability (10-40%) across doses. We initiated a Phase 2 trial of MZE829 in November 2024, dosed our first patient in February 2025 and expect to report proof of concept data in the first quarter of 2026.
5
Our second most advanced lead program, MZE782, is an oral, small molecule that targets the solute transporter, SLC6A19, with the potential to address approximately five million of the CKD patients in the United States with inadequate responses to currently available CKD therapies. Beyond its use as a potential standalone therapy, MZE782 may also provide a significant benefit to patients in combination with standard of care, including as a complementary treatment to current approved regimens or as an alternative option for those patients who do not adequately respond to today’s standard of care. We identified SLC6A19 using non-public sets of matched, genetic and longitudinal clinical data and discovered a bidirectional allelic series with variants that either improve or worsen renal function. We then applied variant functionalization techniques to understand the characteristics of the naturally occurring protective variants and designed our proprietary small molecule to mimic their inhibitory effects. We plan to apply a non-invasive biomarker strategy in our Phase 1 trial to establish proof of mechanism and to select doses for a Phase 2 trial. We initiated our Phase 1 trial of MZE782 in September 2024 and expect to provide initial data from this trial in the second half of 2025.
In addition to CKD, we believe MZE782 may provide benefit to patients suffering from the genetically defined metabolic disease, phenylketonuria, or PKU. Following our ongoing Phase 1 trial of MZE782 in CKD, we plan to conduct a parallel Phase 2 clinical trial to explore MZE782 as a potential treatment of PKU.
Our early-stage research programs
In addition to our two lead programs, we have research efforts underway for next-generation assets for these indications. We are also exploring additional CVRM targets. We are focusing our early research efforts and evaluating genetic targets in CVRM, including obesity, driven in part by the emerging understanding of the interconnectivity of these common diseases affecting the heart and kidney through metabolic drivers, such as obesity.
Our partnered programs
Further, our Compass platform has also produced a pipeline across other therapeutic areas and modalities, including MZE001, our first clinical program that we developed for the treatment of patients with Pompe disease. Within approximately three years, MZE001 progressed from discovery to the clinic and demonstrated proof of mechanism in a Phase 1 trial, suggesting its potential as an oral therapy for the treatment of patients with Pompe disease and demonstrating the potential of our Compass platform. Given our focus on CVRM diseases, where we believe we can maximize our impact on human health, we strategically enter into partnerships with third parties to advance programs that address diseases outside of our core focus areas. In March 2024, following the completion of our Phase 1 trial, we exclusively licensed MZE001 to Shionogi for an upfront payment of $150 million and the potential for additional milestones and royalties. We have also exclusively licensed our ATXN2 and UNC13A programs to other biotechnology companies. Additionally, we formed a spin-out company, Broadwing, to develop therapeutic candidates, including ANGPTL7, for the treatment of ophthalmic diseases. As of December 31, 2024, we owned approximately 48% of the outstanding equity of Broadwing, and we expect our ownership to be significantly diluted upon the conversion of outstanding convertible notes issued by Broadwing. In August 2024, Broadwing granted an exclusive option to a biotechnology company to acquire the ANGPTL7 program. We believe our collaborations validate the potential of our Compass platform and our ability to generate new targets and assets of therapeutic interest across a wide range of indications and therapeutic areas.
Our approach to precision medicine: Compass platform
Our Compass platform and its associated methodologies give us the ability to aggregate matched, genetic, and longitudinal clinical data at scale to identify genes associated with disease, utilizing a combination of private and publicly-available paired clinical data. More importantly, this process uncovers genetic variants of these genes that provide insight into a therapeutic approach to the applicable target. Using machine learning and statistical modeling, variant functionalization tools, and traditional and computational drug discovery technologies, targets are then prioritized based on their roles in biological pathways, their roles as potential drivers of disease, and their structural properties. These insights ultimately inform our clinical development and patient selection strategies, which we believe have the potential to improve the overall likelihood of technical, regulatory and commercial success of our precision medicine candidates, although we cannot provide any assurance that the application of our Compass platform will result in the ultimate regulatory approval of any of our therapeutic candidates. The power of our Compass platform and its methodologies is best exhibited through our clinical and preclinical programs and multiple contributions to the scientific community over the past five years, including the publication in Nature and other leading scientific journals of genetic links and other scientific developments identified through our Compass platform.
6
Figure 2: The three phases of our Compass platform and key differentiating features
Our Compass platform follows a sequential, three phase workflow consisting of: (1) variant discovery, in which we analyze multiple large-scale genetic databases to identify relevant genetic variants; (2) variant to function, in which we demonstrate experimentally the link between genetic variants identified and the biology underpinning protection from disease; and (3) function to therapy, in which we develop the assays, models, molecules and data necessary to support advancing new small molecules into clinical development. This workflow creates an iterative learning loop that improves as we generate and analyze additional data.
A new era of precision medicine: Maze’s opportunity in CVRM diseases
Over the past 20 years, significant advances in human genetics and in the understanding of the biological processes underpinning disease have opened the door to a multitude of new potential therapeutic targets and treatment approaches, which we believe presents a unique opportunity for a new approach to precision medicine. More recently, the availability of matched, genetic and longitudinal clinical data and advanced computational methods to analyze these data has enabled the characterization of genetic variants that are strongly correlated with disease susceptibility and severity. Advancements in functional genomics have also provided new tools to help unravel how genetic variants impact disease progression from a mechanistic perspective. Nevertheless, the process of successfully translating genetic insights into effective precision medicines is a complex challenge that has inspired our mission as a company as well as our name, Maze Therapeutics.
Based on insights from our Compass platform, we design our therapeutic candidates to modulate the target of interest, either by mimicking the beneficial effects of certain protective variants or by blocking the unwanted activity associated with toxic variants, to address the underlying biological drivers of disease. Our process of designing precision medicines that take into account the genetic drivers of disease in defined patient groups parallels many of the foundational principles of precision oncology, which has revolutionized the treatment landscape in cancer, and, we believe, may help streamline our development efforts and increase our odds of clinical success.
Our team and investors
Our leadership team and board of directors have significant experience discovering, developing and commercializing therapies. Our existing shareholders include investors with renowned life sciences experience and a shared, dedicated goal of transforming the lives of patients by creating a leading precision medicine company in the CVRM disease spaces.
Jason Coloma, Ph.D., M.P.H., our Chief Executive Officer, brings over 20 years of life science leadership experience. He most recently operated as a venture partner at Third Rock Ventures, LLC, or Third Rock Ventures, during which time he served as the Chief Operating Officer of Maze before being appointed CEO.
Harold Bernstein, M.D., Ph.D., our President, Research & Development and Chief Medical Officer, brings over 30 years of experience in scientific research, translational medicine and clinical development. Dr. Bernstein most recently was Chief Medical
7
Officer and Head of Global Clinical Development at BioMarin Pharmaceuticals Inc. He previously served as Head of Translational Medicine at Vertex Pharmaceuticals Incorporated, or Vertex, and held roles of increasing responsibility at Merck and Co., Inc., including Head of Early Development for Cardiometabolic Diseases.
Atul Dandekar, our Chief Strategy and Business Officer, brings over 20 years of experience in strategy, clinical development and commercialization. Mr. Dandekar most recently was VP, Global Franchise Head for Ophthalmology at Genentech, Inc., or Genentech, and F. Hoffmann-La Roche AG, or Roche, and previously served as Senior Global Program Head in Neuroscience at Novartis AG.
Our strategy
We leverage our Compass platform to discover and develop precision medicines in subsets of diseases to achieve improved treatment outcomes for patients. Our focus on CVRM diseases, including obesity, is driven in part by the emerging understanding of the interconnectivity of these diseases. By focusing on these common diseases, we believe we can maximize our impact on human health. We actively explore indication expansion based on emerging genetics data and unmet medical need.
The core elements of our business strategy are to:
• Advance the clinical development of MZE829 for AKD, including FSGS, and MZE782 for the treatment of CKD and PKU, diseases affecting patient populations with high unmet need. We are currently advancing our two lead proprietary programs, MZE829 and MZE782, both novel approaches to treating CKD, which affects approximately 37 million patients in the United States alone. MZE829 is an oral, small molecule inhibitor of APOL1 for the treatment of patients with AKD. We initiated a Phase 2 trial of MZE829 in November 2024, dosed our first patient in February 2025 and expect to report proof of concept data in the first quarter of 2026. MZE782 is an oral, small molecule inhibitor of SLC6A19 with the potential to be used as an option for those patients who do not adequately respond to today’s standard of care, or as a complementary treatment to current approved regimens. We initiated a Phase 1 trial of MZE782 in September 2024 and expect to provide initial data from this trial in the second half of 2025. In addition to CKD, MZE782 may provide benefit to patients suffering from PKU. Following our ongoing Phase 1 trial of MZE782 in CKD, we plan to conduct a parallel Phase 2 clinical trial to explore MZE782 as a potential treatment of PKU.
• Leverage our proprietary Compass platform to expand our pipeline of precision medicine candidates. We plan to add new programs into our pipeline by applying our Compass platform to identify novel drug targets in subsets of CVRM diseases with significant unmet need within these therapeutic areas. Our Compass platform aims to leverage new genetic insights to identify well-validated targets and discover therapeutic agents designed to mimic the activity of protective genetic variants, correct the effects of toxic genetic variants, or target genetic modifiers and ultimately guide the development of these potential new medicines. We will continue evaluating strategic partnering opportunities that can complement our internal capabilities. Our goal is to bring novel precision medicines to patients with CVRM diseases, which is where we believe we can maximize our impact on human health.
• Enhance our Compass platform and methodology. We continue to make investments in our Compass platform and improve our drug development process through access to non-public, matched, genetic and longitudinal clinical data, development of variant functionalization tools, and application of cutting edge computational and experimental drug discovery tools (e.g., Cryogenic electron microscopy, or Cryo-EM, virtual screening and machine learning DNA encoded libraries). We plan to enhance our Compass platform to remain at the forefront of genetically informed drug development and continue to access relevant biobanks and other repositories of genetic and clinical data.
• Maximize the commercial potential of our pipeline . We plan to independently advance MZE829 and MZE782 towards commercialization in geographies where we believe we can ultimately be successful on our own. We intend to build a highly targeted sales forces in these geographies to support the adoption of these treatments. Given the magnitude of the global market opportunity, we will maximize the value of these programs by partnering with third parties on therapeutic candidates in geographies we believe are better served by the resources and expertise of other biopharmaceutical companies.
Background
Overview of precision medicine
Human evolution has given rise to significant genetic diversity worldwide. Because of population migrations and mixing, genetic drift, and founder effects, different populations carry distinct genetic variants. Certain of these variants increase an individual’s susceptibility to disease, while other variants can protect individuals from disease. Using the tools of modern human genetics, the scientific community is learning how variations in different genes may impact disease at an unprecedented pace.
8
Therapeutic targets supported by human genetic evidence are more likely to yield treatments that provide clinical benefit to patients. Precision medicine holds the promise of therapeutics specifically tailored to address the particular drivers of an individual patient’s disease state to optimize treatment outcome, but the realization of this promise through clinical implementation has proven elusive. Although more than 100,000 associations between particular genomic regions and specific diseases have been identified, developing medicines to target the drivers of a disease remains challenging. This is due to difficulties in selecting the most pharmacologically relevant genomic associations, difficulties in identifying the mechanism by which these genomic associations cause diseases and challenges in developing therapeutics for newly identified targets.
Addressing differences in response to treatment requires a more advanced understanding of and appreciation for the molecular complexity of disease. This is particularly true for common diseases, the complexity of which can be vast. A disease may involve thousands of genes across multiple cell types in different parts of the body. Because current clinical diagnostic technologies do not have the capability to assess change at such scale, current translational research or clinical practice cannot address disease complexity at this level.
We believe that we are pioneering the effort to translate genetic insights into therapeutic innovations by leveraging the technological convergence between biological sciences and information technology, and that our approach to drug discovery and development significantly mitigates its inherent risks with the key feature of variant functionalization. We leverage our Compass platform to discover and develop precision medicines in subsets of diseases to achieve improved treatment outcomes for patients. Our focus on CVRM diseases, including obesity, is driven in part by the emerging understanding of the interconnectivity of these diseases.
Overview of chronic kidney disease (CKD)
CKD is a serious, progressive condition characterized by the gradual loss of kidney function over time, posing significant health risks and economic burdens. CKD affects approximately 37 million patients in the United States, where it is expected to be the fifth most prevalent chronic disease by 2040, and an estimated 700 million patients worldwide. CKD manifests through various stages, culminating in end-stage renal disease, or ESRD, necessitating dialysis or kidney transplantation for survival. Current treatments for CKD consider patients as falling into clinical categories and focus on slowing disease progression, but do not target the underlying genetic drivers of disease.
In the early stages of CKD, most patients may not have symptoms. However, as kidney function gradually diminishes over time, health problems such as high blood pressure, anemia, muscle weakness and nerve damage, kidney failure and cardiovascular, or CV, disease may develop, leading to premature death. Once the disease progresses to ESRD, the only definitive treatment is kidney transplant, with dialysis serving as a bridge to transplant. As of 2018, the five-year survival rate for all people in the United States who started dialysis was under 50%, presenting a significant and urgent need for alternative treatments for CKD. In addition to the significant impacts on patients and their families, this disease has put a significant burden on the healthcare system in the United States, with more than 550,000 patients requiring dialysis and approximately 230,000 patients living with a kidney transplant. An estimated 14% of the United States population has CKD, with the Medicare program spending an outsized amount, more than 24% or $130 billion of total yearly expenditures, on patients with CKD.
Individuals of African ancestry are at significantly greater risk of developing ESRD than individuals of European ancestry, and account for approximately 33% of patients who experience kidney failure in the United States. The cumulative risk of ESRD is approximately 7.5% of Americans with African ancestry as compared to approximately 2% of Americans with European ancestry. Understanding the genetic drivers of this difference in CKD progression may accelerate the development of treatment strategies and reduce the excess burden.
CKD can also increase the risk of CV diseases, such as heart failure, or HF. Depending on the stage of CKD and the age of the patient, up to 50% of patients diagnosed with CKD will also experience HF. CKD patients who are more likely to develop HF typically have similar risk factors including diabetes, obesity, and hypertension. If CKD is identified and addressed early enough, treatment can help slow disease progression, preserve renal function and reduce CV complications, including HF.
Limitations of current CKD therapies
Despite advances in medical science, current treatments for CKD consider patients as falling into clinical categories and focus on slowing disease progression but do not target the underlying genetic drivers of disease.
In addition to lifestyle modifications, the standard of care for CKD includes three main categories of treatment:
• Established therapies that slow progression: renin-angiotensin-aldosterone system, or RAAS, inhibitors, SGLT2 inhibitors and glucagon-like peptide 1, or GLP-1 agonists.
9
• Medications that mitigate the effects of CKD: medicines to control blood pressure, blood glucose levels, anemia, bone and mineral disorders, fluid overload, and levels of cholesterol and other lipids.
• Dialysis and kidney transplantation: the typical final treatment option for ERSD patients.
Only 50% to 70% of CKD patients respond to lifestyle modification and standard of care treatment, and ultimately almost all CKD patients progress to ESRD. Furthermore, existing therapies are associated with adverse side effects and patients experience substantial healthcare costs. Given the escalating prevalence of CKD, and its profound impact on patient well-being and healthcare systems, there exists a critical and pressing need for innovative treatments capable of halting or reversing disease progression, improving patient outcomes, and mitigating the socioeconomic burden associated with CKD.
Our two lead wholly owned programs, MZE829 and MZE782, are novel precision medicine-based approaches for CKD that inhibit APOL1 and SLC6A19, respectively. Our CKD programs are designed to modulate these targets directly, either by mimicking the beneficial effects of certain protective variants or by blocking the unwanted activity associated with toxic variants, to address the underlying biological drivers of disease. We believe this approach has the potential to be disease modifying and ultimately lead to better treatment outcomes for patients living with CKD.
Overview of APOL1 kidney disease (AKD)
AKD is a life threatening, genetically driven form of CKD. People who have high-risk coding variants in both copies of the APOL1 gene have a heightened risk of developing CKD. Patients who develop AKD have one or both of the two high-risk variants of the APOL1 gene, G1 and G2, in both copies of their APOL1 gene, which can lead to kidney injury and interference with the kidney’s ability to filter harmful substances from the blood.
Figure 3: Prevalence of AKD and associated risk factors
The high-risk APOL1 gene variants are most prevalent in people of West African ancestry, including many who identify as Black, African American, Afro-Caribbean and Latina/Latino. These high-risk APOL1 gene variants likely evolved to protect individuals from Human African trypanosomiasis, or HAT, which causes sleeping sickness. HAT is endemic in sub-Saharan Africa and caused by protozoan parasites transmitted by infected tsetse fly bites. Without treatment, HAT is usually fatal.
In the United States, approximately six million, or 13%, of African Americans have mutations of both copies of the high-risk APOL1 gene variants, and are at risk for developing AKD. It is currently estimated that approximately 20%, or over one million, of those individuals have AKD.
10
APOL1 is a channel-forming innate immunity protein found in circulating high-density lipoproteins in humans and certain primates. In addition to circulating forms, APOL1 is also found locally in kidney endothelial cells and podocytes. Circulating APOL1 mediates resistance to infection from the parasite Trypanosoma brucei. The high-density lipoprotein particle binds to the cell membrane of the parasite, allowing for the uptake of APOL1, which forms a pH-gated cation channel in the membrane of the lysosome. The lysosome then swells and ruptures into the body of the parasite, resulting in its demise. The G1 and G2 variants of APOL1 evolved in response to parasites that became resistant to normal APOL1. However, individuals with two copies of the G1 and/or G2 variants were found to be at higher risk for developing CKD and progressing to ESRD.
Rare individuals lacking APOL1 altogether appear to have no higher risk of developing CKD than the general population, suggesting that AKD is the result of toxicity associated with the risk variants, rather than APOL1 inactivation. This observation also suggests that it may be safe to inhibit APOL1 activity to reduce the risk and progression of AKD.
AKD has various clinical presentations, including FSGS, hypertension-associated kidney disease, HIV-associated nephropathy and lupus nephritis. Published third-party studies and internal analysis also suggest that AKD may be responsible for increasing the likelihood of progression to ESRD in individuals with diabetes.
AKD represents a significant unmet medical need, as there are currently no approved therapies that address its underlying genetic causes or efficacious treatment options for individuals with high-risk APOL1 gene variants.
Third-party clinical trials evaluating the use of a small molecule APOL1 inhibitor have demonstrated a statistically significant and clinically meaningful reduction in proteinuria at 13 weeks compared to baseline in APOL1-mediated FSGS patients. All clinical trials to date have been limited to AKD patients in the nephrotic or sub-nephrotic range, who represent a small percentage of the AKD population, and have excluded patients with hypertensive kidney disease and diabetes, who make up the majority of AKD patients.
Role of SLC6A19 in kidney disease
SLC6A19 encodes the protein BoAT1, a sodium-dependent neutral amino acid transporter expressed primarily in the proximal tubule of the kidney and on the brush border of the small intestine. In the kidney, SLC6A19 plays a role in minimizing the excretion of amino acids in urine by transporting these key nutrients from the urine back into the bloodstream. We identified SLC6A19 as a potentially novel therapeutic target for CKD based the finding that loss-of-function variants in SLC6A19 were associated with improved renal function and protection from CKD.
As shown in Figure 4 below, while treatment strategies for patients with CKD have evolved with the use of RAAS inhibitors and more recently SGLT2 inhibitors and GLP-1 agonists, of the approximately 14 million CKD patients in the United States with clinical symptoms requiring treatment, only approximately 7 million are receiving treatment. Of these, we estimate that up to five million patients may have an inadequate response and could benefit from novel treatments. Additionally, we believe there is potential for SLC6A19-based therapies to be used either alone or in combination with other available treatment options in an even larger group of CKD patients.
11
Figure 4: Initial target CKD populations for MZE782 in the United States
Our lead programs for CKD: MZE829 and MZE782
Our wholly owned pipeline consists of small molecule precision medicines for patients living with CVRM diseases, including obesity. Our two lead wholly owned programs, MZE829 and MZE782, are novel precision medicine-based approaches for CKD that inhibit APOL1 and SLC6A19, respectively.
MZE829 for APOL1 kidney disease (AKD)
Our most advanced lead program, MZE829, is an oral, small molecule inhibitor of APOL1 that seeks to treat patients with AKD, a subset of CKD estimated to affect over one million patients in the United States alone. Our approach to treating AKD aims to block the ability of APOL1 to conduct current at the cell membrane. Based on compelling human genetics and functional genomics data derived from our Compass platform linking the role of the G1 and G2 APOL1 risk variants to CKD, along with a further understanding of APOL1’s function and clinical observation of its localization, we believe a pore-blocking strategy will reduce ion conductance in podocytes and thus reduce APOL1-associated renal toxicity.
While the genetic link between APOL1 and kidney disease has been well established, the mechanism by which it induces kidney injury remained unclear for over a decade. Through our Compass platform and the research we have conducted with our partners, we have identified the mechanism of a naturally occurring genetic variant of APOL1, called N264K. When present, this variant has been shown to reduce the conductance of ions through the APOL1 pore in the presence of the high-risk G1 and G2 APOL1 alleles, thereby suppressing the toxicity of APOL1 in kidney cells and reducing disease progression.
12
The genesis of our therapeutic hypothesis was based upon human genetics involving an individual from Ghana who developed an atypical trypanosome infection. Under normal circumstances, protections afforded by APOL1 would have prevented infection from this particular trypanosome. However, a third party’s sequencing of the APOL1 gene from this individual revealed that the genetic mutation responsible for N264K occurred in a separate part of the APOL1 gene from where the disease-driving mutations occur and established that the mutation resulted in the inability of APOL1 to direct the elimination of trypanosomes. This led us to consider whether the mechanism by which APOL1 promoted trypanosome lysis may also have a causal connection to toxicity in kidney disease. We tested the consequences of the N264K variant in cultured kidney cells, in which expression of the G1 and G2 APOL1 risk variants are toxic. When the risk variant of APOL1 was altered to contain the N264K variant, its toxicity in kidney cells was substantially reduced.
To further validate the finding, we conducted a cross-sectional analysis of 121,492 participants of African ancestry from the Million Veteran Program, or MVP, to determine if the presence of N264K modified the association between the G1 and G2 risk variants and CKD and ESRD. As depicted in Figure 5 below, the results showed a strong association between N264K and a statistically significant risk reduction (p < 0.001) of CKD (left) and ESRD (right) among carriers of the G1 and G2 risk variants. The results were further replicated by research from the Vanderbilt University Medical Center’s Biobank (BioVU; n= 14,386) and the National Institute of Health’s All of Us program (All of Us; n= 14,704), also reflected in Figure 5 below. A meta-analysis across all cohorts demonstrated a 57% reduced risk of CKD and an 81% reduced risk of ESRD in APOL1 high-risk patients carrying the N264K protective variant.
Figure 5: APOL1 N264K variant shown to protect against AKD (CKD) and ESRD
We then used human kidney cell models to demonstrate that the N264K mutation blocked APOL1 pore-forming function and ion conductance, and reduced toxicity of the APOL1 high-risk mutations (the G2 variant shown in Figure 6 below). We generated kidney cell lines in which expression of the toxic G2 APOL1 protein was induced with doxycycline. We then measured calcium ion flow into these cells using a calcium sensitive fluorescent protein. As demonstrated in the left panel below, an increase in calcium uptake occurred in cells where expression of the G2 variant was induced (G2, +Dox) but not in cells in which G2 was not expressed (G2, -Dox). This demonstrated that the G2 APOL1 variant can form an ion permeable pore in the plasma membrane of these cells. As shown in the right panel below, cells designed to express a version of toxic G2 APOL1 with the N264K mutation (G2 N264K) did not show evidence of increased ion flux in the presence of doxycycline. This demonstrated that the protective APOL1 variant N264K blocked G2 APOL1 dependent ion flux in a cell model as measured by calcium uptake, demonstrating that N264K acts by impairing APOL1 pore function. These data informed our therapeutic hypothesis for the treatment of AKD by phenocopying the effects of the N264K variant and blocking the unregulated ion flow that occurs in the presence of the high risk APOL1 variants, G1 and G2.
13
Figure 6: Protective N264K variant corrected ungated ion flux that occurs with G2 risk variant Discovery of MZE829
In order to validate the assertion that inhibition of pore function would limit toxicity, we conducted several small molecule screening campaigns. These screens resulted in our identification of several chemical series that were capable of blocking the influx of ions through APOL1. Kidney cells expressing APOL1 were exposed to pore-blocking molecules from our lead series at a range of concentrations at two different resting membrane potentials. Measurement of the current flowing through the APOL1 pore showed that these molecules inhibited the flow of current in a dose dependent manner.
Further, in studies to assess the ability of our lead compounds to protect against APOL1-mediated toxicity, human kidney cells expressing the G1 and G2 APOL1 risk variants were cultured in the presence and absence of our lead compounds. As the concentration of our lead series APOL1 inhibitor increased, the rate of kidney cell toxicity decreased and kidney cell viability percentage increased in a dose dependent manner.
Conducting the various in vitro and cell-based assays allowed us to evaluate potency and effect of APOL1 compounds. While these assays are informative, they are limited, artificially constructed systems, and often provide incomplete data on how the compounds may interact in a human setting. Because of these complexities, we believe a humanized in vivo mouse model measuring proteinuria reduction is the preferred surrogate for patient improvement. We conducted an in vivo experiment with our development candidate, MZE829, using a transgenic mouse model that simulates human disease with two copies of high-risk APOL1 alleles that drive high levels of proteinuria in response to an inflammatory stimulus driven by expression of interferon gamma.
Findings from this study demonstrated the potential of MZE829 to ameliorate disease manifestations of AKD, specifically proteinuria and the histopathological manifestations of kidney damage. In this study, we treated mice homozygous for a bacterial artificial chromosome, or BAC, transgene expressing the G2 APOL1 variant with interferon gamma to induce APOL1 expression in the kidney. This treatment led to G2 APOL1 upregulation and kidney injury that could be monitored by urinary albumin excretion or urinary albumin-creatinine ratio, or uACR. Mice were treated with interferon gamma and MZE829, and urine was collected from 24 through 48 hours after treatment. As shown in Figure 7 below, MZE829 dose dependently blocked APOL1 induced kidney injury in this translationally relevant G2 APOL1 BAC transgenic mouse model as measured by decreases in uACR.
14
Figure 7: MZE829 inhibited APOL1 dependent proteinuria, as measured by uACR, in a model of AKD
We also compared MZE829 to an independently synthesized sample of the publicly disclosed structure of inaxaplin, or VX-147, in this mouse model of AKD. Inaxaplin is an APOL1 function inhibitor currently in clinical development sponsored by Vertex. Different doses of MZE829 and the synthesis of inaxaplin were given to mice treated with interferon gamma. uACR and free plasma drug concentrations were determined for each dose group, and the exposure-response relationships for both compounds was analyzed as shown in Figure 8 below. The free plasma drug concentrations associated with a 50% reduction in uACR was approximately 100 times lower for MZE829 compared to the synthesis of inaxaplin. These data demonstrated that MZE829 was substantially more potent than our synthesis of inaxaplin in a translationally relevant animal model, and suggest that meaningful efficacy in the clinic may be achievable at lower levels of free drug. Therefore, we believe MZE829 may be more suitable for clinical exploration in a broader range of patients, with lower risk of off-target safety effects.
Figure 8: MZE829 was approximately 100 times more potent than an independently synthesized sample of inaxaplin in a mouse model of AKD
While the mouse model of AKD described above simulated acute onset and treatment of disease, we also developed additional models that more closely resemble chronic disease. In these models, mice harboring BAC transgenes with one copy each of both G1 and G2 were exposed to an adeno-associated virus chronically expressing interferon gamma to produce the manifestations of AKD in humans. Treatment after seven days of continuing interferon expression with a mouse-tool compound (MZ-302) with similar pharmacochemical characteristics to MZE829 demonstrated the ability to significantly reduce uACR in a dose-dependent manner, as shown in Figure 9 below, with almost complete reversal after three weeks of treatment.
15
Figure 9: Reversal of established proteinuria, as measured by uACR, by a Maze APOL1 inhibitor (MZ-302) in a chronic mouse model of AKD
Treatment also was shown to resolve kidney tissue abnormalities (disruption of glomeruli, or glomerulosclerosis as shown in insets) within the same time frame, as reflected in Figure 10 below. This demonstrated that in both acute and chronic mouse models of AKD, our specific and potent APOL1 inhibitors were able to both arrest and reverse disease, providing further validation of our therapeutic hypothesis.
Figure 10: Treatment with MZ-302, a Maze APOL1 inhibitor, significantly reduced glomerular scarring in a chronic mouse model of AKD
MZE829 clinical trials
We recently completed a Phase 1 randomized, placebo-controlled clinical trial evaluating MZE829 in 111 healthy volunteers, including 33 African American volunteers (25 of whom received MZE829 and 8 of whom received placebo), with single ascending dose, or SAD, and multiple ascending dose, or MAD, cohorts. The primary objective of the Phase 1 trial was to assess the safety and tolerability of single and multiple doses of MZE829 in healthy volunteers. The secondary objectives were to evaluate the food effect of a single dose of MZE829 and the pharmacokinetics of single and multiple doses of MZE829. As a part of the Phase 1 trial, we also investigated potential drug-drug interactions, or DDIs, to guide the use of standard-of care medicines in Phase 2.
16
MZE829 Phase 1 results
In October 2024, we reported the Phase 1 results from our Phase 1 trial in healthy volunteers. This first-in-human, randomized, placebo-controlled, single and multiple ascending dose trial was designed to evaluate the safety, PK, food effect, and potential DDIs based on CYP3A4 metabolism of orally administered MZE829 in healthy volunteers and enrolled 111 participants, including 33 African American patients. The Phase 1 trial cohorts consisted of: single dose (n=48); multiple doses (n=40); food effect dosed with 240 mg (n=8); DDI, dosed with 120 mg and itraconazole (n=7); and DDI, dosed with 240 mg and midazolam (n=8). As shown in Figure 11 below, in this trial, MZE829 was well tolerated at multiple doses up to 350 mg daily for seven days. MZE829 was also well tolerated at single doses up to 480 mg. At likely therapeutic dosing levels, all treatment-related adverse events were reported as mild. No serious adverse events were reported at any dose. In total, approximately 20% of patients receiving MZE829 reported any treatment-related adverse event, the majority of which were headache, as compared to 13% of patients receiving placebo. With respect to treatment-related adverse effects reported in three or fewer patients, approximately 20% of patients receiving MZE829 reported headache as a treatment-related adverse event as compared to 4% of patients receiving placebo. At the supratherapeutic dose of 480 mg, we observed mild and moderate treatment-related adverse events consisting of headache, nausea, vomiting and diarrhea (among the 480 mg split-dose cohort, n=3 across all three such events), and no severe adverse events were reported. Due to the tolerability issues reported for multiple patients, we stopped dosing at the 480 mg QD level after two doses.
Figure 11: MZE829 well-tolerated at multiple doses up to 350 mg QD x 7 days
As shown in Figure 12 below, dose-proportional PK was observed with low variability (10-40%) across doses and minimal urinary excretion (<1%). The observed half-life of MZE829 was approximately 15 hours, which supports the potential for MZE829 to be dosed once daily. Additionally, no clinically significant drug-drug interactions were identified, which we believe supports the ability for MZE829 to be administered together with standard of care medicines used in patients with AKD, including cyclosporine, tacrolimus and mycophenolate mofetil.
The results from our Phase 1 trial demonstrated that MZE829 was well tolerated and established the dosing regimen that we are taking into our Phase 2 trial in patients with AKD. Patients with the high risk APOL1 genotype and proteinuric kidney disease are currently being enrolled into our Phase 2 trial to reflect a broad spectrum of AKD patients.
17
Single Ascending Doses*
Multiple Ascending Doses**
* Note: Single doses up to 480 mg were also evaluated in the study. Due to inconsistent exposures, these data are not shown here. Evaluation of the same dose level administrated as split dose (2 hours apart) as well Day 1 exposures at 480 mg MAD cohort suggest the low exposures observed in the 480 mg single dose cohort were erroneous. LLOQ=2ng/ml. n=6/cohort
** Note: Dosing was discontinued in 480 mg QD cohort after second dose. These data are not shown here. LLOQ=2ng/ml. n=6/cohort
Figure 12: MZE829 had a linear PK with dose proportional increases in plasma exposure in 20 mg to 480 mg
Phase 2 trial design
Our Phase 2 clinical trial employs an open-label basket design that includes a range of clinical phenotypes, including those accompanied by type 2 diabetes, and moderate to severe forms of disease as determined by the level of proteinuria (at least 300 milligrams albumin per gram creatinine). It is a 12-week trial to evaluate the safety, efficacy and tolerability of MZE829 using uACR reduction in adults with CKD who have the APOL1 high-risk genotype (two copies of a high-risk APOL1 allele, G1 and/or G2). The trial is intended to initially consist of two cohorts. Both initial cohorts will simultaneously enroll participants aged 18 to 65 with CKD and uACR of at least 300 milligrams albumin per gram creatinine, who carry the APOL1 G1 and G2 mutations (G1/G1, G2/G2, G1/G2), meet estimated glomerular filtration rate, or eGFR, criteria of at least 25 mL/min/1.73m2 up to 90 mL/min/1.73m2, and have received stable doses of current standard of care treatment for CKD for at least eight weeks prior to screening. One cohort will be comprised of participants with CKD (including HTN-related CKD or FSGS) and concurrent type 2 diabetes. The second cohort will be comprised of participants with CKD diagnoses attributed to hypertension or FSGS with or without biopsy and without a known cause for CKD other than APOL1. We expect to enroll approximately 28 patients per cohort, with an option to explore additional doses. These first two cohorts are intended to include patients with a wide array of characteristics of CKD, including patients with more severe disease who have nephrotic range proteinuria and patients with more moderate disease who have lower levels of proteinuria. We further expect to expand into a third cohort of patients with FSGS, enrolling approximately 15 patients.
A once daily oral dose of 250 mg MZE829 will be administered to participants in both cohorts over a 12-week treatment period, which we expect to be in an efficacious dose range based on in vivo pharmacology models. The dose of 250 mg orally administered once daily is supported by the safety, tolerability, and PK profile observed in the Phase 1 trial and completed 13-week nonclinical toxicology studies.
Our Phase 2 evaluation of MZE829 clinical development will aim to address a larger population than current third-party clinical trials, as shown below in Figure 13, which are limited to patients in the nephrotic or sub-nephrotic range only, comprised of non-diabetic patients with FSGS and a small portion of patients with hypertensive nephropathy and heavy proteinuria.
18
Figure 13: Maze plans to explore an expanded population of AKD patients in the United States in clinical trials
Data from Phase 2 are intended to demonstrate proof of concept, with data expected in the first quarter of 2026, and provide appropriate criteria for selection of patient populations and dose range in a subsequent pivotal clinical program.
We intend to use reduction of proteinuria, as measured by the percentage of subjects with a 30% or greater reduction from baseline uACR at week 12, as well as safety and tolerability, as the primary endpoints for the Phase 2 trial. uACR is a sensitive measure of proteinuria in earlier stages of glomerular kidney disease, particularly in hypertension and diabetes, and has been used to assess risk of CV disease. Secondary endpoints will be the change in urine protein-creatinine ratio and an evaluation of MZE829 PK in the patient population. Exploratory endpoints will include change in eGFR, the Kidney Disease Quality of Life 36-item short form survey, and other biomarkers. With respect to the FSGS cohort, we are assessing the potential use of proteinuria and eGFR-based surrogate endpoints as advanced by the Proteinuria a nd GFR as Clinical Trial Endpoints in Foc a l S egmental Gl o merulosc l erosis, or PARASOL, initiative.
Patient identification and selection
We are using clinical genotyping to identify individuals who carry the APOL1 G1 and G2 mutations in connection with enrollment of our Phase 2 clinical trial. Additionally, the APOL1 G1 and G2 variants are included in most currently used standard genetic screening panels for kidney disease. We do not intend to genotype participants for the N264K variant as this is a rare finding and these individuals are unlikely to meet the criteria for AKD as they are relatively protected. We are currently exploring the development of an APOL1 G1/G2 companion diagnostic for commercialization. Various sponsors, including kidney societies, patient advocacy groups, academic programs and other biopharmaceutical companies, are currently conducting global genotyping efforts. These are promoted by the Kidney Health Initiative, a public-private partnership among the U.S. Food and Drug Administration, or FDA, the American Society of Nephrology, and other member organizations, including us. We believe that these genotyping efforts will increase as additional positive data and potential therapies become available. Additionally, in August 2024, we initiated a multicenter, clinical observational study to identify black and African American individuals who carry the APOL1 G1 and G2 mutations, and to explore kidney disease biomarkers in patients with proteinuric kidney disease.
19
MZE782 targeting SLC6A19 for CKD
We believe that MZE782, an oral, small molecule targeting the solute transporter, SLC6A19, has the potential to treat approximately five million of the CKD patients in the United States who have inadequate responses to currently available CKD therapies. Beyond its use as a potential standalone therapy, MZE782 may also provide a significant benefit to patients in combination with standard of care, including as a complementary treatment to current approved regimens, or as an alternative option for those patients who do not adequately respond to the current standard of care. We plan to apply a non-invasive biomarker strategy in our Phase 1 trial in healthy volunteers to establish proof of mechanism and select doses for a Phase 2 trial in CKD patients. We initiated a Phase 1 trial of MZE782 in September 2024 and expect to provide initial data from this trial in the second half of 2025.
Using our Compass platform, we identified SLC6A19 as a target through genetic association with a bidirectional allelic series that included genetic variants that either improve or worsen renal function. We then applied variant functionalization techniques to understand the characteristics of the naturally occurring protective variants, and designed a small molecule inhibitor to mimic those protective characteristics. Using computational tools integrated with established small molecule screening methods, we were able to identify a lead compound series. Cryo-EM structural analysis revealed a novel allosteric binding site that allowed for further optimization toward a lead compound. This approach facilitated the identification of our development candidate, MZE782, with a 250-fold increase in potency relative to earlier compounds in development.
Identification of SLC6A19 as a therapeutic target using our Compass platform
SLC6A19 emerged as a novel therapeutic target for the treatment of CKD based on our analyses of independent sets of human genetic data matched with longitudinal clinical data for kidney health. Through these analyses, we identified a link between loss-of-function variants in SLC6A19 with improved renal function and protection from CKD. As illustrated in Figure 14 below, SLC6A19 variants plotted by allele frequency on the X-axis were statistically significantly associated (p< 5x10 -8 ) with improvement in kidney function (as measured by decreases in serum creatinine) on the Y-axis. One loss-of-function missense variant (D173N) had the largest beneficial effect on kidney function.
Figure 14: Analysis of matched clinical-genetic data from the UK Biobank prioritized novel CKD target SLC6A19
Analysis of the D173N loss-of-function variant and gain-of-function Expression Quantitative Trait Loci, or eQTLs, across the UK Biobank data set established a bidirectional allelic series (both protective and risk alleles) for kidney function. As shown in Figure 15 below, loss-of-function D173N variant was associated with decreased levels of serum creatinine and cystatin C, as well as increased eGFR, consistent with better kidney function. An eQTL that leads to higher levels of SLC6A19 expression was associated with increased levels of serum creatinine and cystatin C and lower eGFR, consistent with worse kidney function. Missense variants that decrease SLC6A19 activity and eQTLs that increase SLC6A19 activity have directionally opposite effects across multiple distinct biomarkers of kidney function supporting the model that loss of function in SLC6A19 protects from CKD.
20
Figure 15: SLC6A19 variants had bidirectional and consistent effects across biomarkers of renal function
Preclinical models of SLC6A19 inhibition
To gain further confidence in SLC6A19 as a relevant therapeutic target for improving kidney health, we generated a preclinical knockout mouse model to recapitulate the effects of the loss-of-function protective variants. As demonstrated in the histopathological images in Figure 16 below, the kidney from a representative wild type mouse (far left) showed marked damage, as indicated by vacuolization (excessive white spaces) in the kidney parenchyma along with breakdown of the normal architecture of glomeruli (the filtration units in the kidney) in response to treatment with the proximal tubule toxin, aristolochic acid, or AAI. In contrast, the kidney from a representative SLC6A19 knockout mouse (inner left) showed normal kidney parenchyma with healthy glomeruli in response to AAI treatment. This demonstrated protection of the kidney from AAI damage in mice that did not express SLC6A19.
Further, complete knockout of SLC6A19 in this model was well tolerated with normal kidney parenchyma (far right), and no impact on body weight, eGFR or other measures of kidney health, or function of other organs. In addition, Hartnup syndrome, a genetic disorder in which individuals are homozygous for loss-of-function mutations in SLC6A19, is characterized by benign loss of amino acids in urine. Patients with Hartnup syndrome can live healthy lives with appropriate dietary supplementation. Heterozygous Hartnup carriers are clinically normal without intervention. Together, these observations provide in vivo evidence that pharmacologic inhibition of SLC6A19 function could be well tolerated in patients with CKD and protect the kidney from injury.
Figure 16: Targeted genetic knockout of SLC6A19 in a preclinical model protected against AAI-induced kidney injury
21
Correlation of SLC6A19 inhibition with clinically meaningful effect
Individuals with one copy of the D173N variant displayed clinically meaningful protection of kidney function in the UK Biobank data set. Functionalization of this variant enabled us to estimate the degree of inhibition required for a clinically significant effect. SCL6A19 harboring the protective D173N variant and other variants associated with SLC6A19 loss-of-function were expressed in a Xenopus oocyte system. Introduction of the D173N mutation resulted in an approximately 50% decrease in transporter activity as measured by uptake of the neutral amino acid, leucine, a natural cargo for the transporter, compared to wild type SLC6A19. Because a protective effect on kidney function is seen in the presence of a single copy of the D173N variant, these data suggest that a clinically meaningful effect could be seen with as little as 50% inhibition of the target.
Discovery of MZE782
Based on our genetic analyses, loss-of-function variants were protective against kidney dysfunction in human beings against kidney injury in the preclinical AAI treatment model. As a result, we launched a drug discovery program to identify small molecule inhibitors of SLC6A19 function. Inhibitors of SLC6A19 were identified in a screen of 200,000 compounds in a cellular fluorometric membrane potential assay.
Several hit series were identified (potencies <10 µM), and the acquisition of dozens of Cryo-EM protein-ligand complex structures revealed that all compounds bound in a specific, cryptic allosteric pocket. Structurally enabled hybridization of the hit series and further optimization using a cellular radiometric leucine uptake assay produced compounds with potencies <500 nM. Further lead optimization benefited from the introduction of polarity which allowed for the best balance of potency and in vivo pharmacokinetic performance. Ultimately, our efforts resulted in MZE782, with an IC50 < 300 nM reflecting a ten-fold improvement in potency compared to the initial hit.
Development of translational biomarkers of SLC6A19 inhibition
Because SLC6A19 transports (and therefore, reabsorbs) neutral amino acids from the urine back into the bloodstream, the excretion of neutral amino acids in the urine should allow for the measure of SLC6A19 inhibition in the kidney. A mouse tool compound derived from in-house high throughput screens, which we refer to as MZ-401, was dosed at 100, 300 and 1000 milligrams per kilogram in a mouse model of phenylketonuria, Pahenu2, in which circulating levels of phenylalanine, or Phe, are elevated. Urine was collected for eight hours post-dose and urinary levels of Phe, glutamine, or Gln, and creatinine were determined by an LC-MS assay. As depicted in Figure 17 below, we observed dose dependent increases in urinary Phe (left) and Gln (right) normalized to creatinine. Although the levels of circulating Phe, but not Gln, are elevated in this specific mouse strain, we believe these data still confirm the utility of urinary excretion of neutral amino acids as a relevant pharmacodynamic measure with which to establish an exposure-response with SLC6A19 inhibition. MZ-401 induced dose dependent increases in urinary phenylalanine and glutamine, consistent with >50% target engagement based on genetic analysis of humans and mice.
Figure 17: A Maze SLC6A19 inhibitor (MZ-401) achieved a response consistent with >50% target engagement based on dose dependent increases in urinary neutral amino acids
22
MZE782 clinical development plans
In September 2024, we initiated a Phase 1 clinical trial evaluating MZE782 in healthy volunteers. The Phase 1 clinical trial is a randomized, double-blind, placebo-controlled single and multiple ascending dose study in approximately 112 healthy volunteers designed to evaluate safety, tolerability, PK and pharmacodynamics as measured by urinary excretion of known SLC6A19 cargo, e.g., neutral amino acids. This non-invasive biomarker is intended to inform dose selection and optimize the design of future clinical trials in patients. We expect to provide initial results of this clinical trial, including potential proof of mechanism utilizing these biomarkers, in the second half of 2025.
Beyond its use as a potential standalone therapy, MZE782 may also provide a significant benefit to patients in combination with standard of care, including as a complementary treatment to current approved regimens, or as an alternative option for those patients who do not adequately respond to the current standard of care.
Subject to receiving supporting data from Phase 1, our current plan is for Phase 2 to focus on CKD patients with inadequate response to the current standard of care. Our ongoing analysis of matched genetic-clinical-metabolomic data in CKD cohorts and exploration of metabolite profiles in these data sets as well as in our Phase 1 cohort may lead to potential approaches to further stratify patient sub-populations for our Phase 2 program. We also intend to explore effect on plasma phenylalanine, or Phe, levels in patients with PKU.
MZE782 targeting SLC6A19 for PKU
In addition to CKD, MZE782 may provide benefit to patients suffering from the genetically defined metabolic disease, phenylketonuria, or PKU. Following our ongoing Phase 1 trial of MZE782 in healthy volunteers, we plan to conduct a parallel Phase 2 patient trial to explore MZE782 potential for treatment of PKU.
PKU overview
PKU is an inherited metabolic disorder caused by mutations in the phenylalanine hydroxylase, or PAH gene, leading to a deficiency of the enzyme. As a result, Phe is insufficiently metabolized and toxic levels accumulate in the body.
PKU is a lifelong genetic disease diagnosed at birth by the routine neonatal blood spot test. There are several forms of PKU, ranging from mild to severe cases. Build-up of Phe in blood and tissues can cause neurological symptoms such as intellectual disability, behavioral abnormalities, and seizures. If left untreated, toxic levels of Phe in the blood can result in progressive and severe neurological impairment and neuropsychological complications. Current management includes adherence to a strict, low-Phe diet and dietary supplementation with other essential amino acids, as well as frequent monitoring of plasma Phe levels. Treatment with sapropterin (Kuvan) works for an estimated 20-75% of patients by enhancing the activity of PAH, especially in milder cases. A newer enzyme replacement therapy, or ERT, pegvaliase (Palynziq), is available for use in adults and achieves effective control of plasma Phe levels in up to 66% of patients, but carries a defined risk of anaphylaxis and injection site reactions. It is estimated that there are currently approximately 13,500 individuals diagnosed with PKU in the United States.
SLC6A19 for PKU
Since SLC6A19 is a sodium-dependent neutral amino acid transporter that mediates neutral amino acid resorption across the small intestine and renal proximal tubule, it is responsible for primary absorption of Phe from food in the intestine and kidney reabsorption of excreted Phe back into the bloodstream. We believe inhibiting SLC6A19 could help to both block Phe uptake in the gut and facilitate urinary excretion of excess Phe, and provide a potential therapy for patients with PKU independent of responsiveness to Kuvan or other PAH stimulators.
In mice and humans, loss of SLC6A19 limits neutral amino acid uptake resulting in fecal and urinary excretion. Mouse genetic experiments, both at Maze and in published literature, as well as recently third-party published clinical studies, suggest that inhibiting SLC6A19 using a small molecule is a viable approach for treating PKU.
MZE782 for PKU
For patients with PKU, MZE782 is being developed as an oral therapy designed to reduce plasma Phe levels by inhibiting intestinal uptake and promoting urinary excretion of Phe. MZE782 has the potential to be used as a monotherapy or in combination with standard of care. In contrast to current standard of care, SLC6A19 inhibition works by a novel mechanism and is independent of patient PAH levels or BH4 responsiveness, key signatures of current, non-ERT standard of care.
23
Based on our preclinical findings, MZE782 has the potential to be more potent than current standard of care with a potentially larger effect on reducing absorption of Phe in the gut and increasing excretion of Phe in urine. This supports the potential for MZE782 to significantly reduce levels of plasma Phe, and achieve normal plasma Phe levels in a majority of PKU patients, independent of their PAH mutation or responsiveness to PAH stimulation.
Preclinical data
To determine the potential effect of SLC6A19 inhibition on plasma Phe levels, MZ-401 was dosed at 100, 300 and 1000 milligrams per kilogram in a mouse model of phenylketonuria, or Pahenu2, in which circulating levels of Phe were elevated. Urine was collected for eight hours post-dose and plasma and urinary levels of Phe and urinary levels of creatinine were determined by an LC-MS assay. As depicted in Figure 18 below, we observed dose dependent decreases in plasma Phe (left) and increases in urinary Phe (right) normalized to creatinine.
This supports the mechanism of action of SLC6A19 inhibition in lowering plasma Phe levels in part by increasing urinary excretion of Phe.
Figure 18: A Maze SLC6A19 inhibitor (MZ-401) demonstrated dose-dependent lowering of plasma phenylalanine coincident with dose-dependent increases in urinary phenylalanine
Clinical trial design
The Phase 1 clinical trial currently underway is a randomized, double-blind, placebo-controlled single and multiple ascending dose study in healthy volunteers designed to evaluate safety, tolerability, PK and pharmacodynamics as measured by urinary excretion of known SLC6A19 cargo, including Phe.
Pending the results of our ongoing Phase 1 trial, we intend to explore the potential for MZE782 for the treatment of PKU in a Phase 2 clinical trial in patients with PKU. We expect the endpoints of the trial to include exploration of MZE782 effect on plasma Phe levels in patients with PKU, evaluation of the 28-day reduction in plasma Phe in patients with PKU, and evaluation of the percentage of PKU patients that achieve normal plasma Phe levels. We plan to finalize the trial design following Phase 1 trial results in healthy volunteers, which we expect in the second half of 2025. The findings from the Phase 1 trial will inform dose selection and design of our Phase 2 study in patients with PKU.
24
Additional CKD and CVRM research programs
In addition to our two lead programs in CKD, we are exploring additional targets that we have identified as potential next generation small molecule candidates. Using our Compass platform, we identified a CKD target through genetic association with a bidirectional allelic series that included genetic variants that either improve or worsen renal function, then applied variant functionalization techniques to understand the characteristics of the naturally occurring protective variants. Based on these analyses, we have initiated assay development for a high-throughput compound screen designed to identify a small molecule inhibitor to mimic those protective characteristics.
We have further identified an additional CVRM target through genetic analysis as described above, and are applying variant functionalization techniques to define the characteristics of the naturally occurring protective variants. We are currently scaling assays that we have developed to be used in a high-throughput screen to identify quality compounds that would serve as leads for further chemical optimization.
Other development opportunities including small molecule research in CVRM
We also have research efforts underway for our next-generation programs in common diseases. We are focusing our early research efforts and evaluating genetic targets in CVRM diseases, including obesity, driven in part by the emerging understanding of the interconnectivity of these common diseases affecting the heart and kidney through metabolic drivers, such as obesity. These research efforts include exploring complications of type 2 diabetes, non-central nervous system mechanisms of obesity, and myocardial dysfunction due to metabolic disease.
Patients who are more likely to develop CKD and other diseases such as heart failure, HF, typically have similar comorbidities, including obesity, and we believe our precision medicine approach through our Compass platform will allow for additional targets in these therapeutic areas. We aspire to ultimately guide the development of new medicines utilizing new genetic insights to identify valid targets and discover therapeutic agents designed to mimic the activity of protective genetic variants or correct the effects of toxic genetic variants. We expect that our commitment to a pragmatic development approach will improve the likelihood of success and patient impact.
In metabolism, we have identified a key set of potential targets to address obesity and are utilizing our statistical, computational and functional genomics research engine to explore non-central nervous system-driven mechanisms that affect body mass index and weight distribution. With our programs, we will look to complement the existing CKD therapy of GLP-1 receptor agonists, which are primarily driven by a central nervous system mechanism of action, and potentially address the unmet needs of patients who do not respond or cannot tolerate the current therapeutic options, or seek a maintenance option for ongoing weight control.
Our partnered programs
Using our Compass platform, we have validated targets and new therapeutic approaches targeting diseases outside of our core focus areas, including neurology, ophthalmology and rare diseases. We have entered into partnership arrangements with third parties with respect to several of these targets. These programs are not only sources of revenue, but also demonstrate the power of our Compass platform.
MZE001 for Pompe disease
Our first program to enter the clinic, MZE001, has the potential to be a novel therapeutic approach to treating Pompe disease. MZE001 is an investigational oral, small molecule inhibitor of muscle-specific glycogen synthase, or glycogen synthase 1, which is encoded by the gene glycogen synthase 1, aimed at reducing the glycogen concentration in muscles.
Pompe disease is a rare, inherited lysosomal storage disorder caused by mutations in the gene coding for acid alpha-glucosidase that can lead to the buildup of glycogen, a complex sugar, in skeletal, respiratory and cardiac muscle resulting in progressive weakness, HF and respiratory compromise. Shionogi, the licensee for this program, estimates that approximately 50,000 patients are living with Pompe disease worldwide.
25
The Compass platform enabled Maze to progress a therapeutic candidate, MZE001, from discovery to the clinic within approximately three years. Our Phase 1 first-in-human trial, which was completed in December 2022, demonstrated proof of mechanism in 129 healthy volunteers. This clinical trial was a randomized, double-blind, placebo-controlled, SAD and MAD study in healthy volunteers. The primary and secondary objectives, respectively, were to demonstrate the safety and tolerability, and evaluate the PK, of single and multiple doses of MZE001 in healthy adults. An exploratory objective was to evaluate biomarkers of glycogen metabolism to demonstrate proof of mechanism, i.e., that MZE001 treatment would result in a reduction in muscle glycogen. In the Phase 1 trial, MZE001 was well tolerated at all doses tested, with no serious adverse events observed. Importantly, the exploratory analyses showed that MZE001 inhibited the synthesis of muscle glycogen and reduced total muscle glycogen compared to placebo. We believe these data support MZE001’s potential as an oral therapy for the treatment of patients with Pompe disease. MZE001 has the potential to be used either as a monotherapy or as an add-on to ERT, the current standard of care.
In March 2024, we exclusively licensed MZE001 to Shionogi for the rights to develop and commercialize MZE001. Under the terms of the agreement, Shionogi acquired an exclusive, worldwide, sublicensable license to research, develop, manufacture and commercialize MZE001 as well as related compounds, know-how and intellectual property. Shionogi paid an upfront fee of $150 million, and we will be eligible to receive milestone payments based on development, regulatory and commercial achievements plus tiered royalties based upon future net sales.
Application of our Compass platform to advance MZE001
The buildup of glycogen in skeletal, respiratory and cardiac muscle tissues is the primary driver of disease progression in patients with Pompe disease. While ERT, the current standard of care, has brought significant benefit to patients, glycogen accumulation in muscle continues to allow the disease to progress, specifically impacting ambulation and respiratory function, and has been only partially effective at clearing toxic glycogen accumulation in these tissues.
Inhibition of muscle glycogen synthase is a form of substrate reduction therapy, which has the potential to decrease muscle glycogen synthesis and its subsequent accumulation. By leveraging large sources of matched, genetic and longitudinal clinical data with our Compass platform, we sought to address longstanding questions around safety and efficacy that previously precluded the development of a substrate reduction therapy, and designed MZE001 to address the therapeutic gap in current standard of care.
While glycogen synthase 1 has long been a therapeutic target of interest, there were two main challenges to previous drug targeting efforts. First, there were concerns about the unknown clinical safety implications of chronically lowering muscle glycogen levels. Second, glycogen synthase 1 is a complex protein, closely related to liver-specific glycogen synthase 2, which plays an important role in glucose control. While both enzymes are tetramers made up of two asymmetric dimers, their molecular structures were unknown. As a result, efforts to target glycogen synthase 1 without inhibiting glycogen synthase 2 had proven difficult. Through the use of our Compass platform, we were able to overcome both of these challenges.
First, our Compass platform provided insight into the impact of chronic reduction in muscle glycogen levels and identified a likely therapeutic window. PPP1R3A, a gene that encodes the protein phosphatase 1 regulatory subunit 3A, is a key regulatory protein in the glycogen metabolic pathway. A common variant in the PPP1R3A gene involving a frameshift mutation predicted to lead to a truncated form of the protein was previously identified in healthy European individuals. In a study using magnetic resonance spectroscopy in individuals with this PPP1R3A gene variant, those heterozygous for the mutation were found to have chronically lower levels of muscle glycogen, by as much as 65%. These individuals were not found to have any associated clinical abnormalities. We were able to confirm and expand on this finding using our Compass platform by analyzing a much larger data set of individuals with the PPP1R3A gene variant, including a small number of individuals homozygous for the PPP1R3A frameshift mutation. In both heterozygous and homozygous states, no clinically relevant differences in exercise capacity, cardiac function or glucose levels could be detected compared to reference control populations. These findings provided reassurance that a wide therapeutic index would support substrate reduction therapy for Pompe disease.
Second, our Compass platform used both novel chemical matter and advanced molecular visualization technologies, including Cryo-EM, to solve the molecular structure of glycogen synthase 1. This identified a previously cryptic allosteric binding site that ultimately informed the development of a potent and selective small molecule inhibitor, MZE001.
26
Neurology portfolio: ATXN2 and UNC13A
Overview of ALS
ALS is a progressive and fatal neurodegenerative disease primarily affecting the upper and lower motor neurons, ultimately resulting in the loss of muscle control. Gradual onset of progressive muscle weakness is the most common initial symptom, which leads to difficulty in speaking, chewing, swallowing and breathing. The time from first symptom to diagnosis is approximately 12 months with death, typically from neuromuscular respiratory failure, occurring within three to five years of symptom onset. Up to 50% of patients with ALS develop cognitive impairment associated with frontotemporal dementia, or FTD. The cumulative lifetime risk of ALS is about 1 in 400 and the incidence is one to two per 100,000 people per year, equating to about 5,760 to 6,400 new diagnoses annually. The total number of cases is approximately five per 100,000 people and the Center for Disease Control and Prevention estimates the prevalence of ALS in the United States is approximately 16,000 patients.
While many of the genetic drivers underlying ALS are known, a high variability in disease phenotype is observed. A small number of ALS patients live well beyond the three to five-year life expectancy. With differences in life expectancy not explained by the underlying mutations, genetic modifiers are likely present.
ATXN2 program
In earlier studies of model organisms, we identified ATXN2 as a genetic modifier whereby the inhibition was shown to limit the toxicity of a protein, TDP-43, found to be pathologically aggregated in up to 97% of all ALS patients. We subsequently validated the function of ATXN2 as a genetic modifier using our Compass platform. We utilized our functional genomics and human genetics tools to develop a microRNA gene therapy that targets ATXN2 to reduce aggregation of TDP-43.
In May 2024, we exclusively licensed our ATXN2 program to Neurocrine Biosciences, Inc. As consideration for such license, we received upfront payment, and we will be eligible to receive milestone payments upon the completion of certain regulatory, development and commercial achievements, as well as royalties based upon future annual net sales.
UNC13A program
Genome-wide association studies have established that single genetic traits, or variants, in the UNC13A gene are associated with ALS and FTD in humans, but how those variants increase the risk for disease was previously unknown. Maze and its partners uncovered a connection between genetic variation in UNC13A, a gene critical to the function of the nervous system, and the abnormal build-up of TDP-43, a hallmark molecular characteristic of ALS and FTD. These findings were published in Nature , and fill a long-standing gap in the understanding of how ALS and FTD, two serious neurodegenerative diseases that have no known cures or broadly effective treatments, develop. These findings were further validated in in vitro models that showed that removal of TDP-43 from the nucleus causes cryptic exons to form in UNC13A which, in turn, decreased the levels of the UNC13A protein. We built our Compass platform with the aim of finding genetic insights like this, which is a key step in translating such genetic insights into therapies for patients.
In April 2024, we exclusively licensed our UNC13A program to Trace Neurosicence, Inc. As consideration for such license, we received an upfront payment, and we will be eligible to receive milestone payments upon the completion of certain development, regulatory and commercial achievements, as well as royalties based upon future annual net sales.
Ophthalmology portfolio
Our work in ophthalmology is another example of the application of our Compass platform and variant functionalization at work, where we identified and characterized the genetic relevance of ANGPTL7 as a potential drug target for certain ophthalmic diseases like glaucoma. We identified certain genetic variants that enabled us to derive insight into how natural human genetic diversity correlates with the clinical diagnosis of glaucoma and with enhanced elevated or diminished reduced intraocular pressure, a risk factor for glaucoma and glaucoma risk. Next, we identified targets for therapeutic intervention with an established role in human biology. Out of these targets, we found multiple rare protein-altering variants in one putative target, the gene ANGPTL7, that were associated with lower IOP and reduced risk for glaucoma. In November 2020, together with Alloy Therapeutics, Inc., or Alloy, we created Broadwing, a spin-out company to develop antibody therapies for ANGPTL7 and another undisclosed target in ophthalmic diseases for geographic atrophy, targets that were genetically validated by our Compass platform. We made an initial cash and in-kind contributions, including facilities and operational services, to Broadwing in exchange for a 50% equity interest. Alloy contributed cash and its antibody discovery services for the other 50% equity interest. As of December 31, 2024, we owned approximately 48% of the outstanding equity of Broadwing, and we expect our ownership to be significantly diluted upon the conversion of outstanding convertible notes issued by Broadwing.
27
Our Compass platform
Our pipeline of precision medicine candidates is built upon our Compass platform. Our Compass platform supports end-to-end variant identification and functionalization capabilities and methodologies for drug development, and has been purpose-built to inform different phases of our drug discovery and development process through clinical trial design.
We believe variant functionalization, the process of understanding how genetic variants affect the function of a target protein, is a foundational aspect of precision medicine. Variant functionalization through our Compass platform allows us to elevate drug discovery tractability considerations as a component of target selection. Our approach to developing new, transformational therapies for CVRM diseases is premised on understanding how genetic variants impact the function of target proteins, which in turn provides insight into how best to modulate the identified target variant and an understanding of patient populations that will benefit. We believe this approach enables highly predictive identification and validation of those genetically supported targets that are most likely to have clinical relevance and actionability, thereby increasing the probability for clinical success and accelerating the expansion of our candidate pipeline.
In addition to variant functionalization, our Compass platform and its associated methodologies give us the ability to aggregate matched, genetic and longitudinal clinical datasets at scale to identify genes associated with disease, but more importantly, to determine how genetic variants of these genes provide insight into a therapeutic approach to the applicable target. Targets are then prioritized based on their roles in biological pathways, their roles as potential drivers of disease, and their structural properties, using machine learning and statistical modeling, variant functionalization tools, and traditional and computational drug discovery technologies. These insights ultimately inform our clinical development and patient selection strategies, which we believe have the potential to improve the overall likelihood of technical, regulatory and commercial success of our medicines, although we cannot provide any assurance that the application of our Compass platform will result in the ultimate regulatory approval of any of our therapeutic candidates. The power of our platform and its methodologies is best exhibited through our clinical and preclinical programs, and multiple contributions to the scientific community over the past five years, including the publication in Nature and other leading scientific journals of discoveries made through our Compass platform in the fields of human genetics, molecular biology and medicinal chemistry.
We have built and utilized the Compass platform upon the confluence of three ongoing advancements to gain an understanding of the relationship between genes, the protein products encoded by these genes, and specific, observable human characteristics, or traits and to translate these insights into innovative therapeutics. These trends are: the increasing availability of human genetic data paired with clinical data; the rapid evolution of experimental functional genomic technologies that can probe gene function and interactions between genes in parallel; and advances in computational power and speed that enable the integration and analysis of vast amounts of data.
In summary, the Compass platform provides us with a differentiated ability to: analyze and visualize the vast and proliferating volume of patient-level genetic data and paired clinical data worldwide with efficiency and speed, augmented with advanced data science tools and technologies; experimentally validate and characterize the linkages between specific genes and diseases identified through our data mining activities and the strategic application of advanced functional genomic technologies; and apply insights derived through variant functionalization and structure-based design to develop an optimal therapy for the intended target.
Competition
The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property. While we believe that our Compass platform and our knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from major pharmaceutical and biotechnology companies, academic institutions, government agencies and private and public research institutions, among others.
Any therapeutic candidates that we or our partners successfully develop and commercialize may compete with existing therapies and new therapies that may become available in the future that are approved to treat the same indications for which we or our partners may obtain approval for our or their therapeutic candidates. It is also possible that we or our partners may face competition from other pharmaceutical approaches as well as other types of therapies. The key competitive factors affecting the success of all our programs, if approved, include, but are not limited to be their efficacy, safety, convenience, adoption by prescribers, price, level of generic competition, and availability of reimbursement.
We may face competition from companies developing therapies for CKD and related nephropathies, including but not limited to:
• Established therapies: including RAAS inhibitors, SGLT2 inhibitors and GLP-1 receptor agonists.
• Novel mechanisms: various companies developing therapies targeting different pathways implicated in CKD progression.
28
While there are currently no approved therapies for AKD, we are aware of companies advancing therapeutic candidates in clinical trials that target APOL1.
Our second most advanced lead program, MZE782, is a small molecule targeting SLC6A19, a novel target in CKD and PKU. While there are no currently approved therapies directly modulating SLC6A19, we may face competition from other companies pursuing programs targeting SLC6A19 or alternative approaches for renal indications.
Many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Mergers and acquisitions in the biopharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through partnership arrangements with large and established companies.
Further, precision medicine is a rapidly developing field, with increasing usage within the pharmaceutical and biotechnology industry of machine learning and AI technologies to analyze genetic data. While we believe our Compass platform has advantages over potential competitors based on our experience in variant functionalization, our access to genetic databases, and the length of time that we have been engaged in developing precision medicine, other companies may have greater resources or the ability to acquire more advanced technology to identify targets and may acquire access to the same genetic data that we utilize. We may not be able to keep up with the pace of innovation that is occurring in our field, and we may face increasing competition in developing precision medicines.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other applicable regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.
Intellectual property
Intellectual property is of vital importance in our field and in biotechnology generally. We seek to protect and enhance proprietary technologies, inventions, and improvements that are commercially important to the development of our business by seeking, maintaining, and defending intellectual property rights, including patent rights. We may also seek to rely on regulatory protection afforded through inclusion in expedited development and review, data exclusivity, market exclusivity and/or patent term extensions where available.
Our commercial success will depend in part on obtaining and maintaining patent protection of our current and future therapeutic candidates and the methods used to develop and manufacture them, as well as successfully defending our patents against third-party challenges, and operating without infringing on, misappropriating or otherwise violating the intellectual property and proprietary rights of others. The development of our therapeutic candidates is at a relatively early stage and as a consequence, our patent portfolio is also at an early stage. We cannot be sure that patents will be granted based on our currently pending patent applications or patent applications we may file in the future. Nor can we be sure that any of our granted patents or patents that may be granted to us in the future will be commercially useful in protecting our therapeutic candidates, technologies and processes. In addition, any patents that we may hold, whether owned or licensed, may be challenged, circumvented or invalidated by third parties.
The term of individual patents depends upon the law in the countries in which they are obtained. In most countries, including the United States, the term of a patent is 20 years from the earliest date of filing a non-provisional patent application, unless otherwise extended or adjusted. U.S. non-provisional applications and/or Patent Cooperation Treaty, or PCT, applications may be filed that claim priority to an earlier-filed patent application, provided that the earlier-filed patent application was filed within 12 months of the U.S. non-provisional or PCT filing date. The PCT system allows for the designation of PCT member states in which national or regional patent applications may later be pursued. A PCT application cannot mature into a patent until, among other things, one or more national or regional stage patent applications are filed within the applicable time limit, which is generally 30 or 31 months from the PCT application’s earliest priority date, depending on the jurisdiction.
29
The ability to obtain patent protection and the degree of such protection depends on several factors, including whether an invention is directed to patentable subject matter, the novelty and non-obviousness of the claimed invention, and the ability to satisfy the requirements of applicable patent laws, such as enablement and written description, in addition to other administrative requirements for obtaining a patent. In addition, the claim scope in a patent application may be significantly narrowed before a patent is issued, and the scope of issued claims can be reinterpreted or further altered even after patent issuance. Consequently, we may not obtain or maintain adequate patent protection for any of our proprietary technologies or current or future therapeutic candidates.
In addition to patent protection, we also rely on trade secrets, know-how, other proprietary information and continuing technological innovation to develop and maintain our competitive position. We seek to protect and maintain the confidentiality of trade secrets and other proprietary information to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. For example, we seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. However, such security measures may be breached and we may not have adequate remedies for such breaches. We also seek to protect our proprietary information and trade secrets by entering into confidentiality and invention assignment agreements with our employees, consultants and other parties who have access to such information. These agreements generally 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 generally 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, we cannot guarantee that we have entered into such agreements with each party that has or may have had access to our trade secrets or other proprietary information or has been involved in the development of intellectual property. Additionally, these agreements can be breached and we may not have adequate remedies for any such breach. Moreover, our trade secrets may otherwise become known or be independently discovered by competitors, and to the extent that our employees, consultants, contractors or partners use intellectual property or proprietary information owned by others in their work for us, disputes may arise as to our intellectual property rights. For all of these reasons, we may not be able to adequately protect proprietary information, trade secrets, know-how and inventions important to the development of our business.
The intellectual property 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 avoiding infringing upon, misappropriating or otherwise violating the intellectual property and proprietary rights of third parties. Third-party patents could 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. For more information regarding the risks related to intellectual property, see “Risk factors—Risks related to intellectual property.”
Our policy is to seek patent protection for the technologies, inventions and improvements that we develop and that we consider important to the advancement of our business.
For our small molecule APOL1 program, as of March 15, 2025, we own patent families that cover composition of matter of our APOL1 compounds, including MZE829, methods of use, and processes. These patent families include one issued U.S. patent, three pending U.S. provisional patent applications, five pending PCT patent applications, two pending U.S. non-provisional patent applications, and over forty pending foreign patent applications in various jurisdictions including but not limited to Australia, Brazil, Canada, China, the European Patent Office, Hong Kong, Israel, India, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, Singapore, and Taiwan. Any currently issued patents or patents that may issue in the future from these applications in our APOL1 program are projected to expire between 2042 and 2046 unless extended or otherwise adjusted.
For our small molecule SLC6A19 program, as of March 15, 2025, we own patent families that cover composition of matter of our SLC6A19 compounds, including MZE782, methods of use, and processes. These patent families include eight pending U.S. provisional patent applications, four pending PCT patent applications, one pending U.S non-provisional patent application, and two pending foreign patent applications. Any currently issued patents or patents that may issue in the future from these applications in our SLC6A19 program are projected to expire between 2043 and 2046 unless extended or otherwise adjusted.
We have entered into three agreements to exclusively license or assign our patent portfolios associated with programs that are outside our areas of core focus. Pursuant to these agreements, we no longer have control of the prosecution of the issued patents and pending patent applications in each of these portfolios. We cannot guarantee that our licensees will successfully develop, obtain marketing authorization for, or commercialize products that would result in our receiving royalties pursuant to such license agreements.
30
We have exclusively licensed our GYS1 patent portfolio, which includes an issued U.S. patent covering MZE001, to Shionogi. At the time we entered into the License Agreement, our GYS1 patent portfolio included a pending U.S. non-provisional patent application, three pending PCT applications, and over twenty-five pending foreign patent applications in various jurisdictions including but not limited to Australia, Brazil, Canada, China, the European Patent Office, Hong Kong, Israel, India, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, Singapore, and Taiwan. The patent portfolio we licensed to Shionogi is directed to compositions of matter, uses and processes, and any currently issued patents or patents that may issue in the future in this portfolio are projected to expire between 2042 and 2043 unless extended or otherwise adjusted. Shionogi controls the prosecution of this patent portfolio. We have exclusively licensed our patent portfolio relating to our program for ATXN2 gene therapy to another biotechnology company who controls the prosecution of this portfolio. At the time we entered into this agreement, no patents had been issued. Our ATXN2 gene therapy patent portfolio included two pending non-provisional patent applications and over fifteen pending foreign patent applications in various jurisdictions. The ATXN2 gene therapy patent portfolio is directed to compositions of matter and uses, and any patents that may issue in the future in this portfolio are projected to expire between 2041 and 2042 unless extended or otherwise adjusted.
In addition to our owned and out-licensed patent portfolios described above, we assigned our UNC13A ASO patent portfolio in April 2024 to another biotechnology company.
Manufacturing
We do not have any clinical manufacturing facilities. We currently rely, and expect to continue to rely, on third party contract manufacturing organizations, or CMOs, including foreign CMOs, for clinical manufacturing of MZE829, MZE782 and our future therapeutic candidates, as well as for commercial manufacturing if our therapeutic candidates receive marketing approval.
We use multiple CMOs, including foreign CMOs, to manufacture our clinical-stage therapeutic candidates to conduct our clinical trials. As part of our strategy, we seek to develop or advance therapeutic candidates that can be produced cost-effectively at contract manufacturing facilities without the need for unusual manufacturing equipment. All of our current therapeutic candidates are small molecule drug products that we believe will require between 12 and 14 months to manufacture from initiation of drug substance manufacturing to completion of drug product, assuming we are able to obtain manufacturing slots with the appropriate CMOs.
We expect to enter into commercial supply agreements with commercial manufacturers prior to any potential approval of any of our therapeutic candidates. We believe our current CMOs are able to adequately support manufacturing for our current and planned clinical trials and additional CMOs may be onboarded at later stages of clinical development and commercialization.
To the extent any of our therapeutic candidates require companion diagnostics, which are assays or tests to identify an appropriate patient population, we generally rely, and expect to continue to rely, on third parties to manufacture such assays or tests.
Governmental regulation and product approval
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
FDA approval process
In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Pharmaceutical products—such as small molecule drugs and biological products, or biologics—used for the prevention, treatment, or cure of a disease or condition of a human being are subject to regulation under the FDCA. Failure to comply with applicable United States requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending new drug applications, or NDAs, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.
31
Pharmaceutical product development for a new product or certain changes to an approved product in the United States typically involves preclinical laboratory and animal tests, the submission to the FDA of an Investigational New Drug Application, or IND, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.
Preclinical tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including Good Laboratory Practices.
The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long-term nonclinical tests, such as tests of reproductive toxicity and carcinogenicity in animals, may continue after the IND is submitted. A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither commented on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin. Clinical trials involve the administration of the investigational drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with GCP, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors; as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.
The FDA may order the temporary or permanent discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA regulations or presents an unacceptable risk to the clinical trial patients. Imposition of a clinical hold may be full or partial. The study protocol and informed consent information for patients in clinical trials must also be submitted to an Institutional Review Board, or IRB, for approval. The IRB will also monitor the clinical trial until completed. The IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether a trial may move forward at designated checkpoints based on access to certain data from the trial.
Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the drug into healthy human subjects or patients, the product is tested to assess safety, dosage tolerance, metabolism, PK, pharmacological actions, side effects associated with drug exposure, and to obtain early evidence of a treatment effect if possible. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular indication, determine optimal dose and regimen, and to identify common adverse effects and safety risks. If a compound demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain additional information about clinical effects and confirm efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of the product. In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the safety and efficacy of the drug. In rare instances, a single Phase 3 trial may be sufficient when either (1) the trial is a large, multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible or (2) the single trial is supported by other confirmatory evidence. Approval on the basis of a single trial may be subject to a requirement for additional post-approval studies.
In addition, the manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug.
32
After completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before marketing and distribution of the product may begin in the United States. The NDA must include the results of all preclinical, clinical, and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting an NDA is substantial. The submission of most NDAs is additionally subject to a substantial application user fee. Under an approved NDA, the applicant is also subject to an annual program fee. These fees typically increase annually. The FDA has 60 days from its receipt of an NDA to determine whether the application will be filed based on the FDA’s determination that it is adequately organized and sufficiently complete to permit substantive review. Once the submission is filed, the FDA begins an in-depth review. The FDA has agreed to certain performance goals to complete the review of NDAs. Most applications are classified as Standard Review products that are reviewed within ten months of the date the FDA files the NDA; applications classified as Priority Review are reviewed within six months of the date the FDA files the NDA. An NDA can be classified for Priority Review when the FDA determines the drug has the potential to treat a serious or life-threatening condition and, if approved, would be a significant improvement in safety or effectiveness compared to available therapies. The review process for both standard and priority reviews may be extended by the FDA for three or more additional months to consider certain late-submitted information, or information intended to clarify information already provided in the NDA submission.
The FDA may also refer applications for novel drugs, as well as drug products that present difficult questions of safety or efficacy, to be reviewed by an advisory committee—typically a panel that includes clinicians, statisticians and other experts—for review, evaluation, and a recommendation as to whether the NDA should be approved. The FDA is not bound by the recommendation of an advisory committee, but generally follows such recommendations. Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug product is manufactured. The FDA will not approve the product unless compliance with current good manufacturing practices, or cGMPs, is satisfactory and the NDA contains data that provide substantial evidence that the drug is safe and effective in the claimed indication.
After the FDA evaluates the NDA and completes any clinical and manufacturing site inspections, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the deficiencies in the NDA submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application for approval. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. An approval letter authorizes commercial marketing and distribution of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA may require a Risk Evaluation and Mitigation Strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks to patients. A REMS can include medication guides, communication plans for healthcare professionals, and elements to assure a product’s safe use, or ETASU. An ETASU can include, but is not limited to, special training or certification for prescribing or dispensing the product, dispensing the product only under certain circumstances, special monitoring, and the use of patient-specific registries. The requirement for a REMS can materially affect the potential market and profitability of the product. Moreover, the FDA may require substantial post-approval testing and surveillance to monitor the product’s safety or efficacy.
Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. Changes to some of the conditions established in an approved NDA, including changes in indications, product labeling, manufacturing processes or facilities, require submission and FDA approval of a new NDA, or supplement to an approved NDA, before the change can be implemented. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing original NDAs.
Fast track designation and priority review
FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Fast track designation may be granted for products that are intended to treat a serious or life-threatening disease or condition for which there is no effective treatment and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. Any product submitted to FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review.
Priority review may be granted for products that are intended to treat a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. FDA will attempt to direct additional resources to the evaluation of an application designated for priority review in an effort to facilitate the review.
33
Accelerated approval
Accelerated approval may be granted for a product that is intended to treat a serious or life-threatening condition and that generally provides a meaningful therapeutic advantage to patients over existing treatments. A product eligible for accelerated approval may be approved on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions, or survives. The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large studies to demonstrate a clinical or survival benefit. The accelerated approval pathway is contingent on a sponsor’s agreement to conduct additional post-approval confirmatory studies to verify and describe the product’s clinical benefit. The FDA must specify conditions for the post-approval study which may include details regarding enrollment targets, the study protocol and study milestones. These confirmatory trials must be completed with due diligence and the FDA may require that the trial be designed, initiated, and/or fully enrolled prior to submission of the application or approval. Sponsors are also required to submit regular reports regarding the progress of conducting these post-approval studies. Failure to conduct required post-approval studies in accordance with FDA’s conditions and with due diligence, or submit the progress reports as well as failure to confirm a clinical benefit during post-marketing studies, would allow the FDA to undertake enforcement action or withdraw the product from the market on an expedited basis. All promotional materials for product candidates approved under accelerated approval regulations are subject to prior review by the FDA.
Disclosure of clinical trial information
Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information on the website www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of a clinical trial are then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of clinical development programs as well as clinical trial design.
Pediatric information
Under the Pediatric Research Equity Act, or PREA, NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any drug with orphan product designation except a product with a new active ingredient that is a molecularly targeted cancer product intended for the treatment of an adult cancer and directed at a molecular target determined by FDA to be substantially relevant to the growth or progression of a pediatric cancer that is subject to an NDA submitted on or after August 18, 2020.
The Best Pharmaceuticals for Children Act, or BPCA, provides a six-month extension of any exclusivity-patent or non-patent-for a drug if certain conditions are met. Conditions for exclusivity include the FDA’s determination that information relating to the use of a new drug in the pediatric population may produce health benefits in that population, FDA making a written request for pediatric studies, and the applicant agreeing to perform, and reporting on, the requested studies within the statutory timeframe. Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.
Post-approval requirements
Once an NDA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.
Adverse event reporting and submission of periodic safety summary reports are required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as Phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control, drug manufacture, packaging, and labeling procedures must continue to conform to cGMPs after approval.
34
Drugs manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the agency inspects a drug’s manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with required regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.
The Hatch-Waxman amendments
Orange book listing
Under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch Waxman Amendments, NDA applicants are required to identify to FDA each patent whose claims cover the applicant’s drug or approved method of using the drug. Upon approval of a drug, the applicant must update its listing of patents to the FDA in timely fashion and each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.
Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an abbreviated NDA, or ANDA. An ANDA provides for marketing of a drug product that has the same active ingredient(s), strength, route of administration, and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. An approved ANDA product is considered to be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, preclinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved under the ANDA pathway are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug pursuant to each state’s laws on drug substitution.
The ANDA applicant is required to certify to the FDA concerning any patents identified for the reference listed drug in the Orange Book. Specifically, the applicant must certify to each patent in one of the following ways: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid, unenforceable or will not be infringed by the new product. A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid or unenforceable, is called a Paragraph IV certification. For patents listed that claim an approved method of use, under certain circumstances the ANDA applicant may also elect to submit a statement certifying that its proposed ANDA label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent, which is called a Section VIII statement. If the applicant does not challenge the listed patents through a Paragraph IV certification, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA-holder and patentee(s) once the ANDA has been accepted for filing by the FDA (referred to as the “notice letter”). The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice letter. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months from the date the notice letter is received, expiration of the patent, the date of a settlement order or consent decree signed and entered by the court stating that the patent that is the subject of the certification is invalid or not infringed, or a decision in the patent case that is favorable to the ANDA applicant.
The ANDA application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired. In some instances, an ANDA applicant may receive approval prior to expiration of certain non-patent exclusivity if the applicant seeks, and FDA permits, the omission of such exclusivity-protected information from the ANDA prescribing information.
Exclusivity
Upon NDA approval of a new chemical entity, or NCE, which is a drug that contains no active moiety that has been approved by FDA in any other NDA, that drug receives five years of marketing exclusivity during which FDA cannot receive any ANDA seeking approval of a generic version of that drug unless the application contains a Paragraph IV certification, in which case the application may be submitted one year prior to expiration of the NCE exclusivity. If there is no listed patent in the Orange Book, there may not be a Paragraph IV certification, and, thus, no ANDA for a generic version of the drug may be filed before the expiration of the exclusivity period.
35
Certain changes to an approved drug, such as the approval of a new indication, the approval of a new strength, and the approval of a new condition of use, are associated with a three-year period of exclusivity from the date of approval during which FDA cannot approve an ANDA for a generic drug that includes the change. In some instances, an ANDA applicant may receive approval prior to expiration of the three-year exclusivity if the applicant seeks, and FDA permits, the omission of such exclusivity-protected information from the ANDA package insert.
Patent term extension
The Hatch Waxman Amendments permit a patent term extension as compensation for patent term lost during the FDA regulatory review process. Patent term extension, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. After NDA approval, owners of relevant drug patents may apply for the extension. The allowable patent term extension depends on a number of factors and is on a case by case basis, generally calculated as half of the drug’s testing phase (the time between IND application and NDA submission) and all of the review phase (the time between NDA submission and approval) that occurs after patent issuance up to a maximum of five years and subject to the 14 year cap. The time can be reduced for any time FDA determines that the applicant did not pursue approval with due diligence.
The United States Patent and Trademark Office, or USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. However, the USPTO may not grant an extension because of, for example, an applicant failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than requested.
The total patent term after the extension may not extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be enforced during the extension period. The application for the extension must be submitted prior to the expiration of the patent, and for patents that might expire during the application phase, the patent owner may request an interim patent extension. An interim patent extension increases the patent term by up to one year and may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is reduced by one year. The director of the USPTO must determine that approval of the drug covered by the patent for which a patent extension is being sought is likely. Interim patent extensions are not available for a drug for which an NDA has not been submitted.
FDA approval and regulation of companion diagnostics
If safe and effective use of a therapeutic product depends on an in vitro diagnostic, then the FDA generally will require approval or clearance of that diagnostic, known as a companion diagnostic, before or at the same time that the FDA approves the product. In August 2014, the FDA issued final guidance clarifying the requirements that will apply to approval of therapeutic products and in vitro companion diagnostics. According to the guidance, if FDA determines that a companion diagnostic device is essential to the safe and effective use of a new therapeutic product or indication, FDA generally will not approve the therapeutic product or new therapeutic product indication if the companion diagnostic device is not approved or cleared for that indication.
Approval or clearance of the companion diagnostic device will ensure that the device has been adequately evaluated and has adequate performance characteristics in the intended population. The review of in vitro companion diagnostics in conjunction with the review of a therapeutic product will, therefore, likely involve coordination of review by CDER and the FDA’s Office of In Vitro Diagnostics and Radiological Health.
Under the FDCA, in vitro diagnostics, including companion diagnostics, are regulated as medical devices. In the United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. Unless an exemption applies, diagnostic tests require marketing clearance or approval from the FDA prior to commercial distribution. The two primary types of FDA marketing authorization applicable to a medical device are premarket notification, also called 510(k) clearance, and premarket approval, or PMA. The vast majority of companion diagnostics require PMA approval.
36
The PMA process, including the gathering of clinical and preclinical data and the submission to and review by the FDA, can take several years or longer. It involves a rigorous premarket review during which the applicant must prepare and provide the FDA with reasonable assurance of the device’s safety and effectiveness and information about the device and its components regarding, among other things, device design, manufacturing and labeling. PMA applications are subject to an application fee. In addition, PMAs for certain devices must generally include the results from extensive preclinical and adequate and well-controlled clinical trials to establish the safety and effectiveness of the device for each indication for which FDA approval is sought. In particular, for a diagnostic, a PMA application typically requires data regarding analytical and clinical validation studies. As part of the PMA review, the FDA will typically inspect the manufacturer’s facilities for compliance with the Quality System Regulation, or QSR, which imposes elaborate testing, control, documentation and other quality assurance requirements.
PMA approval is not guaranteed, and the FDA may ultimately issue a not approvable letter to a PMA submission based on deficiencies in the application and require additional clinical trial or other data that may be expensive and time-consuming to generate and that can substantially delay approval. If the FDA’s evaluation of the PMA application is favorable, the FDA typically issues an approvable letter requiring the applicant’s agreement to specific conditions, such as changes in labeling, or specific additional information, such as submission of final labeling, in order to secure final approval of the PMA. If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. A not approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the PMA approvable. The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and then the data submitted in an amendment to the PMA. If the FDA concludes that the applicable criteria have been met, the FDA will issue a PMA for the approved indications, which can be more limited than those originally sought by the applicant. The PMA can include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution. Once granted, PMA approval may be withdrawn by the FDA if compliance with post approval requirements, conditions of approval or other regulatory standards are not maintained, or problems are identified following initial marketing.
After a device is placed on the market, it remains subject to significant regulatory requirements. Medical devices may be marketed only for the uses and indications for which they are cleared or approved. Device manufacturers must also register their establishments and list their devices with the FDA. A medical device manufacturer’s manufacturing processes and those of its suppliers are required to comply with the applicable portions of the QSR, which cover the methods and documentation of the design, testing, production, processes, controls, quality assurance, labeling, packaging and shipping of medical devices. Domestic and foreign facility records and manufacturing processes are subject to periodic unscheduled inspections by the FDA.
Other U.S. healthcare laws and compliance requirements
In the United States, pharmaceutical and biotechnology company activities are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare & Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services, or HHS, (e.g., the Office of Inspector General and the Office for Civil Rights), the U.S. Department of Justice, or 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 federal false claims laws, the privacy and security provisions of the federal Health Insurance Portability and Accountability Act of 1996, 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, recommending or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and/or formulary managers 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. 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 Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor. In addition, the statutory exceptions and regulatory safe harbors are subject to change.
37
Additionally, the intent standard under the Anti-Kickback Statute was amended by the ACA, to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act (discussed below).
The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
Federal false claims laws, including the federal civil False Claims Act, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government 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. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the civil False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus generally non-reimbursable, uses and purportedly concealing price concessions in the pricing information submitted to the government for government price reporting purposes.
HIPAA created additional federal criminal statutes that prohibit 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 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. Similar to the Anti-Kickback Statute, a person or entity does not need 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 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.
Data privacy and security regulations by both the federal government and the states in which business is conducted may also be applicable. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes among other things, certain requirements relating to the privacy, security, transmission and breach of individually identifiable health information. HIPAA requires covered entities to limit the use and disclosure of protected health information to specifically authorized situations, and requires covered entities to implement security measures to protect health information that they maintain in electronic form. Among other things, HITECH made HIPAA’s security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. 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 the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.
In addition, certain states have also adopted data privacy and security laws and regulations, which govern the processing of health-related and other personal information. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues. For example, CCPA, imposes obligations on businesses that meet certain thresholds that process the personal information of California residents (including employees based in California). These obligations include, but are not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal information, including the ability to opt-out of certain sales of personal information. The CCPA provides for a private right of action for certain data breaches, which may increase the likelihood of, and risks associated with, data breach litigation. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA could increase compliance costs and potential liability. The 2020 amendments to the CCPA also created the California Privacy Protection Agency, a new enforcement agency whose sole responsibility is to enforce the CCPA and is empowered to create new CCPA regulations. Other states have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the local and federal levels, including discussion in the U.S. of a new comprehensive federal data privacy law. In addition to government activity and private rights of actions provided by some of the state privacy laws, privacy advocacy groups and technology and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on companies.
38
Internationally, many countries have privacy and data protection laws that create potentially complex compliance issues . For example, the EU GDPR and UK GDPR impose strict requirements for processing the personal data of individuals, including, for example, requirements to establish a legal basis for processing, higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals and a strengthened individual data rights regime, requirements to implement safeguards to protect the security and confidentiality of personal data that requires the adoption of administrative, physical and technical safeguards, shortened timelines for data breach notifications to appropriate data protection authorities or data subjects, limitations on retention and secondary use of information, increased requirements pertaining to health data, regulation of the transferring of personal data across jurisdiction and additional obligations when third-party processors are contracted in connection with the processing of the personal data. EU member states are tasked under the EU GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the EU GDPR requirements and potentially extends the obligations and potential liability for failing to meet such obligations. Under the EU GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to €20 million or 4% of annual global revenue, whichever is greater. Such fines would be in addition to (i) the rights of individuals to sue for damages in respect of any data privacy breach which causes them to suffer harm, (ii) the right of individual member states to impose additional sanctions over and above the administrative fines specified in the GDPR and (iii) the ability of supervisory authorities to impose orders requiring companies to modify their practices.
Additionally, the federal Physician Payments 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 (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) 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. Manufacturers are also required to report such information regarding its relationships with physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants and certified nurse midwives during the previous year.
Commercial distribution of products requires compliance with state laws that require the registration of manufacturers and wholesale distributors of drug 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. In addition, 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. Certain local jurisdictions also require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Sales and marketing activities are also potentially subject to federal and state consumer protection and unfair competition laws.
Violation of any of the federal and state healthcare laws described above or any other governmental regulations may result in penalties, including without limitation, significant civil, criminal and/or administrative penalties, damages, fines, disgorgement, exclusion from participation in government programs, such as Medicare and Medicaid, imprisonment, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, refusal to enter into government contracts, oversight monitoring, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings.
39
Coverage, pricing and reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which regulatory approval is obtained. In the United States and markets in other countries, sales of any products for which regulatory approval is received 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. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication. 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. Expensive pharmaco-economic studies may need to be conducted in order to demonstrate the medical necessity and cost-effectiveness of product candidates, in addition to the costs required to obtain the FDA approvals. Product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one 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 reimbursement may not be available to enable the maintenance of price levels sufficient to realize an appropriate return on investment in product development.
Different pricing and reimbursement schemes exist in other countries. In the EU, 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 very intense. As a result, increasingly high barriers are being erected to the entry of new 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 regulatory approval is received for commercial sale may suffer if the government and other third-party payors fail to provide coverage and adequate reimbursement. In addition, emphasis on managed care in the United States has increased and is expected to continue to increase the pressure on healthcare pricing. 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 regulatory approval is received, less favorable coverage policies and reimbursement rates may be implemented in the future.
40
Healthcare reform
Healthcare reforms that have been adopted, and that may be adopted in the future, could result in further reductions in coverage and levels of reimbursement for pharmaceutical products, increases in rebates payable under U.S. government rebate programs and additional downward pressure on pharmaceutical product prices. Healthcare reform proposals recently culminated in the enactment of the Inflation Reduction Act, which will eliminate, beginning in 2025, the coverage gap under Medicare Part D by significantly lowering the enrollee maximum out-of-pocket cost and requiring manufacturers to subsidize, through a newly established manufacturer discount program, 10% of Part D enrollees’ prescription costs for brand drugs below the out-of-pocket limit, and 20% once the out-of-pocket limit has been reached. The Inflation Reduction Act will also allow HHS to directly negotiate the selling price of a statutorily specified number of drugs each year that CMS reimburses under Medicare Part B and Part D. The negotiated price may not exceed a statutory ceiling price. Only high-expenditure single-source drugs that have been approved for at least 7 years (11 years for biologics) can qualify for negotiation, with the negotiated price taking effect two years after the selection year. For 2026, the first year in which negotiated prices become effective, CMS selected 10 high-cost Medicare Part D drugs in 2023, negotiations began in 2024, and the negotiated maximum fair price for each product has been announced. CMS has selected 15 additional Medicare Part D drugs for negotiated maximum fair pricing in 2027. For 2028, an additional 15 drugs, which may be covered under either Medicare Part B or Part D, will be selected, and for 2029 and subsequent years, 20 Part B or Part D drugs will be selected. A drug or biological product that has an orphan drug designation for only one rare disease or condition will be excluded from the Inflation Reduction Act’s price negotiation requirements, but loses that exclusion if it has designations for more than one rare disease or condition, or if is approved for an indication that is not within that single designated rare disease or condition, unless such additional designation or such disqualifying approvals are withdrawn by the time CMS evaluates the drug for selection for negotiation. The Inflation Reduction Act also imposes rebates on Medicare Part B and Part D drugs whose prices have increased at a rate greater than the rate of inflation. The Inflation Reduction Act permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. Manufacturers that fail to comply with the Inflation Reduction Act may be subject to various penalties, some significant, including civil monetary penalties. The Inflation Reduction Act also extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. These provisions are taking effect progressively starting in 2023, although they may be subject to legal challenges. For example, the provisions related to the negotiation of selling prices of high-expenditure single-source drugs and biologics have been challenged in multiple lawsuits. Thus, while it is unclear how the Inflation Reduction Act will be implemented, it will likely have a significant impact on the pharmaceutical industry and the pricing of pharmaceutical products, particularly pharmaceutical products indicated for prevalent conditions. It is unclear to what extent other statutory, regulatory, and administrative initiatives will be enacted and implemented in the future.
Employees and human capital resources
As of December 31, 2024, we had 125 employees, all of whom were full-time and 98 of whom were engaged in research and development activities. Approximately 53 of our employees hold Ph.D. or M.D. degrees. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be an asset.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. It is important that we not only attract and retain the best and brightest diverse talent, but also ensure they remain engaged and can thrive in an environment that is committed to helping them grow, succeed and contribute directly to achieving our purpose. The principal purposes of our equity and cash incentive plans are to attract, retain and motivate personnel through the granting of stock-based and cash-based compensation awards in order to increase the success of our Company by motivating such individuals to perform to the best of their abilities in the furtherance of our objectives. We also strive to foster career growth and internal mobility by providing a broad range of training, mentoring and other development opportunities.
Corporate information
We were incorporated under the laws of the State of Delaware on August 29, 2017, originally under the name Genetic Modifiers NewCo, Inc. We changed our name on July 5, 2018 to Modulus Therapeutics, Inc. and on September 25, 2018, to Maze Therapeutics, Inc.
Our principal executive offices are located at 171 Oyster Point Blvd., Suite 300, South San Francisco, California 94080, and our telephone number is (650) 850-5070. Our website address is www.mazetx.com.
We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission, or SEC, under the Securities Exchange Act. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that we file electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov. Copies of each of our filings with the SEC can also be viewed and
41
downloaded free of charge at our website, www.mazetx.com, after the reports and amendments are electronically filed with or furnished to the SEC.
Also available on our website is information relating to our corporate governance and our Board, including our Corporate Governance Guidelines; our Code of Business Conduct; and our Board Committee Charters. We will provide any of the foregoing information without charge upon written request to our Corporate Secretary.
We use our Investor Relations website (http://ir.mazetx.com) as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD promulgated by the SEC. These disclosures are included in the “news and events” section of our website. Accordingly, investors should monitor this portion of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
The information contained on our website does not constitute, and shall not be deemed to constitute, a part of this Annual Report on Form 10-K, or any other report we file with, or furnish to, the SEC. Our references to the URLs for websites are intended to be inactive textual references only.
The mark “Maze Therapeutics,” the Maze logo, “Maze Compass” and all product names are our registered or common law trademarks. All other service marks, trademarks and trade names appearing in this Annual Report on Form 10-K are the property of their respective owners. Solely for convenience, the trademarks and tradenames referred to in this Annual Report on Form 10-K appear without the ® and symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and tradenames.
Item 1A. R isk Factors
Investing in our common stock involves a high degree of risk. Before making your decision to invest in shares of our common stock, you should carefully consider the risks described below, together with the other information contained in this Annual Report on Form 10-K, including in the sections titled “Special note regarding forward-looking statements” and “Management’s discussion and analysis of financial condition and results of operations” and in our financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. We cannot assure you that any of the events discussed below will not occur. These events could have a material and adverse impact on our business, financial condition, results of operations and prospects. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.
Risks related to our limited operating history, financial position and need for capital
We are a clinical-stage biopharmaceutical company with a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability. Since our inception, we have incurred significant operating losses and have not generated any product revenue. We expect to incur continued losses for the foreseeable future and may never achieve or maintain profitability.
Investment in drug development is a highly speculative undertaking and involves a substantial degree of risk. We are a clinical-stage biopharmaceutical company with a limited operating history. Our lead programs are still in early clinical and preclinical development, and we are subject to the risks of failure inherent in the development of therapeutic candidates based on novel technologies. We have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biotechnology industry. Furthermore, we do not expect to generate any product revenue from commercial sales for the foreseeable future, and we expect to continue to incur significant operating losses for the foreseeable future due to the cost of clinical trials, preclinical studies, research and development, and the regulatory approval process of our therapeutic candidates. For the years ended December 31, 2024 and 2023, we incurred net income of $52.2 million and a net loss of $100.4 million, respectively. As of December 31, 2024, we had an accumulated deficit of $358.4 million. We expect to continue to incur significant research and development and other expenses related to our ongoing operations.
42
Since our inception, we have focused substantially all of our efforts and financial resources on research and development activities for our programs and on establishing arrangements and collaborations with third parties for the development of our therapeutic candidates. To date, we have not generated any product revenue from product sales and have financed our operations primarily through sales of our equity and convertible promissory notes, as well as one-time, nonrefundable, upfront licensing payments.
Our prior losses, combined with expected future losses, have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. We expect our research and development expenses to significantly increase in connection with clinical trials for our lead programs, MZE829 and MZE782, further development of our Maze Compass platform, or our Compass platform, planned preclinical studies, IND filings and clinical trials for future therapeutic candidates. We will also incur substantial additional expenses as we seek to expand our intellectual property portfolio, including through potential in-licensing opportunities, and hire additional personnel as we scale up our operations. We expect to incur additional costs associated with operating as a public company. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all.
Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue apart from upfront licensing payments, and we do not know when, or if, we will generate any sales, milestone, or royalty revenue. We do not expect to generate additional significant revenue from licensing arrangements in the near term. We do not expect to generate significant revenue unless and until we obtain marketing approval for, and begin to sell, our therapeutic candidates.
To become and remain profitable, we must succeed in designing, developing and eventually commercializing products that generate significant revenue. This will require us to be successful in a range of challenging activities, including therapeutic candidate selection, preclinical testing and clinical trials of our therapeutic candidates, continuing to discover and develop additional therapeutic candidates, establishing arrangements with third parties for the manufacture of preclinical and clinical supplies, obtaining regulatory approval for any therapeutic candidates that successfully complete clinical trials, manufacturing, marketing and selling any products for which we may obtain marketing approval and obtaining coverage and adequate reimbursement from government and third-party payors for any such products. We are only in the preliminary stages of development and clinical trials, and we may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability or meet outside expectations for our profitability.
Because of the numerous risks and uncertainties associated with pharmaceutical development, we are unable to accurately predict the timing or amount of increased expenses we will incur or when, or if, we will be able to achieve profitability. If we decide to or are required by the U.S. Food and Drug Administration, or FDA, or regulatory authorities in other jurisdictions to perform preclinical studies or clinical trials in addition to those currently expected, or if there are any delays in establishing appropriate manufacturing arrangements for, in initiating clinical trials or preclinical studies for, or in the development of any of our therapeutic candidates, our expenses could increase materially and profitability could be further delayed.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. We expect our financial condition and operating results to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.
We will require substantial additional capital to finance our operations and achieve our goals. If we are unable to raise capital when needed or on terms acceptable to us, we may be forced to delay, reduce or eliminate our research or product development programs, any future commercialization efforts or other operations.
Developing pharmaceutical products, including conducting clinical trials and preclinical studies, is a very time-consuming, expensive and uncertain process that takes years to complete. Our operations have consumed substantial amounts of cash since inception, and we expect our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we advance our developmental programs, advance our current clinical trial and preclinical studies, commence additional clinical trials and preclinical studies and expand the breadth of our Compass platform. In addition, even if we obtain marketing approval for any of our therapeutic candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. We expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional capital in connection with our continuing operations. Adequate additional financing may not be available to us on favorable terms, or at all. In addition, we may seek additional capital due to favorable market
43
conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If we are unable to raise capital when needed or on favorable terms, we could be forced to delay, reduce or eliminate our clinical and preclinical development, research and development programs, our commercialization plans or other operations.
As of December 31, 2024, our cash and cash equivalents were $196.8 million. Based on our current operating plan, we believe our existing cash and cash equivalents as of December 31, 2024, together with the net proceeds of approximately $127.8 million from our initial public offering completed in February 2025, will enable us to fund our operating expenses and capital expenditure requirements for at least one year from the date of this Annual Report on Form 10-K. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Changes beyond our control may occur that would cause us to use our available capital before that time, including changes in and progress of our development activities and changes in regulation. Our future capital requirements will depend on many factors, including, but not limited to:
• the costs associated with the type, scope, progress and results of research and discovery, preclinical development, laboratory testing and clinical trials for our current or future therapeutic candidates, including MZE829 and MZE782;
• the extent to which we develop, in-license or acquire other pipeline therapeutic candidates or technologies;
• the number and development requirements of other therapeutic candidates that we may pursue, and other indications for our current therapeutic candidates that we may pursue;
• the costs related to entering into partnerships or other arrangements with third parties;
• the costs, timing and outcome of obtaining regulatory approvals of our current or future therapeutic candidates we may pursue;
• the costs and fees associated with the discovery, acquisition or in-license of our products or technologies, including to maintain and expand our Compass platform;
• the scope and costs of making arrangements with third-party manufacturers for preclinical, clinical and commercial supplies of our current or future therapeutic candidates;
• the scope and costs involved in growing our organization to the size needed to allow for the research, development and potential commercialization of our current or future therapeutic candidates;
• the costs associated with commercializing any approved therapeutic candidates, including establishing sales, marketing and distribution capabilities;
• the costs associated with completing any post-marketing studies or trials required by the FDA or other regulatory authorities;
• the revenue, if any, received from commercial sales of our current or future therapeutic candidates, if any are approved;
• the costs associated with addressing any potential interruptions or delays resulting from factors related to overall global affairs, such as conflicts overseas;
• the costs and timing of preparing, filing and prosecuting patent applications, maintaining, defending and enforcing our intellectual property and proprietary rights and defending intellectual property-related claims that we may become subject to, including any litigation costs and the outcome of such litigation;
• the costs associated with potential product liability claims, including the costs associated with obtaining insurance against such claims and with defending against such claims; and
• our ability to establish and maintain collaboration arrangements on favorable terms, if at all and the timing and amount of any milestone, royalty or other payments we are required to make or are eligible to receive under such collaborations, if any.
44
We will require additional capital for our research and development programs. Our ability to raise additional funds will be dependent on financial, economic and market conditions, geopolitical issues and other factors, over which we may have limited or no control. If adequate funds are not available on commercially acceptable terms when needed, we may be forced to delay, reduce or terminate our research and development activities of all or part of our research programs or therapeutic candidates or we may be unable to take advantage of future business opportunities. Furthermore, any additional capital-raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our current and future therapeutic candidates, if approved. Changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or therapeutic candidates.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or therapeutic candidates, including granting licenses to our technologies, on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts or grant rights to third parties to develop and market therapeutic candidates that we would otherwise prefer to develop and market ourselves.
Our loan and security agreement provides our lender with a first priority lien against substantially all of our assets, except for intellectual property, and contains restrictive and financial covenants that may limit our operating flexibility.
Our loan and security agreement, dated June 27, 2022, between us and Banc of California (f/k/a Pacific Western Bank), as amended as of the date hereof, or the Loan Agreement, is a line of credit secured by a lien covering substantially all of our personal property, excluding intellectual property.
The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things, dispose of assets, make changes to our business, management, ownership or business locations, merge or consolidate, incur additional indebtedness, pay dividends or other distributions or repurchase equity, make investments and certain capital expenditures, and enter into certain transactions with affiliates, in each case subject to certain exceptions. Our ability to comply with these and other covenants is dependent on several factors, some of which are beyond our control.
While we have not drawn on the Loan Agreement to date, the restrictions and covenants in the Loan Agreement, as well as those contained in any future debt financing agreements that we may enter into, may restrict our ability to finance our operations and engage in, expand or otherwise pursue our business activities and strategies. Our ability to comply with these covenants and restrictions may be affected by events beyond our control, and breaches of these covenants and restrictions could result in a default under the Loan Agreement or under any future financing agreements that we may enter into, which would give our lenders the right to terminate their commitments to provide loans and to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable.
Further, the interest rate for any future term loan drawn under the Loan Agreement will be based on the published prime rate, a floating rate, subject to a maximum rate equal to the greater of (i) 0.75% above the published prime rate as then in effect and (ii) 4.50%. The Federal Reserve has raised, and may in the future further raise, interest rates to combat the effects of recent high inflation. An increase in the prime rate resulting in interest rates above the set minimum rate would increase our debt service obligations, which could have a negative impact on our cash flow, financial position or operating results, or result in increased borrowing costs in the future.
45
Risks related to discovery and development of our therapeutic candidates
We are early in our development efforts and highly dependent on the success of our lead programs. If we are unable to commercialize our therapeutic candidates or experience significant delays in doing so, our business will be materially harmed.
Our therapeutic candidates are in early stages of development. We do not have any products that are approved for sale in any jurisdiction. We initiated a Phase 2 trial of MZE829, our most advanced lead program, in November 2024, dosed our first patient in February 2025 and expect to report proof of concept data in the first quarter of 2026. We initiated a Phase 1 clinical trial of our second lead program, MZE782, in September 2024. Our other programs are at an early research stage, with no therapeutic candidates identified. Our research programs may not result in viable therapeutic candidates for some time, if ever, and our therapeutic candidates in development may not achieve success in our current or any future clinical trials, or obtain regulatory approval.
Our ability to generate product revenues, which may not occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our therapeutic candidates. The success of our therapeutic candidates will depend on several factors, including, but not limited to:
• timely and successful completion of, and timely enrollment of patients in, clinical trials with favorable results;
• submission of new drug applications, or NDAs, or other regulatory applications, and receipt and related terms of regulatory approvals from applicable regulatory authorities, including the completion of any required post-marketing studies or trials and available funding to perform any post-marketing commitments;
• raising additional funds necessary to complete clinical development of and commercialize our therapeutic candidates;
• timely and successful completion of preclinical studies with favorable results;
• submission of INDs or other regulatory applications, and authorizations to initiate clinical trials from the FDA and foreign regulatory agencies;
• demonstration of safety, efficacy and acceptable risk-benefit profiles of our therapeutic candidates to the satisfaction of the FDA and foreign regulatory authorities;
• obtaining, maintaining, defending and enforcing patent, trade secret and other intellectual property and proprietary protection and regulatory exclusivity for our therapeutic candidates;
• making arrangements with third-party suppliers and manufacturers for preclinical, clinical and commercial supplies of our therapeutic candidates;
• developing and implementing marketing and reimbursement strategies, as well as adequate demand forecasts for supply and sales planning;
• establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others in a market where promotional sales approaches are rapidly moving to digital platforms;
• acceptance of our products, if and when approved, by patients, the medical community and third-party payors;
• effectively competing with other therapies, including those that have not yet entered the market;
• obtaining and maintaining third-party payor coverage and adequate reimbursement;
• obtaining appropriate support from patient advocacy organizations;
• addressing any delays in our clinical trials, or in the manufacture or distribution of our therapeutic candidates, if approved, resulting from any major natural disasters, health pandemics or significant political events; and
• maintaining a continued acceptable safety profile of the products following approval.
46
Many of these factors are beyond our control, and it is possible that none of our therapeutic candidates will ever obtain regulatory approval, even if we expend substantial time and resources seeking such approval. Even if we do obtain regulatory approval, it is possible that one or more of these factors could cause significant delays or an inability to successfully commercialize our therapeutic candidates, which would materially harm our business.
Additionally, clinical or regulatory setbacks to other companies developing similar products or within adjacent fields, may impact the clinical development of and regulatory pathway for our current or future therapeutic candidates, or may negatively impact the perceptions of value or risk of our technologies.
Preclinical and clinical drug development is a lengthy and expensive process, with uncertain timelines and outcomes. If preclinical studies or clinical trials of our therapeutic candidates are prolonged or delayed, we may be unable to obtain required regulatory approvals, and therefore be unable to commercialize our therapeutic candidates or any of our future therapeutic candidates on a timely basis or at all.
We have limited experience designing and implementing clinical trials. We initiated a Phase 2 trial of MZE829, our most advanced lead program, in November 2024, dosed our first patient in February 2025 and expect to report proof of concept data in the first quarter of 2026. We initiated a Phase 1 clinical trial of MZE782 in September 2024. Failure to design any one of our clinical trials adequately, or incorrect assumptions about the design of the trial, could adversely affect the ability to initiate the trial, enroll patients, complete the trial, or use the clinical trial’s results to support an application for regulatory approval, as well as lead to increased or unexpected costs.
Our programs are in the early stages of development, and the risk of failure is high. Our programs may fail to identify potential therapeutic candidates for clinical development for a number of reasons. We are unable to predict when or if our programs will lead to therapeutic candidates or when or if our therapeutic candidates will prove effective and safe in humans or will obtain marketing approval. Before obtaining marketing approval from regulatory authorities for the sale of any of our therapeutic candidates, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our therapeutic candidates in humans. Our potential therapeutic candidates may be shown to have harmful side effects in animal model studies, may not show promising signals of therapeutic effect in such experiments or studies, or may have other characteristics that may make the therapeutic candidates impractical to manufacture, unmarketable, or unlikely to receive marketing approval.
We are currently focused on advancing the development of our lead programs, MZE829 and MZE782; however, even with significant investment of time and funding to advance these therapeutic candidates, we cannot guarantee that our clinical and preclinical development efforts will be successful. The start or end of a clinical trial may be delayed or halted due to delays in or failure to obtain regulatory approval to commence the trial, delays in or failure to reach agreement on acceptable terms with prospective clinical research organizations, or CROs, or clinical trial sites, delays in or failure to obtain Institutional Review Board, or IRB, approval at each site, changing regulatory requirements, manufacturing challenges, clinical sites or CROs deviating from the trial protocol or failing to comply with regulatory requirements or meet contractual obligations, slower than anticipated patient enrollment, changing standards of care, availability or prevalence of use of a comparative therapeutic or required prior therapy, clinical outcomes, failure of patients to complete the trial or return for post-treatment follow-up, or financial constraints. Delays or difficulties in patient enrollment or difficulties in retaining trial participants can result in increased costs, longer development times, requirements to manufacture additional drug supply, or termination of a clinical trial.
Clinical trials of a new therapeutic candidate require the enrollment of a sufficient number of patients, which may include patients who are suffering from the disease the therapeutic candidate is intended to treat and who meet other eligibility criteria, which may require genetic testing of prospective patients. Rates of patient enrollment are affected by many factors, including the size of the patient population, the eligibility criteria for the clinical trial, the age and condition of the patients, the stage and severity of disease, the nature of the protocol, the proximity of patients to clinical sites, and the availability of effective treatments or competing academic and other clinical trials for the relevant disease.
A therapeutic candidate can unexpectedly fail at any stage of preclinical and clinical development. The historical failure rate for therapeutic candidates is high due to scientific feasibility, safety, efficacy, changing standards of medical care, and other variables. The novelty of our Compass platform may mean our failure rates are higher than historical norms. We will have to conduct additional trials in our proposed indications to support any future regulatory submissions. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles despite promising results in earlier, smaller clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses. We do not know whether our clinical trials will demonstrate consistent or adequate efficacy and safety with respect to the proposed indication for use that is sufficient to receive regulatory approval or market our therapeutic candidates. To the extent that the results of the clinical trials are not satisfactory to the FDA or foreign regulatory agencies for supporting a marketing application, we may be required to expend significant resources, which may not be available to us, to conduct additional clinical trials in support of potential approval of our therapeutic candidates.
47
We, the FDA, an IRB, an independent ethics committee, or EC, or other applicable regulatory authorities may suspend clinical trials of a therapeutic candidate at any time for various reasons, including a belief that subjects participating in such trials are being exposed to unacceptable health risks or adverse side effects. Similarly, an IRB or EC may suspend a clinical trial at a particular trial site. We may not have the financial resources to continue development of, or to enter into collaborations for, a therapeutic candidate if we experience any problems or other unforeseen events delaying or preventing clinical development or regulatory approval of, or our ability to commercialize, therapeutic candidates, including:
• negative or inconclusive results from our clinical trials, or the clinical trials of others for therapeutic candidates similar to ours, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;
• serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using therapeutics similar to our therapeutic candidates;
• serious drug-related side effects experienced in the past by individuals using therapeutics similar to our therapeutic candidates;
• delays in submitting IND applications, clinical trial applications or comparable foreign applications, or delays or failure in obtaining the necessary approvals from regulators or IRBs to commence a clinical trial, or a suspension or termination of a clinical trial once commenced;
• conditions imposed by the FDA or comparable foreign authorities, such as the European Medicines Agency, or EMA, regarding the scope or design of our clinical trials;
• delays or difficulty in enrolling research subjects in clinical trials, for a variety of reasons including, but not limited to, change in priorities for clinical trial sites, the clinical trials of other therapeutic candidates or approval of a competitor’s product for the same indication;
• high drop-out rates of research subjects;
• inadequate supply or quality of therapeutic candidate or therapeutic candidate components, or materials or other supplies necessary for the conduct of our clinical trials, including those owned, manufactured, or provided by companies other than ours;
• greater than anticipated clinical trial costs, including the cost of any approved drugs used in combination with our therapeutic candidates;
• poor effectiveness of our therapeutic candidates during clinical trials;
• unfavorable FDA or other regulatory agency inspection and review of a clinical trial site;
• failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all;
• delays and changes in regulatory requirements, policies, and guidelines, including the imposition of additional regulatory oversight around clinical testing generally or with respect to our technology in particular; or
• varying interpretations of data by the FDA and similar foreign regulatory agencies.
If we are impacted by one or more of these factors and are unable to remediate the issue in a timely manner or at all, then we could experience significant delays or an inability to successfully obtain regulatory approvals for our therapeutic candidates. Without regulatory approval, we will be unable to commercialize our therapeutic candidates, which would materially harm our business and potentially make it impossible to continue our operations.
Results of preclinical studies or early-stage clinical trials of any therapeutic candidates may not be predictive of the results of future preclinical studies or clinical trials.
Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to the outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later preclinical studies or clinical trials or of clinical trials of the same therapeutic candidates in other indications, and interim or preliminary results of a clinical trial do not necessarily predict final results. For example, even if successful, the results of our preclinical studies of our lead programs may not be predictive of the results of outcomes in subsequent clinical trials on human subjects. Later-stage clinical trials could differ in significant ways from early-stage clinical trials, including changes to inclusion and exclusion criteria, efficacy endpoints, dosing regimen and statistical design.
48
If we encounter delays or difficulties enrolling patients in our clinical trials and/or retaining patients in clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
We may experience difficulties in patient enrollment in our clinical trials for a variety of external reasons beyond our control, including supply chain disruptions, staffing shortages and other business and economic disruptions resulting from geopolitical actions, including war and terrorism, natural disasters, including earthquakes, typhoons, floods and fires, as well as other disruptions resulting from the impact of public health factors, including pandemics or other health crises, business disruptions of our strategic partners, third-party manufacturers, suppliers and other third parties upon which we rely. Our therapeutic candidates are developed using a precision medicine approach intended to identify specific genetic targets amenable to therapeutic intervention in CVRM diseases. As a result, the potential population of patients eligible for enrollment in our clinical trials will be smaller than the population eligible for enrollment in trials targeting the entire population with the disease, and it may be difficult to identify and enroll adequate numbers of patients in our trials. For example, our therapeutic candidate MZE829 is targeted to treat kidney disease associated with genetic variations in the APOL1 gene, which are most prevalent in people of West African ancestry, including many who identify as Black, African American, Afro-Caribbean and Latina/Latino, which narrows the patient population eligible for enrollment in these trials.
In addition, the eligibility criteria of our clinical trials will further limit the pool of available trial participants. For our therapeutic candidate MZE829, we depend on and expect to perform genetic screening in order to identify candidates with the applicable genetic variations for our clinical trials. As we expect future therapeutic candidates to also target specific genetic subgroups of common conditions, as identified through our Compass platform, it is likely that future therapeutic candidates will also require identification of patients with the applicable genotype, which will require genetic screening and further costs and timing delays in identifying patients eligible for our clinical trials. Genetic screening could involve more time consuming, costly and invasive procedures than patients may be willing to accept. If patients are not willing to undergo genetic screening, or any other eligibility criteria we have for our clinical trials, it would lead to greater costs and/or timing delays for us in order to identify eligible and the necessary patients for our clinical trials. The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of eligible patients who remain in the trial until completion of treatment and adequate follow-up. In general, the enrollment and retention of patients depends on many factors, including, but not limited to:
• inability to enroll, or delay in enrollment of, patients due to infectious disease outbreaks and public health crises;
• the patient eligibility criteria defined in the protocol;
• the perceived risks and benefits of the therapeutic candidate being studied;
• the size of the patient population required for analysis of the trial’s primary endpoints;
• the proximity of patients to trial sites;
• the design of the trial;
• the ability to recruit clinical trial investigators with the appropriate competencies and experience;
• the ability to obtain and maintain patient consent;
• geopolitical events in countries where we have or seek to have clinical trial sites;
• reporting of the preliminary results of any of our clinical trials;
• potential approval and commercial availability of a competitor’s product for the same indication; and
• the risk that patients enrolled in clinical trials will drop out of the trials before completion of treatment and adequate follow-up.
In addition, our clinical trials will compete with other clinical trials for therapeutic candidates that are in the same therapeutic areas as our therapeutic candidates, and this competition will reduce the number and types of patients available to or retained by us because patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one or more of our competitors. Other biopharmaceutical companies are currently conducting clinical trials, and may in the future conduct clinical trials, that compete for the same patient population as us. Since the number of qualified clinical investigation sites is limited, and often associated with a small number of academic centers, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. Unanticipated geopolitical events in countries where we may seek to have clinical trial sites could also negatively impact our ability to enroll or retain patients in our trials.
49
Our therapeutic candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, require expansion of the trial size, limit their commercial potential, or result in significant negative consequences.
If serious adverse events or undesirable side effects arise, we could be required to suspend, delay, or halt our clinical trials. Additionally, serious adverse events or undesirable side effects could cause regulatory authorities to deny approval or require us to limit development of that therapeutic candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Undesirable side effects could also result in an expansion in the size of our clinical trials, increasing the expected costs and timeline of our clinical trials. Side effects that are observed during trials, whether treatment related or not, could also affect patient recruitment for future trials or the ability of enrolled patients to complete the trial or result in potential product liability claims. Many compounds that initially show promise in clinical or preclinical testing are later found to cause undesirable or unexpected side effects that prevent further development of the compound.
Further, if serious adverse events or undesirable side effects are identified during development or after approval and are determined to be attributed to any of our therapeutic candidates, we may be required to develop Risk Evaluation and Mitigation Strategies, or REMS, to ensure that the benefits of treatment with such therapeutic candidate outweigh the risks for each potential patient. A REMS may include, among other things, a communication plan to health care practitioners, patient education, extensive patient monitoring or distribution systems and other processes that would make our therapeutic candidate more restricted or costly to distribute to patients.
Our two lead programs are intended to treat chronic kidney disease, or CKD, which is a progressive condition associated with severe and often life-threatening co-morbidities. Clinical trials that involve patients with significant co-morbidities are associated with increased risks as such participants may be particularly susceptible to safety and toxicity risks. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff, as safety and toxicity monitoring may be complicated and difficult to manage, which could result in patient death or other significant issues. Additionally, it can be difficult to determine if the serious adverse or unexpected side effects were caused by our therapeutic candidate or another factor, especially in subjects who may suffer from other medical conditions and take other medications.
Any of these occurrences may materially harm our business, financial condition and prospects.
We may not be successful in applying our Compass platform to identify targets with therapeutic potential or to discover and develop safe, effective or commercially viable therapeutic candidates.
We use our Compass platform to identify and prioritize potential drug targets, to assess the likelihood that we can develop a therapeutic candidate that interacts with the applicable target to elicit the desired therapeutic effect, and to transition these insights efficiently into well-supported therapeutic candidates. We believe our use of our Compass platform, which identifies and prioritizes targets using statistical modeling, variant functionalization tools, and traditional and computational drug discovery technologies, augmented with machine learning and artificial intelligence, or AI, increases our likelihood of producing therapies that provide meaningful clinical benefit, but past success in identifying potential therapeutic candidates does not assure similar future success with our other programs. We may not succeed in applying our Compass platform to identify targets or promising therapeutic candidates in the future. We therefore cannot provide any assurance that we will be able to successfully identify additional therapeutic candidates or advance any of our programs or future therapeutic candidates into clinical development, nor can we provide any assurance whether the application of our Compass platform will result in the ultimate regulatory approval of any of our therapeutic candidates.
Efforts to identify, acquire or in-license, and then develop therapeutic candidates require substantial technical, financial and human resources, whether or not any therapeutic candidates are ultimately identified. We apply our Compass platform to discover potential genetic targets for which we may be able to develop precision therapeutic candidates. Our efforts may initially show promise in identifying potential targets linked to diseases or conditions, yet fail to yield therapeutic candidates for clinical development or regulatory approval for many reasons, including the following:
• the platform methodology used may not be successful in identifying potential therapeutic candidates;
• competitors may develop alternatives that render any therapeutic candidates we develop obsolete;
• any therapeutic candidates we develop may nevertheless be covered by third parties’ patents or other exclusive rights;
• a therapeutic candidate may be shown, in subsequent preclinical or clinical investigations, to have harmful side effects or characteristics that indicate it is unlikely to be effective, or otherwise would not meet applicable regulatory criteria;
• a therapeutic candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and
50
• a therapeutic candidate may not be accepted as safe and/or effective by physicians, patients, the medical community or third-party payors.
Certain of the diseases we, or which our partners, seek to treat have low prevalence and/or have available therapies, and it may be difficult for us or our partners to identify patients with these diseases or face competition in the recruitment of these limited groups of patients, which may lead to difficulties in enrolling clinical trials.
Genetically defined diseases generally, and especially some of those which our out-licensed programs target, including Pompe disease, have low prevalence and incidence. This could pose obstacles to the timely recruitment, enrollment and retention of a sufficient number of eligible patients into our partners’ trials or limit a therapeutic candidate’s commercial potential, and thus the milestone payments and royalties we would receive for those licenses. Other companies have ongoing clinical trials for therapeutic candidates that treat the same indications as our wholly owned and our out-licensed therapeutic candidates, and patients who otherwise would be eligible for our or our partners’ planned clinical trials instead may enroll in clinical trials of our competitors’ therapeutic candidates. In addition, where there are currently available therapies or if our competitors’ therapeutic candidates gain regulatory approval and become commercially available, patients may be reluctant to enroll in a clinical trial. As more companies begin to focus attention and resources on therapeutic candidates to treat the same indications as the ones we have out-licensed, our licensees may experience delays or be unable to successfully recruit and enroll a sufficient number of eligible patients in their clinical trials.
Our licensees’ inability to enroll a sufficient number of patients with these diseases into their planned clinical trials would result in significant delays and could cause them to not initiate or abandon one or more clinical trials altogether, potentially depriving us of milestone payments and royalties potentially associated with these licenses.
We may experience delays in commencing and completing, or ultimately be unable to complete, the development and/or commercialization of our therapeutic candidates.
Before we can initiate clinical trials of a therapeutic candidate in any indication, we must submit the results of preclinical studies to the FDA or to comparable foreign authorities, along with other information, including information about the therapeutic candidate’s chemistry, manufacturing and controls, and our proposed clinical trial protocol, as part of an IND or comparable foreign regulatory filings.
The FDA may require us to conduct additional preclinical studies for any therapeutic candidate before it allows us to initiate clinical trials under any IND, which may lead to additional delays and increase the costs of our preclinical development programs.
Any delays in the commencement or completion of preclinical studies or clinical trials could significantly affect our development costs. We may experience numerous unforeseen events during, or as a result of, preclinical studies or clinical trials that could delay or prevent our ability to obtain marketing approval or commercialize our therapeutic candidates, including, but not limited to:
• regulators, IRBs or ECs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
• the FDA may disagree as to the design or implementation of our clinical trials;
• we may experience delays in reaching, or fail to reach, agreement on acceptable preclinical studies or clinical trial contracts or clinical trial protocols with prospective CROs and prospective trial sites;
• the cost of our preclinical studies and clinical trials may be greater than we anticipate, and we may lack adequate funding to continue preclinical studies and clinical trials;
• our third-party partners may fail to obtain regulatory approval of companion diagnostic tests on which we may rely, if required, on a timely basis, or at all;
• our third-party contractors may fail to meet their contractual obligations to us in a timely manner, or at all, or may fail to comply with regulatory requirements;
• we may have to suspend or terminate clinical trials for various reasons, including a finding by us or by a Data Monitoring Committee that the participants are being exposed to unacceptable health risks;
• our therapeutic candidates may produce negative or inconclusive results, or have undesirable side effects or other unexpected characteristics, and we may decide, or our investigators, regulators or IRBs/ECs may require us, to conduct additional preclinical studies or clinical trials, or delay, halt or abandon our development programs;
51
• our clinical trials may be negatively impacted or delayed by changes to clinical trial protocol;
• the supply or quality of our therapeutic candidates or other materials necessary to conduct clinical trials may be insufficient or inadequate and result in delays or suspension of our clinical trials; and
• global health crises or geopolitical conflict may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned clinical trials.
Delays, including delays caused by the above factors and other factors described in this “Risk factors” section, can be costly and could negatively affect our ability to complete preclinical studies or clinical trials or obtain timely marketing approvals. We do not know whether any of our planned preclinical studies or clinical trials will begin on or be completed on a timely basis, or at all. For example, the FDA may place a partial or full clinical hold on any of our clinical trials for a variety of reasons, including safety concerns and noncompliance with regulatory requirements. If we are not able to complete successful clinical trials, we will not be able to obtain regulatory approval and will not be able to commercialize our therapeutic candidates.
Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our therapeutic candidates or allow our competitors to bring products to market before we do, which may impair our ability to successfully commercialize our therapeutic candidates and harm our business and results of operations.
We may expend our limited resources to pursue a particular therapeutic candidate or indication and fail to capitalize on therapeutic candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on research programs and therapeutic candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other therapeutic candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions and spending on current and future research and development programs may not yield any commercially viable products or profitable market opportunities, which may adversely affect our business, financial condition, results of operations and prospects. If we do not accurately evaluate the commercial potential or target market for a particular therapeutic candidate, we may relinquish valuable rights to that therapeutic candidate through collaboration, licensing or other royalty collaborations or arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such therapeutic candidate.
If ethical and other concerns surrounding the use of genetic information become widespread, there may be limitations on our ability to access genetic information for our Compass platform.
One of the pillars of our Compass platform is our ability to access and aggregate numerous and varied genomic and phenotypic data collections, particularly those that pair genetic and clinical data. Genetic testing to provide this data has given rise to ethical questions and controversies regarding confidentiality and the appropriate uses of the resulting information. For these reasons, governmental authorities may call for limits on or regulate the use of genetic data, including by limiting the compilation of genetic information or prohibiting testing for genetic predisposition to various conditions, particularly for those that have no known cure. Some of the major data sources of genetic and clinical data for our Compass platform derive from publicly funded and managed databases. One of our key objectives is to continue to augment our access to diverse sources of genetic information from multiple population groups. If our access to these additional sources of human genetic data becomes restricted, due to governmental limitations or otherwise, the capability of our Compass platform may be reduced, and we may be unable to continue to recognize the benefits of our Compass platform on our expected timeframe, or at all, which would have a negative effect on our business or financial condition.
Interim, topline and preliminary data from preclinical studies and clinical trials that we or our partners announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we or our partners may make public interim, topline or preliminary data from our or their preclinical studies and clinical trials that are based on a preliminary analysis of then-available data, of which, the results, related findings and conclusions are subject to change following a more comprehensive review of the data or accumulation of additional data. Interim, topline or preliminary data from clinical trials that we or our partners may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Interim, preliminary or topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the interim, preliminary or topline data that were previously made public. As a result, interim, topline and preliminary data should be viewed with caution until the final data are available. Adverse differences between interim, topline or preliminary data and final data could significantly harm our reputation and business, financial condition, results of operations and prospects.
52
Further, regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, analyses or conclusions, or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular drug candidate, and our company in general. If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval of, and commercialize, any of our current or future therapeutic candidates may be harmed, which could harm our business, financial condition, results of operations and prospects.
If we do not achieve our projected development goals in the time frames we announce or expect, the development of our therapeutic candidates may be delayed and, as a result, our stock price may decline.
From time to time, we estimate the timing of the anticipated accomplishment of various scientific, clinical, regulatory and other therapeutic development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of preclinical studies and clinical trials and the submission of regulatory filings. From time to time, we may publicly announce the expected timing of some of these milestones. All of these milestones are and will be based on numerous assumptions, estimates, calculations, conclusions, or analyses. The actual timing of these milestones can vary dramatically compared to our assumptions and estimates, in some cases for reasons beyond our control. If we do not meet these milestones as publicly announced, or at all, the commercialization of our therapeutics may be delayed or never achieved, which could harm our business, financial condition, results of operations and prospects and may cause our stock price to decline.
Risks related to our reliance on third parties
Our Compass platform relies on access to high quality data repositories with paired genetic and clinical data and loss of such access, or the inability to use such data, could have a material adverse effect on our business, financial condition, results of operations and prospects.
We rely on non-exclusive access to third-party data sources of genetic and paired clinical data for our Compass platform, including, among others, the University of Helsinki, Queen Mary University, the UK Biobank, Biobank Japan and the Million Veteran Program, as well as specialized databases such as the Chronic Renal Insufficiency Cohort which is managed by the National Institute for Diabetic, Digestive and Kidney Diseases and other genetic data sets we have acquired or may acquire access to in the future. Our ability to access data from these and similar sources is vital to all phases of our Compass platform, including target identification and variant functionalization.
For the most part, we do not control the quantity or type of data that is stored in genetic data repositories, and we may only have access to summary level or aggregate data. Some institutions only provide access to their data for limited purposes, or will require us to make results publicly available. We cannot guarantee that our access to any particular source of genetic or paired clinical data will be available in the future, or that the data that is available will meet the needs of our business strategy or our Compass platform.
We pay substantial membership fees to access certain genetic data repositories. Our memberships provide us with certain preferred access to non-public data, as well as some oversight of the biobanks through membership in the steering committees for these organizations. Most of the other members of these consortiums are larger and better resourced than we are. Any termination of our arrangements with these organizations would require us to rely more heavily on less well-developed resources or require us to invest in finding alternative, and potentially more costly, genetic data resources, if such resources are available at all, and could delay or impair our research and development efforts.
Furthermore, while any loss of access to these or similar genetic data repositories may not directly impact the development of our lead programs, we cannot predict the effects such loss could have on our preclinical and clinical studies and development efforts and our ability to discover and develop additional therapeutic candidates, or optimize our future clinical trials.
While we have not identified any licenses that are required to conduct our genomics work to date, we may in the future identify a third-party technology we need to license to expand or continue to operate our Compass platform. For example, certain aspects of our Compass platform make use of CRISPR Cas9 technology at the early research stages, and while the patent coverage of such technology remains uncertain, certain institutions that have rights in CRISPR Cas9 patents have sought and may in the future seek to obtain license fees from biotechnology companies like ours. If we were unable to license or otherwise obtain access to such technology on reasonable terms or at all, and we were required to cease operation of our Compass platform, it would have a material adverse effect on our business, results of operations, financial condition and prospects.
53
We have entered, and may in the future enter, into strategic collaborations, transactions and licensing partnerships for research, development or commercialization of our programs, including our first therapeutic candidate MZE001, and we may not be able to realize the full value of these partnerships or our partnered programs.
Our Compass platform has identified, and may identify in the future, genetic targets and therapeutic candidates outside of our core area of focus in CVRM diseases. Our business strategy includes seeking strategic collaborations to advance these targets. For example, in 2024, we granted exclusive licenses to advance two programs related to targets we were pursuing in amyotrophic lateral sclerosis, or ALS— ATXN2 and UNC13A—to other biotechnology companies, as well as an exclusive license with a pharmaceutical partner, Shionogi & Co., Ltd., or Shionogi, to advance our first clinical stage therapeutic candidate, MZE001.
We may face significant competition in seeking appropriate strategic partners, and negotiating partnership or collaboration terms that are favorable to us, and the negotiation process may be time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our programs and therapeutic candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our therapeutic candidates as having the requisite potential to obtain marketing approval. Certain kinds of strategic transactions, including exclusive licenses, may be subject to potential government review, including by antitrust agencies such as the U.S. Federal Trade Commission, or FTC, which can add substantially to the time and expense of completing a transaction. For example, in 2023, the FTC conducted an investigation of our proposed exclusive license of the MZE001 program to Genzyme Corporation, a subsidiary of Sanofi, and ultimately filed an action to enjoin the transaction based upon allegations that the Genzyme license would substantially lessen competition among pharmaceutical treatments for Pompe disease. If we are unable to license or collaborate on our programs, we may have to curtail the development of the therapeutic candidate for which we are seeking a partner, reduce or delay its development program or one or more of our other development programs, increase our expenditures and undertake development activities at our own expense, or accept terms that are for a lower value than we believe the asset is worth.
In our arrangements with third parties, we have limited control over the amount and timing of resources that our partners dedicate to the development or commercialization of our therapeutic candidates. Our ability to generate revenues from these arrangements will depend on our partners’ abilities and efforts to successfully perform the functions assigned to them in these arrangements to meet regulatory and development milestones, and if a product is approved, to commercialize it.
Partnerships involving development and commercialization of our therapeutic candidates, including our existing exclusive license to Shionogi, pose numerous risks to us, including the following:
• partners have significant discretion in determining the efforts and resources that they will apply to these collaborations and may not perform their obligations as expected;
• partners may de-emphasize or elect not to pursue development or commercialization programs based on studies or trials results, changes in the partners’ strategic focus, including as a result of a sale or disposition of a business unit or development function or a business combination involving the partner, or available funding or external factors such as an acquisition that diverts resources or creates competing priorities;
• partners may delay or abandon preclinical studies or clinical trials for our therapeutic candidates, provide insufficient funding for such programs, repeat or conduct new studies or trials or require a new formulation of a therapeutic candidate;
• partners could independently develop, or develop with third parties, therapeutic candidates that compete directly or indirectly with our therapeutic candidates if the partners believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
• a partner with marketing and distribution rights to multiple therapeutic candidates may not commit sufficient resources to the marketing and distribution of our therapeutic candidates relative to others;
• partners may not recognize, properly obtain, maintain, defend or enforce our intellectual property rights or may use our intellectual property in such a way as to invite litigation or other intellectual property-related proceedings that could jeopardize or invalidate our intellectual property or expose us to potential litigation or other intellectual property-related proceedings;
• disputes may arise between the partners and us that result in the delay or termination of the research, development or commercialization of our therapeutic candidates or that result in costly litigation or arbitration that diverts management attention and resources;
• partnerships may be terminated by the partner, and, if terminated, may result in our need for additional capital to pursue further development or commercialization of the applicable therapeutic candidates; and
54
• the strategic arrangements we have entered into may not lead to development or commercialization of our therapeutic candidates in the most efficient manner or at all.
Failure to recognize the benefit of strategic collaborations or partnerships we have entered or may enter in the future could adversely affect our business, financial condition, results of operations and prospects.
We face risks associated with new companies we may create, such as joint ventures and spin-outs.
Part of our business model includes creating business partnerships and new corporate entities to develop and potentially commercialize therapeutic targets identified through our Compass platform that are outside of our core area of expertise. For example, in 2020, we formed a spin-out company with Alloy Therapeutics, Inc., or Alloy, to develop antibody therapies for ANGPTL7 and another undisclosed target in ophthalmic diseases. Going forward, we may create or acquire interests in more joint venture enterprises, spin-outs, and other entities to execute our business strategy. These business collaborations involve risks that our partners may:
• have economic or business interests or goals that are inconsistent with or adverse to ours;
• take actions contrary to our requests or contrary to our policies or objectives, including actions that may violate applicable law;
• be unable or unwilling to fulfill their obligations under the relevant joint venture and spin-out agreements;
• have financial or business difficulties;
• consume the time and attention of our senior executives, who may serve on the board of such companies;
• take actions that may harm our reputation; or
• have disputes with us as to the scope of their or our rights, responsibilities and obligations.
We will not be able to fully control all aspects of the operations of these partnerships or entities, and we may not have full visibility or control over the operations of these enterprises, including their business decisions, compliance practices or their filing, maintenance, protection and enforcement of intellectual property rights, among others. For example, although we have certain opt-in rights to jointly develop and commercialize certain therapeutic candidates developed through our spin-out company with Alloy, we do not have the power to control the operations of Alloy, which owns the applicable programs and therapeutic candidates and the associated intellectual property rights. In addition, if these entities seek further financing, we may be required to contribute additional cash to maintain our equity stake in these entities or our equity stake may be diluted and our investment impaired.
Our present partnerships or spin outs may not be successful. We may have disputes or encounter other problems with respect to our present or future partners, and our agreements may not be effective or enforceable in resolving these disputes. We may not be able to resolve such disputes and solve such problems in a timely manner or on favorable economic terms, or at all. Any failure by us to address these potential disputes or conflicts of interest effectively could have a material adverse effect on our business, prospects, financial condition, results of operations or cash flows.
We rely on third parties to conduct current and future clinical trials, and those third parties may not perform satisfactorily or at all, including failing to meet deadlines for completing such trials, failing to satisfy legal or regulatory requirements or terminating the relationship.
We rely, and expect to continue to rely, on third-party CROs to conduct any current and future clinical trials for our therapeutic candidates. We currently do not plan to conduct any clinical trials independently. Agreements with these CROs might terminate for a variety of reasons, including for their failure to perform. Entry into alternative arrangements, if necessary, could significantly delay our product development activities.
Our reliance on these CROs for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols in the applicable IND. Moreover, the FDA requires compliance with standards, commonly referred to as good clinical practices for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected, and we will be responsible for ensuring our clinical trials are conducted in compliance with applicable laws and regulation, including good clinical practices.
55
If these CROs do not successfully carry out their contractual duties, meet expected deadlines or conduct the clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our therapeutic candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our therapeutic candidates, which may adversely affect our business, financial condition, results of operations and prospects.
We rely on third parties to manufacture our clinical product supplies and therapeutic candidates and we may not be able to obtain adequate supplies at a reasonable cost or in a timely way.
The process of manufacturing pharmaceutical products is complex and highly regulated. We do not have any manufacturing facilities or plans to establish manufacturing capabilities in the near future. We rely, and expect to continue to rely, on third parties, including foreign manufacturers, for the manufacture of our therapeutic candidates for preclinical and clinical testing, development purposes, to support regulatory application submissions, as well as for commercial manufacture if any of our therapeutic candidates obtain marketing approval. This reliance on third parties increases the risk that we will not have sufficient quantities of our therapeutic candidates or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts. In addition, global health crises or geopolitical conflict may result in disruptions to the operations or an extended shutdown of certain businesses, which could include certain of our contract manufacturers. Further, as our therapeutic candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, we are likely to alter various aspects of the development program, such as manufacturing methods, to optimize processes and results, which may result in additional cost or delay.
We have only limited supply arrangements in place with respect to our therapeutic candidates, and these arrangements do not extend to Phase 3 clinical or commercial supply. We acquire many key materials on a purchase order basis. As a result, we may not have long-term committed arrangements with respect to aspects of our therapeutic candidates and other materials. We will need to establish one or more agreements with third parties to develop and scale up the drug manufacturing process, conduct testing, and generate data to support a regulatory submission, and may be unable to do so on favorable terms. If we obtain marketing approval for any of our therapeutic candidates, we will need to establish an agreement for commercial manufacture with a third party.
Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including, but not limited to:
• reliance on the third party for regulatory, compliance and quality assurance;
• reliance on the third party for product development, analytical testing, and data generation to support regulatory applications;
• operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier, the issuance of an FDA Form 483 notice or warning letter, or other enforcement action by FDA or other regulatory authority;
• the possible breach of the manufacturing agreement by the third party;
• the possible infringement, misappropriation, violation or unauthorized disclosure of our intellectual property and proprietary rights, including our trade secrets, know-how and other confidential information;
• the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us;
• competition with other companies for access to manufacturing capacity;
• carrier disruptions or increased costs that are beyond our control; and
• failure to deliver our products under specified storage conditions and in a timely manner.
Third-party manufacturers may not be able to comply with current good manufacturing practice, or cGMP, regulations or similar regulatory requirements outside of the United States. If the FDA determines that our contract manufacturing organizations, or CMOs, are not in compliance with FDA laws and regulations, including those governing cGMPs, the FDA may not approve an NDA until the deficiencies are corrected or we replace the manufacturer in our application with a manufacturer that is in compliance. Moreover, our failure, or the failure of our third-party manufacturers and suppliers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, seizures or recalls of therapeutic candidates, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. In addition, approved products and the facilities at which they are manufactured are required to maintain ongoing compliance with extensive FDA requirements and the requirements of other similar agencies, including ensuring that quality control and manufacturing procedures conform to cGMP requirements. As such, our CMOs are subject to continual review and periodic inspections to assess compliance with cGMPs. Furthermore, although we do not have day-to-day control over the operations of our CMOs, we are responsible for ensuring compliance with applicable laws and regulations, including cGMPs.
56
Further, we rely on third parties located in China for some of our contract manufacturing, and we expect to continue to use such third-party manufacturers for such purposes. For any activities conducted in China, we are exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies of the United States or Chinese governments, political unrest or unstable economic conditions in China. In addition, certain Chinese biotechnology companies may become subject to trade restrictions, sanctions, other regulatory requirements, or proposed legislation by the U.S. government, which could restrict or even prohibit our ability to work with such entities, thereby potentially disrupting the supply of material to us. For example, the BIOSECURE Act that was passed by the U.S. House of Representatives, as well as a substantially similar bill proposed in the U.S. Senate, target U.S. government contracts, grants and loans for entities that use equipment and services from certain named Chinese biotechnology companies. Given the current uncertain political and legislative environment, it is unclear what form the BIOSECURE Act will take and whether or when it will be enacted into law. If enacted as passed by the House of Representatives, the BIOSECURE Act would, among other things, prohibit U.S. federal agencies from entering into or renewing any contract with any entity that uses biotechnology equipment or services produced or provided by a “biotechnology company of concern” to perform that contract. The BIOSECURE Act defines a “biotechnology company of concern” to include WuXi Apptec and its affiliates, collectively, WuXi, and provides that additional companies may be designated as “biotechnology companies of concern.” The version of the bill passed by the House of Representatives includes a “grandfathering” provision that provides that the BIOSECURE Act’s prohibitions will not apply to pre-existing contracts and agreements entered into prior to the legislation’s effective date until 2032. We are currently parties to agreements with WuXi, pursuant to which WuXi provides development and manufacturing services to us. If these bills become law, or similar laws are passed, we may be restricted in our ability to work with WuXi and other Chinese biotechnology manufacturing companies to the extent we would contract with, or otherwise receive funding from, the U.S. government. As a result, we may need to seek alternative CMO relationships, but we expect that the grandfathering provision will provide adequate time to identify and execute agreements with alternative CMOs. While we believe we will be able to identify and contract with such alternative CMOs, we cannot predict the terms of any such alternative arrangement nor what actions may ultimately be taken with respect to trade relations between the United States and China or other countries, what products and services may be subject to such actions or what actions may be taken by China or the other countries in retaliation. In addition to the BIOSECURE ACT, any unfavorable government policies on international trade, such as export controls, capital controls or tariffs, new legislation or regulations, renegotiation of existing trade agreements, or any retaliatory trade actions due to recent or future trade tension, may impede, delay, limit, or increase the cost of manufacturing our therapeutic candidates. Such events could result in our clinical or commercial supply of drug, packaging and other services being interrupted or limited, which could harm our business.
In addition, our third-party manufacturers and suppliers are subject to numerous environmental, health and safety laws and regulations, including those governing the handling, use, storage, treatment and disposal of waste products, and failure to comply with such laws and regulations could result in significant costs associated with civil or criminal fines and penalties for such third parties. Based on the severity of regulatory actions that may be brought against these third parties in the future, our clinical or commercial supply of drug and packaging and other services could be interrupted or limited, which could harm our business.
Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant supply or a second source for bulk drug substance. If our current CMOs for preclinical and clinical testing cannot perform as agreed, we may be required to replace such CMOs. Although we believe that there are several potential alternative manufacturers who could manufacture our therapeutic candidates, we may incur added costs and delays in identifying and qualifying any such replacement manufacturer or be able to reach agreement with any alternative manufacturer. Further, our third-party manufacturers may experience manufacturing or shipping difficulties due to resource constraints or as a result of natural disasters, labor disputes, unstable political environments, or global health crises. If our current third-party manufacturers cannot perform as agreed, we may be required to replace such manufacturers and we may be unable to replace them on a timely basis or at all.
Our current and anticipated future dependence upon others for the manufacture of our therapeutic candidates may adversely affect our future profit margins and our ability to commercialize any products that obtain marketing approval on a timely and competitive basis.
57
Our reliance on third parties requires us to share certain of our trade secrets, which increases the possibility that a competitor or other third party will discover them or that our trade secrets will be misappropriated or disclosed.
Our reliance on third parties may require us to share certain of our proprietary technology and confidential information, including trade secrets, with them. We seek to protect our proprietary technology, in part, by entering into confidentiality agreements, and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our partners, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors or other third parties, are intentionally or inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets and despite our efforts to protect our trade secrets, a competitor’s or other third party’s discovery of our proprietary technology and confidential information or other unauthorized use or disclosure of such technology or information would impair our competitive position and may have a material adverse effect on our business, financial condition, results of operations and prospects.
Risks related to government regulation
The FDA regulatory approval process is lengthy and time-consuming.
The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of our therapeutic candidates are subject to extensive regulation by the FDA and other regulatory authorities in the United States. Our current lead programs, MZE829 and MZE782, are both small molecules and will be regulated as drugs. We are not permitted to market any drug in the United States until we receive approval of the respective NDA. We have not previously submitted an NDA to the FDA or made similar submissions to comparable foreign regulatory agencies. An NDA must include extensive preclinical and clinical data and supporting information to establish the therapeutic candidate’s safety and effectiveness for each desired indication, which takes many years to collect through clinical and preclinical testing of the therapeutic candidate and is subject to a high failure rate. Further, the NDA must also include significant information regarding the chemistry, manufacturing, and controls for the product, including storage and handling of the product. The manufacturing facility is also required to maintain a compliance status acceptable to the FDA. In addition, even if such clinical trials are successfully completed, we cannot guarantee that the FDA or comparable foreign regulatory agencies will interpret the results as we do, and more trials could be required before we submit an NDA, or other foreign marketing application. Further, the FDA may call an advisory committee meeting to discuss the product and its intended use, as well as scientific and regulatory issues related to the product and the NDA, which may further delay approval of our therapeutic candidates or lead to restrictions on their intended use.
We, as a company, have limited experience in submitting INDs in the United States and we do not have experience in obtaining regulatory approval to initiate clinical trials in any other jurisdiction. Nor do we have experience in manufacturing or in quality assurance in order to market our therapeutic candidates in the United States or in any other jurisdiction.
We have limited experience in submitting INDs in the United States and we do not have experience in obtaining regulatory approval to initiate clinical trials in any other jurisdiction. Nor do we have experience in manufacturing or in quality assurance in order to market a drug and we expect to rely on third-party CROs, CMOs or other third-party consultants or vendors to assist us in this process. Our inexperience may result in failure or delay in obtaining permission to initiate clinical trials or in obtaining marketing approval for our therapeutic candidates. If we are unable to obtain regulatory and marketing approval for our therapeutic candidates, or experience significant delays in our efforts to do so, our business could be substantially harmed.
Our failure to obtain marketing approval in foreign jurisdictions would prevent our therapeutic candidates from being marketed abroad, and any approval we are granted for our therapeutic candidates in the United States would not assure approval of therapeutic candidates in foreign jurisdictions.
In order to market and sell our products in any jurisdiction outside the United States, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before such product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to submit for marketing approvals and may not receive necessary approvals to commercialize our products in any market.
58
If we decide to pursue a fast track designation by the FDA, it may not lead to a faster development or regulatory review or approval process.
Some of our therapeutic candidates may be intended to treat serious or life-threatening conditions and may demonstrate the potential to address an unmet medical need for such conditions, and as such they would be eligible for expedited processes within the FDA such as fast track designation. The FDA has broad discretion whether or not to grant such designation, so even if we believe a particular therapeutic candidate is eligible for this designation, we cannot guarantee that the FDA would decide to grant it. Even if we do receive fast track designation, we may not experience a faster development process, review or approval. The FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program.
If we decide to pursue accelerated approval for any of our therapeutic candidates, it may not lead to a faster regulatory review or approval process and does not increase the likelihood that our therapeutic candidates will receive marketing approval.
As part of our business strategy, we may pursue accelerated approval for one or more of our therapeutic candidates. Under the FDA’s accelerated approval program, the FDA may approve a drug for a serious or life-threatening illness that provides meaningful product benefit to patients over existing treatments based upon 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. We may seek accelerated approval for one or more of our therapeutic candidates on the basis of a surrogate endpoint that we believe is reasonably likely to predict clinical benefit.
If any of our therapeutic candidates receive accelerated approval from the FDA, we will be required to undergo one or more confirmatory clinical trials. If such a therapeutic candidate fails to meet its safety and efficacy endpoints in such confirmatory clinical trials, the FDA may withdraw the accelerated approval.
Recently, the accelerated approval pathway has come under scrutiny within the FDA and by Congress. The FDA has put increased focus on ensuring that confirmatory studies are conducted with diligence and, ultimately, that such studies confirm clinical benefit. In addition, the enactment of the Food and Drug Omnibus Reform Act, or FDORA, included provisions related to the accelerated approval pathway. Pursuant to FDORA, the FDA is authorized to require a post-approval study to be underway prior to approval or within a specified time period following approval. FDORA also requires the FDA to specify conditions of any required post-approval study and requires sponsors to submit progress reports for required post-approval studies and any conditions required by the FDA. FDORA enables the FDA to initiate enforcement action for the failure to conduct with due diligence a required post-approval study, including a failure to meet any required conditions specified by the FDA or to submit timely reports.
There is no assurance that any therapeutic candidate will successfully advance through its confirmatory clinical trial(s). Therefore, even if a therapeutic candidate receives accelerated approval from the FDA, such approval may be withdrawn at a later date.
Even if we, or any of our partners, obtain marketing approval for our therapeutic candidates, the terms of approvals, ongoing regulation of our product, including enforcement of post-marketing requirements by regulatory agencies or other post-approval restrictions, may require the expenditure of substantial resources, which could materially impair our ability to generate revenue. If we, or any of our partners or manufacturers, fail to comply with all regulatory requirements or experience unanticipated problems with our products, when and if any of them are approved, we could be subject to substantial penalties, including withdrawal of our product from the market.
Any therapeutic candidate for which we, or any partners obtain marketing approval, as well as the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include, but are not limited to, restrictions governing promotion of an approved product, submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding drug distribution and the distribution of samples to physicians and recordkeeping.
For instance, even if marketing approval of a product is granted, the FDA may impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product, including the adoption and implementation of a REMS.
59
We, or any of our partners, must also comply with requirements concerning advertising and promotion for any of our therapeutic candidates for which we or they obtain marketing approval. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the therapeutic candidate’s approved labeling. Thus, we, and any partners, will not be able to promote any products we develop for indications or uses for which they are not approved.
In addition, manufacturers of approved products and those manufacturers’ facilities are required to ensure that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We, our third-party manufacturers, and any partners and their third-party manufacturers, and our CMOs would be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs.
Accordingly, assuming we, or any partners, obtain marketing approval for one or more of our therapeutic candidates, we, any partners and our CMOs will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control. If we are not able to comply with post-approval regulatory requirements, we could have the marketing approvals for our products withdrawn by regulatory authorities and our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. As a result, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.
The FDA as well as other federal and state agencies, including the U.S. Department of Justice, enforce and closely regulate compliance with all requirements governing drug products, including those requirements pertaining to marketing and promotion of drugs in accordance with the provisions of the approved labeling and manufacturing of products in accordance with cGMP requirements. For example, the FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability. Violations of such requirements may lead to investigations alleging violations of the Federal Food, Drug, and Cosmetic Act and other statutes, including the False Claims Act and other federal and state healthcare fraud and abuse laws as well as state consumer protection laws. Our failure to comply with all regulatory requirements, and later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, may yield various results, including:
• litigation involving patients using our products;
• restrictions on such products, manufacturers or manufacturing processes;
• modifications to the labeling or restrictions on the marketing of a product;
• restrictions on distribution or use;
• requirements to conduct post-marketing studies or clinical trials;
• warning or untitled letters;
• withdrawal or recall of the product from the market;
• refusal to approve pending applications or supplements to approved applications that we submit;
• fines, restitution or disgorgement of profits or revenues;
• suspension or withdrawal of marketing approvals;
• damage to relationships with any potential partners;
• unfavorable press coverage and damage to our reputation;
• refusal to permit the import or export of our products;
• product seizure; or
• injunctions or the imposition of civil or criminal penalties.
Non-compliance by us or any future partner with regulatory requirements, including safety monitoring or pharmacovigilance, and with requirements related to the development of our products can also result in significant financial penalties.
60
If generic versions of our small molecule therapeutic candidates are approved, our revenue and results of operations would be adversely affected.
The Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Amendments, permits the FDA to approve abbreviated NDAs, or ANDAs, for generic versions of small molecule branded drugs. We refer to this process as the ANDA process. The ANDA process permits a competitor to obtain marketing approval for a drug with the same active ingredient as a branded drug but does not generally require the conduct and submission of clinical efficacy studies for the generic product. In place of such clinical studies, an ANDA applicant usually needs only to submit data demonstrating that its product is bioequivalent to the branded product. The Hatch-Waxman Amendments require an ANDA applicant seeking FDA approval of its proposed generic product prior to the expiration of any patents we may list in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the Orange Book) to certify that the applicant believes that our patents are invalid or will not be infringed by the manufacture, use or sale of the drug for which the application has been submitted (a Paragraph IV certification) and notify us of such certification (a Paragraph IV notice).
Pursuant to the Hatch-Waxman Amendments, with regard to a drug that has received five years of marketing exclusivity as a result of being a new chemical entity, or NCE, FDA cannot receive any ANDA seeking approval of a generic version of that drug during the five-year period of exclusivity unless the application contains a Paragraph IV certification, in which case the application may be submitted one year prior to expiration of the NCE exclusivity. Accordingly, potential competitors will be permitted to submit ANDA applications for proposed generic versions of any small molecule products for which we obtain approval four or five years from the date of such approval was granted.
Upon receipt of a Paragraph IV notice, the Hatch-Waxman Amendments allow us, with proper basis, to bring an action for patent infringement against the ANDA filer, asking that the proposed generic product not be approved until after our patents expire. If we commence a lawsuit within 45 days from receipt of the paragraph IV notice, the Hatch-Waxman Amendments provide a 30-month stay, during which time the FDA cannot finally approve the ANDA application. If the litigation is resolved in favor of the ANDA applicant during the 30-month stay period, the stay will be lifted and the FDA may approve the ANDA if it is otherwise ready for approval. The discovery, trial and appeals process in such a lawsuit is costly, time consuming, and may result in generic competition if the ANDA applicant prevails.
Our current and future relationships with customers and third-party payors may be subject to applicable anti-kickback, fraud and abuse, transparency, health privacy, and other healthcare laws and regulations, which could expose us to significant penalties, including criminal, civil, and administrative penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, including physicians, and third-party payors will play a primary role in the recommendation and prescription of any therapeutic candidates for which we obtain marketing approval. Our current and future arrangements with such healthcare providers, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we research, as well as, market, sell and distribute any products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations that may be applicable to our business include the following:
• the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
• the federal civil, including the False Claims Act, which can be enforced by civil whistleblower or qui tam actions on behalf of the government, and criminal false claims laws and the civil monetary penalties law, prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment by a federal government program, or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government;
• the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, regardless of the payor (e.g., public or private), and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or fraudulent statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;
• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or
61
disclosure of, individually identifiable health information, relating to the privacy, security, and transmission of such individually identifiable health information;
• the federal transparency requirements under the ACA, requires certain manufacturers of drugs, devices, biologics and medical supplies to report to the Centers for Medicare & Medicaid Services, or CMS, information related to payments and other transfers of value provided to, and ownership and investment interests held by, physicians, as defined by such law, and their immediate family members; and
• analogous state laws and regulations such as state anti-kickback and false claims laws and analogous non-U.S. fraud and abuse laws and regulations, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance regulations promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures, or drug pricing, including price increases. State and local laws require the registration of pharmaceutical sales representatives. State and non-U.S. laws that also govern the privacy and security of personal information (including health information in some circumstances), many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional integrity reporting and oversight obligations, 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. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil and administrative sanctions, including exclusions from government funded healthcare programs, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our therapeutic candidates and may affect pricing and third-party payment for our therapeutic candidates and decrease the prices we may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our therapeutic candidates, restrict or regulate post-approval activities and affect pricing and third-party payment for our therapeutic candidates, which could negatively affect our ability to profitably sell any therapeutic candidates for which we obtain marketing approval.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our therapeutic candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
In addition, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
62
Several healthcare reform initiatives culminated in the enactment of the Inflation Reduction Act in August 2022, which allows, among other things, the Department of Health and Human Services, or HHS, to negotiate the selling price of a statutorily specified number of drugs and biologics each year that the Centers for Medicare & Medicaid Services, or CMS, reimburses under Medicare Part B and Part D. The negotiated price may not exceed a statutory ceiling price. Only high-expenditure single-source drugs that have been approved for at least 7 years (11 years for single-source biologics) can qualify for negotiation, with the negotiated price taking effect two years after the selection year. For 2026, the first year in which negotiated prices become effective, CMS selected 10 high-cost Medicare Part D drugs in 2023, negotiations began in 2024, and the negotiated maximum fair price for each drug has been announced. CMS has selected 15 additional Medicare Part D drugs for negotiated maximum fair pricing in 2027. For 2028, up to an additional 15 drugs, which may be covered under either Medicare Part B or Part D, will be selected, and for 2029 and subsequent years, up to 20 additional Part B or Part D drugs will be selected. A drug or biological product that has an orphan drug designation for only one rare disease or condition will be excluded from the Inflation Reduction Act’s price negotiation requirements, but loses that exclusion if it has designations for more than one rare disease or condition, or if is approved for an indication that is not within that single designated rare disease or condition, unless such additional designation or such disqualifying approvals are withdrawn by the time CMS evaluates the drug for selection for negotiation. The Inflation Reduction Act also imposes rebates on Medicare Part B and Part D drugs whose prices have increased at a rate greater than the rate of inflation. In addition, the law eliminates the “donut hole” under Medicare Part D beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and establishing a new manufacturer discount program, which requires manufacturers, in order for their drugs to be covered by Medicare Part D, to provide statutorily defined discounts on their brand (NDA) drugs dispensed to Part D enrollees. The Inflation Reduction Act also extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The Inflation Reduction Act permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. Manufacturers that fail to comply with the Inflation Reduction Act may be subject to various penalties, some significant, including civil monetary penalties. These provisions are taking effect progressively starting in 2023, although they may be subject to legal challenges. For example, the provisions related to the negotiation of selling prices of high-expenditure single-source drugs and biologics have been challenged in multiple lawsuits. Thus, it is unclear how the Inflation Reduction Act will be implemented but it will likely have a significant impact on the pharmaceutical industry and the pricing of our products and therapeutic candidates. The adoption of restrictive price controls in new jurisdictions, more restrictive controls in existing jurisdictions or the failure to obtain or maintain timely or adequate pricing could also adversely impact revenue. We expect pricing pressures will continue globally.
In addition, at the state level, individual states have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect that additional state and federal healthcare reform measures may be adopted in the future. Such reform measures may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. 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.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our therapeutic candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain, or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved, or commercialized in a timely manner or at all, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new therapeutic candidates to be reviewed and/or approved by necessary government agencies, which may adversely affect our business, financial condition, results of operations and prospects. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
63
Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing.
Certain laws and regulations require us to test our therapeutic candidates on animals before initiating clinical trials involving humans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted, delayed, or become more expensive.
Even if we are able to commercialize a drug candidate, coverage and adequate reimbursement may not be available or such drug candidate may become subject to unfavorable pricing regulations or third-party coverage and reimbursement policies, which would harm our business.
The regulations that govern regulatory approvals, pricing, and reimbursement for drug products vary widely from country to country. Some countries require approval of the sale price of a drug product before it can be marketed or may require us or our partners to conduct clinical trials that compare the cost-effectiveness of our therapeutic candidates to other therapies to obtain reimbursement or pricing approval. In many countries, the pricing review period begins after regulatory approval is granted. In some foreign markets, prescription drug product pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain regulatory approval for a drug in a particular country, but then be subject to price regulations that delay our commercial launch of the drug, possibly for lengthy time periods, and negatively impact the revenue we are able to generate from the sale of the drug in that country. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various EU member states, and parallel trade, such as arbitrage between low-priced and high-priced member states, can further reduce prices. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products, if approved in those countries. Adverse pricing limitations may hinder our ability to recoup our investment in one or more therapeutic candidates, even if any of our current or future therapeutic candidates obtain regulatory approval.
Our ability to commercialize any drugs successfully also will depend in part on the extent to which coverage and adequate reimbursement for these drugs and related treatments will be available from third-party payors, such as government authorities, private health insurers, and other organizations. Even if we succeed in bringing one or more drugs to market, these drugs may not be considered cost-effective, and the amount reimbursed for any drugs may be insufficient to allow us to sell our drugs on a competitive basis. Moreover, in the United States, no uniform policy requirement for coverage and reimbursement for drugs exists among third-party payors, which may result in significant variations in coverage and reimbursement from payor to payor. Even if favorable coverage and reimbursement status is attained for one or more drug products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. If the price we are able to charge for any drugs we develop, or the coverage and reimbursement provided for such drugs, is inadequate in light of our development and other costs, our return on investment could be affected adversely.
Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling certain therapeutic candidates outside of the United States and require us to develop and implement costly compliance programs.
If we expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of such third party in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the company, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.
Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.
64
Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing or selling certain therapeutic candidates outside of the United States, which could limit our growth potential and increase our development costs.
Failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission, or the SEC, also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.
If we, or any third-party contractors we engage, fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We and our third-party contractors are subject to numerous foreign, federal, state and local environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and radioactive and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination, discharge or injury from these materials. In the event of contamination, discharge or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources, including any available insurance. We could be subject to civil damages and criminal penalties in the event of an improper or unauthorized release of, or exposure of individuals to, hazardous materials. Further, it is possible that the materials we use could contaminate another party’s property. In addition, claimants may sue us for injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our total assets and our ability to pay the liability.
In addition, our leasing and operation of real property may subject us to liability pursuant to certain of these laws or regulations. Under existing U.S. environmental laws and regulations, current or previous owners or operators of real property and entities that disposed or arranged for the disposal of hazardous substances may be held strictly, jointly and severally liable for the cost of investigating or remediating contamination caused by hazardous substance releases, even if they did not know of and were not responsible for the releases.
We could incur significant costs and liabilities which may adversely affect our financial condition and operating results for failure to comply with such laws and regulations, including, among other things, civil or criminal fines and penalties, property damage and personal injury claims, costs associated with upgrades to our facilities or changes to our operating procedures, or injunctions limiting or altering our operations.
Although we maintain liability insurance to cover us for costs and expenses we may incur due to injuries to our employees, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability, including claims that may arise from pollution from chemical, radioactive or biological materials, or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials. Our partners may also be working with various types of hazardous materials in connection with our collaborations.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations, which are becoming increasingly more stringent, may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
65
We are subject to certain U.S. and certain foreign anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations. We can face serious consequences for violations.
U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations prohibit, among other things, companies and their employees, agents, CROs, CMOs, legal counsel, accountants, consultants, contractors and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of these laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences. We have and expect to continue to have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. We also expect our non-U.S. activities, including those in China, to increase over time. We expect to continue to rely on third parties for research, preclinical studies and clinical trials and/or to obtain necessary permits, licenses, patent registrations and other marketing approvals. We can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners, even if we do not explicitly authorize or have prior knowledge of such activities.
Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.
We are, and may in the future be, subject to stringent and changing obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.
In the ordinary course of business, we collect, receive, store, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, share and otherwise process (which we refer to as process or processing) certain personal information and other sensitive information, including our proprietary and confidential business data, trade secrets, employee data, intellectual property, data we or our CROs collect about trial participants in connection with clinical trials, and other sensitive data. The global data protection landscape is rapidly evolving and we are and may increasingly become subject to numerous data privacy and security obligations, such as various state, federal and foreign laws, regulations, guidance, directives, industry standards, external and internal privacy and security policies, contractual requirements and other obligations that govern the processing of sensitive or confidential information by us and on our behalf, and we may be subject to new or additional data protection laws and regulations and face increased scrutiny from regulators as our business grows. The legislative and regulatory landscape for data privacy and security continues to evolve in jurisdictions worldwide, and there has been an increasing focus on these issues with the potential to affect our business, financial condition, results of operations and prospects.
Various federal, state, local and foreign legislative and regulatory bodies, or self-regulatory organizations, may expand current laws, rules or regulations, enact new laws, rules or regulations or issue revised rules or guidance regarding data privacy and security that could result in regulatory investigations, fines or injunctions, as well as civil claims including class actions, and reputational damage. Implementation standards, interpretation, and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to process personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, our internal or external policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, data privacy laws, and other similar laws. For example, all 50 states and the District of Columbia have enacted breach notification laws that may require us to notify patients, customers, employees or regulators in the event of unauthorized access to or disclosure of personal or confidential information experienced by us or our service providers. These laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly. Moreover, HIPAA, as amended by HITECH, imposes among other things, certain requirements relating to the privacy, security, transmission, and breach of individually identifiable health information. We may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA. Depending on the facts and circumstances, we could be subject to significant penalties if we violate HIPAA.
66
Certain states have also adopted comparable privacy and security laws and regulations, which govern the processing of health-related and other personal information. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners. For example, the California Consumer Privacy Act of 2018 (as amended by the California Privacy Rights Act of 2020), or CCPA, imposes obligations on businesses that meet certain thresholds that process the personal information of California residents (including employees based in California). These obligations include, but are not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal information, which includes a private right of action for certain data breaches. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA could increase compliance costs and potential liability. The 2020 amendments to the CCPA also created the California Privacy Protection Agency, a new enforcement agency whose sole responsibility is to enforce the CCPA and is empowered to create new CCPA regulations. Other states, such as Virginia, Indiana, Oregon, Texas, Tennessee, Montana, Iowa, Delaware, Connecticut, Utah, Washington and Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels. In addition to government activity and private rights of actions provided by some of the state privacy laws, privacy advocacy groups and technology and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us.
Around the world, many countries have privacy and data protection laws that create potentially complex compliance issues for us, our future customers, and strategic partners. For example, outside the United States, the EU’s General Data Protection Regulation, or EU GDPR, and the United Kingdom’s GDPR, or UK GDPR, impose strict requirements for processing the personal data of individuals. For example, under the EU GDPR, government regulators may impose temporary or definitive bans on data processing, as well as fines of up to €20 million or 4% of annual global revenue, whichever is greater. Such fines would be in addition to (i) the rights of individuals to sue for damages in respect of any data privacy breach which causes them to suffer harm, (ii) the right of individual member states to impose additional sanctions over and above the administrative fines specified in the GDPR and (iii) the ability of supervisory authorities to impose orders requiring companies to modify their practices. If we are found not to be compliant with the GDPR or similar requirements, we may be subject to significant fines and the risk of civil litigation. Among other requirements, the GDPR and UK GDPR (and certain other foreign jurisdictions) regulate the cross-border transfer of personal data, which could make it more difficult to transfer information across jurisdictions (such as transferring or receiving personal data that originates in the EU or the United Kingdom to countries such as the United States which are not considered by the EU or United Kingdom to provide adequate protection of personal data). In October 2022, the EU-U.S. Data Privacy Framework, or EU-U.S. DPF, was implemented, and the European Commission adopted an adequacy decision on July 10, 2023 that set conditions for personal data transfers from the EU to certified companies in the United States without additional safeguards in place. However, this decision will likely face legal challenges and ultimately may be invalidated by the Court of Justice of the EU. On October 12, 2023, a UK-U.S. Data Bridge came into force to operate as an extension of the EU-U.S. DPF to facilitate transfers of personal data between the United Kingdom and certified entities in the United States. Such Data Bridge could not only be challenged, but also may be affected by any challenges to the EU-U.S. DPF. Furthermore, in June 2021, the European Commission adopted new standard contractual clauses under the GDPR for transfers of personal data outside the European Economic Area to countries that the European Commission has not deemed to provide an adequate level of protection for such personal data. While we strive to adhere to all requirements to transfer information across jurisdictions using safeguards endorsed by government guidance (such as using the Standard Contractual Clauses approved by the European Commission), we must still adapt to changing guidance and will follow any anticipated litigation closely. As the regulatory guidance and enforcement landscape in relation to data transfers continue to develop, we could suffer additional costs, complaints and/or regulatory investigations or fines; we may have to stop using certain tools and vendors and make other operational changes; we may have to implement revised standard contractual clauses for existing arrangements within required time frames; and/or it could adversely affect our business, financial condition, results of operations and prospects.
Any such changes in the law related to the use of personal information or data could compromise our ability to develop an adequate marketing strategy and pursue our growth strategy effectively or even prevent us from providing certain products in jurisdictions in which we currently operate or may operate in the future. Complying with these numerous, complex, conflicting, and often changing regulations is expensive and difficult, and failure to comply with any data privacy or security laws, whether by us, one of our CROs, CMOs, partners or another third party, which may adversely affect our business, financial condition, results of operations and prospects., financial condition, results of operations and prospects, including but not limited to: investigation costs; material fines and penalties; compensatory, special, punitive and statutory damages; litigation; consent orders regarding our privacy and security practices; requirements that we provide notices, credit monitoring services and/or credit restoration services or other relevant services to impacted individuals; adverse actions against our licenses to do business; reputational damage; and injunctive relief.
67
In addition to data privacy and security laws, we are also bound by other contractual obligations related to data privacy and security that could prove to be more burdensome as laws and regulations evolve. We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, rules and regulations or other legal obligations relating to privacy or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business. Any of these events could adversely affect our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations (including clinical trials); inability to process personal information or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
We cannot assure you that our CROs, CMOs or other third-party service providers with access to our or our suppliers’, manufacturers’, clinical trial participants’ and employees’ sensitive information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security incidents, which could have a corresponding effect on our business, including putting us in breach of our obligations under privacy laws and regulations and/or which could in turn adversely affect our business, financial condition, results of operations and prospects. We cannot assure you that our contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing of such information. Any of the foregoing could adversely affect our business, financial condition, results of operations and prospects.
Although we endeavor to comply with our public statements and documentation regarding our handling of personal information, we may at times fail to do so or be perceived to have failed to do so. Our publication of our privacy policies and other statements we publish that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive, unfair or misrepresentative of our actual practices. Any actual or perceived failure by us to comply with federal, state or foreign laws, rules or regulations, industry standards, contractual or other legal obligations, or any actual, perceived or suspected cybersecurity incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of personal information or other data, may result in enforcement actions and prosecutions, private litigation, significant fines, penalties and censure, claims for damages by customers and other affected individuals, regulatory inquiries and investigations or adverse publicity and could cause our customers to lose trust in us, any of which could adversely affect our business, financial condition, results of operations and prospects.
Risks related to commercialization of our therapeutic candidates
We face significant competition in an environment of rapid technological change and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies or technologies that are more advanced or effective than ours, which may harm our business and financial condition, and our ability to successfully market or commercialize our therapeutic candidates.
The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property. While we believe that our platform and our knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from major pharmaceutical and biotechnology companies, academic institutions, government agencies and private and public research institutions, among others.
Any therapeutic candidates that we or our partners successfully develop and commercialize may compete with existing therapies and new therapies that may become available in the future that are approved to treat the same indications for which we or they may obtain approval for our therapeutic candidates. It is also possible that we or our partners may face competition from other pharmaceutical approaches as well as other types of therapies. The key competitive factors affecting the success of all our programs, if approved, include, but are not limited to their efficacy, safety, convenience, adoption by prescribers, price, level of generic competition, and availability of reimbursement.
We may face competition from companies developing therapies for CKD and related nephropathies, including but not limited to established therapies including renin-angiotensin-aldosterone system, or RAAS, inhibitors, SGLT2 inhibitors and glucagon-like peptide 1, or GLP-1 agonists, as well as novel mechanisms such as therapies being developed by various companies targeting different pathways implicated in CKD progression.
While there are currently no approved therapies for APOL1 kidney disease, or AKD, we are aware of companies advancing therapeutic candidates in clinical trials that target APOL1.
Our second most advanced lead program, MZE782, is a small molecule targeting SLC6A19, a novel target in CKD and PKU. While there are no currently approved therapies directly modulating SLC6A19, we may face competition from other companies pursuing programs targeting SLC6A19 or alternative approaches for renal and metabolic indications.
Many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining
68
regulatory approvals, and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Mergers and acquisitions in the biopharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Further, precision medicine is a rapidly developing field, with increasing usage within the pharmaceutical and biotechnology industry of machine learning and AI technologies to analyze genetic data. While we believe our Compass platform has advantages over potential competitors based on our experience in variant functionalization, our access to genetic databases, and the length of time that we have been engaged in developing precision medicine, other companies may have greater resources or the ability to acquire more advanced technology to identify targets and may acquire access to the same genetic data that we utilize. We may not be able to keep up with the pace of innovation that is occurring in our field, and we may face increasing competition in developing precision medicines.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other applicable regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.
Even if our Compass platform is effective as a research tool, we may be unable to develop or commercialize new drugs, therapies or other products based on discoveries from our Compass platform.
Even if our Compass platform performs its intended functions, we may be unable to use the discoveries resulting from the platform to produce new therapies. Despite recent scientific advances in the life sciences and our improved understanding of biology, the roles of genes and proteins and their involvement in diseases and in other life processes is not well understood. Therefore, notwithstanding any potential promising results in earlier studies or clinical trials, we may face significant setbacks in current or future studies or clinical trials. If we are unable to use our platform discoveries platform to develop and market new drugs or therapies, our business may fail or we may never become profitable.
We, or the third parties we rely on, may be unable to develop the diagnostic tests or clinical assays to successfully advance our therapeutic candidates through clinical trials or commercialization.
Some or all of our therapeutic candidates may require companion diagnostic tests for clinical trials or commercialization. If we are unable to successfully develop the applicable companion diagnostic tests, experience significant delays in doing so, or rely on third parties in the development of such companion diagnostic tests, or if we are required by the FDA to obtain approval of a companion diagnostic test in connection with approval of any of our therapeutic candidates, and we do not obtain or face delays in obtaining FDA approval of a companion diagnostic test, the full commercial potential of our therapeutic candidates and our ability to generate revenue will be materially impaired.
Our approach to drug discovery and developing therapeutic candidates relies on human genetics and functional genomics to identify targets for therapeutic intervention as well as predictive biomarkers to evaluate the effects of our therapeutic candidates. For those therapeutic candidates that advance to clinical trials, predictive biomarkers, such as a specific genetic screen, may become necessary for subject selection and thus may require the incorporation of a diagnostic test, or companion diagnostic, into our clinical trial design. If required, we may engage one or more third-party partners to co-develop the necessary companion diagnostic.
69
If safe and effective use of any of our therapeutic candidates depends on a companion diagnostic test, then the FDA generally will require approval or clearance of that companion diagnostic, before or at the same time that the FDA approves our therapeutic candidates, if at all. According to FDA guidance, if the FDA determines that a companion diagnostic device is essential to the safe and effective use of a novel therapeutic product or indication, the FDA generally will not approve the therapeutic product or new therapeutic product indication if the companion diagnostic is not also approved or cleared for that indication. If a satisfactory companion diagnostic is not commercially available, we may be required to create or obtain one that would be subject to regulatory approval requirements. In the past, FDA has issued guidance on the development of companion diagnostics generally as well as for specific disease categories. We will continue to evaluate the impact of FDA guidance on our companion diagnostic development and strategy. This guidance and any future guidance or policies from the FDA and other regulatory authorities may impact our development of a companion diagnostic for our therapeutic candidates and result in delays in regulatory approval. We may be required to conduct additional studies or clinical trials to support a broader claim. Also, to the extent other approved diagnostics are able to broaden their labeling claims to include our approved drug products, we may be forced to abandon our companion diagnostic development plans or we may not be able to compete effectively upon approval, which could adversely impact our ability to generate revenue from the sale of our approved products and our business, financial condition, results of operations and prospects.
We expect to rely on third parties for the design, development and manufacture of companion diagnostic tests for our therapeutic candidates that require such tests. If the FDA, EMA or a comparable regulatory authority requires approval of a companion diagnostic for any of our therapeutic candidates, whether before or after the therapeutic candidate obtains marketing approval, we, and/or future partners, may encounter difficulties in developing and obtaining approval for such therapeutic candidate. If we or our third-party partners experience any delay in developing or obtaining regulatory approval of a companion diagnostic, we may be unable to enroll enough patients in future clinical trials, the development of our therapeutic candidates may be adversely affected or we may not obtain marketing approval, and we may not realize the full commercial potential of our therapeutic candidates.
We currently have no marketing and sales organization and have no experience as a company in commercializing products, and we may need to invest significant resources to develop these capabilities. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our products, we may not be able to generate product revenue.
We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of biopharmaceutical products. To achieve commercial success for any therapeutic candidate for which we obtain marketing approval, we will need to establish sales, marketing and distribution capabilities, either by ourselves or through collaboration or other arrangements with third parties.
There are risks involved with establishing our own sales and marketing capabilities. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a therapeutic candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have incurred these commercialization expenses prematurely or unnecessarily. These efforts may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our products on our own include, but not limited to:
• our inability to recruit, train and retain adequate numbers of effective sales, marketing, reimbursement, customer service, medical affairs, and other support personnel;
• the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
• unforeseen costs and expenses associated with creating an independent sales and marketing organization.
If we are unable to establish our own sales and marketing capabilities, our revenue from product sales and our profitability, if any, are likely to be lower than if we ourselves were to market and sell any products that we develop. In addition, we may not be successful in entering into arrangements with third parties to market and sell our therapeutic candidates or may be unable to do so on terms that are acceptable to us. Any of these third parties may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our therapeutic candidates.
70
Even if any of our therapeutic candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
If any of our therapeutic candidates receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success. If our therapeutic candidates do not achieve an adequate level of acceptance, we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of our therapeutic candidates, if approved for commercial sale, will depend on a number of factors, including:
• the efficacy and potential advantages compared to alternative treatments;
• the acceptance of our therapeutic candidates as front-line treatment for various indications;
• the prevalence and severity of any side effects, in particular compared to alternative treatments;
• limitations or warnings contained in the labeling approved for our therapeutic candidates by the FDA;
• the size of the target patient population;
• the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
• our ability to offer our products for sale at competitive prices;
• the convenience and ease of administration compared to alternative treatments;
• the strength of marketing, sales and distribution support;
• publicity for our therapeutic candidates and alternative treatments;
• the existence of distribution and/or use restrictions, such as through a REMS;
• the availability of third-party payor coverage, adequate reimbursement and favorable pricing policies;
• the timing of any required marketing approval;
• support from patient advocacy groups; and
• any restrictions on the use of our products together with other medications.
Even if our therapeutic candidates were to display a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of such therapeutic candidates will not be fully known until after they are launched.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any therapeutic candidates that we may develop alone or with partners.
Clinical development does not always fully characterize the safety and efficacy profile of a new medicine, and it is always possible that a drug or biologic, even after regulatory approval, may exhibit unforeseen side effects. We face an inherent risk of product liability exposure related to the testing of our therapeutic candidates in human clinical trials and will face an even greater risk if we commercialize any products that we may develop. If we cannot successfully defend ourselves against any claims that our therapeutic candidates caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
• decreased demand for any therapeutic candidates that we may develop;
• injury to our reputation and significant negative media attention;
• initiation of investigations by regulators;
• withdrawal of clinical trial participants;
• significant time and costs to defend the related litigation;
• diversion of management and scientific resources from our business operations;
• substantial monetary awards to trial participants or patients;
• loss of revenue;
• reduced resources of our management to pursue our business strategy; and
• the inability to commercialize any products that we may develop.
71
As a clinical-stage company, we currently hold product liability insurance coverage for our clinical trials. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. A successful product liability claim or series of claims brought against us could decrease our cash and could adversely affect our business, financial condition, results of operations and prospects.
Our estimated market opportunities for our therapeutic candidates are subject to numerous uncertainties and may prove to be inaccurate. If we have overestimated the size of our market opportunities, our future growth may be limited.
Our estimated addressable markets and market opportunities for our therapeutic candidates are based on a variety of inputs, including data published by third parties, our own market insights and internal market intelligence, and internally generated data and assumptions. We have not independently verified any third-party information and cannot be assured of its accuracy or completeness. Market opportunity estimates, whether obtained or derived from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may prove not to be accurate, particularly given the relatively early stage of our therapeutic candidates. Although we believe our market opportunity estimates are reasonable, such information is inherently imprecise. In addition, our assumptions and estimates of market opportunities are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including but not limited to those described in this Annual Report on Form 10-K. If this third-party or internally generated data prove to be inaccurate or if we make errors in our assumptions based on that data, or if the facts underlying our assumptions change over time, our actual market may be more limited than we estimate it to be. In addition, these inaccuracies or errors may cause us to misallocate capital and other critical business resources, which could harm our business. The estimates of our market opportunities included in this Annual Report on Form 10-K should not be taken as indicative of our ability to grow our business.
Moreover, prices for novel approved treatments must often be set high in order to recover the sponsor’s development and manufacturing costs, fund additional research and achieve profitability, and we may be unable to obtain the price necessary to achieve these things. We may also need to fund patient support programs upon the marketing of a therapeutic candidate, which would negatively affect the revenue of a therapeutic candidate. We may be unable to maintain or obtain sufficient therapy sales volumes at a price high enough to justify our development efforts and our sales, marketing and manufacturing expenses.
Risks related to our business operations
Our future success depends on our ability to retain key employees, to engage advisors and consultants and to attract, retain and motivate qualified personnel.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on the development and management expertise of our scientific founders who are leading researchers in genetics and bioinformatics, as well as the other principal members of our management, scientific and clinical team. We currently do not maintain key person insurance on these individuals. Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time.
Moreover, we might not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses, particularly in the San Francisco Bay Area where we are headquartered, and we may be required to expend significant financial resources in our employee recruitment and retention efforts. Many pharmaceutical companies with whom we compete for qualified personnel have greater financial and other resources, different risk profiles and longer operating histories in the industry than we do. They also may provide candidates with more diverse opportunities and better chances for career advancement. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will harm our ability to implement our business strategy and achieve our business objectives.
In addition, we have scientific and clinical advisors and consultants who assist us in formulating our development and clinical strategies. These advisors and consultants are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, our advisors and consultants may have arrangements with other companies to assist those companies in developing products or technologies that may compete with ours.
72
We will need to grow our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.
As our development and commercialization plans and strategies develop, and in connection with our recent transition into operating as a public company, we expect to expand our employee base for managerial, operational, financial and other resources. In addition, we have limited experience in clinical development and, as our therapeutic candidates enter and advance through preclinical studies and clinical trials, we will need to expand our development, regulatory and manufacturing capabilities or contract with other organizations to provide these capabilities for us. We have to manage additional relationships with partners, suppliers and other organizations as part of our ongoing and anticipated clinical trials, and we expect to continue to have to manage additional relationships with partners, suppliers and other organizations in the future. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial and management controls, reporting systems and procedures. We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. In addition, we may need to expand our facilities, including laboratory operations, and may be unable to do so on commercially reasonable terms, or at all. Our inability to successfully manage our growth and expand our operations could have a material and adverse effect on our business, financial condition, results of operations and prospects.
Our current or future employees, clinical trial investigators, CROs, CMOs, consultants, vendors and partners may engage in misconduct or other improper activities, including non-compliance with regulatory requirements, violations of regulatory standards, and insider trading.
We are exposed to the risk of misconduct by our current or future employees, clinical trial investigators, CROs, CMOs, consultants, vendors and partners. Misconduct by these parties could include fraud or intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (i) FDA regulations or those of comparable foreign regulatory agencies, (ii) manufacturing or clinical standards, (iii) federal and state health and data privacy, security, fraud and abuse, government price reporting, transparency reporting requirements, and other healthcare laws and regulations in the United States and abroad, (iv) sexual harassment and other workplace misconduct, or (v) laws that require the true, complete and accurate reporting of financial information or data. Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation, or improper or unauthorized use of AI or machine learnings tools that result in the disclosure of confidential information or reliance on inaccurate information.
We have adopted a code of conduct applicable to all of our employees, as well as a disclosure program and other applicable policies and procedures, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with laws or regulations. If any actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, such actions could adversely affect our ability to operate our business and our results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional integrity reporting and oversight obligations, and the curtailment or restructuring of our operations.
Our business is dependent on the integrity of information technology systems and failure of such systems could disrupt our business.
Like most companies, we depend on the efficient and uninterrupted operation of our information technology and communications systems and those of our third-party vendors, contractors or consultants. Such systems may fail or suffer security breaches, cyberattacks, loss or leakage of data and other disruptions, which could cause adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.
We, and third parties on whom we depend, are increasingly dependent on information technology systems, infrastructure and data to operate our and their businesses. In the ordinary course of business, we process confidential information (including but not limited to intellectual property, proprietary business data and patient data). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced elements of our information technology systems and operations to third parties, and as a result we rely on and manage a number of third-party vendors and other contractors and consultants who have access to and process our confidential information.
73
Although we are still in the process of implementing our internal security controls, policies and other measures, we take steps designed to detect, mitigate, and remediate vulnerabilities in our information systems (such as our hardware and/or software, including that of third parties upon which we rely). We may not, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Despite the implementation of these security measures, our information technology systems and those of our third-party vendors and other contractors and consultants have been in the past and may be in the future potentially vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, accidents by our employees or third-party service providers, natural disasters, terrorism, war, global pandemics, and telecommunication and electrical failures. We may also experience security incidents from inadvertent or intentional actions by our employees, third-party vendors, contractors, consultants, business partners and/or other third parties, including theft, fraud or unauthorized access to or use of our information technology systems, or attack or damage from hacking, cyberattacks or supply chain attacks by malicious third parties and sophisticated nation-state and nation-state-supported actors (including the deployment of harmful computer viruses and malware, ransomware, denial or degradation-of-service attacks, phishing attacks and other social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), which may compromise our system infrastructure, or that of our third-party vendors and other contractors and consultants, impede our ability to conduct business, delay our financial reporting or lead to data leakage.
While we have a security consultant provide annual assessments on our systems vulnerabilities, the risk of a security incident or disruption, particularly through cyberattacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. We may not be able to anticipate all types of security threats, nor implement preventive measures effective against all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations, or hostile foreign governments or agencies. Cyberattacks or security incidents could remain undetected for an extended period, which could potentially result in significant harm to our information technology systems, as well as unauthorized access to the information stored on and transmitted by our information technology systems. Even if identified, the full extent of a cyberattack or security incident may not be determined immediately and we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. Moreover, recovery of our information technology systems may be additionally hampered where we have outsourced the operation of information technology systems and information storage to third parties. Any breach, loss or compromise of confidential information may also subject us to liability, government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); breach notification and additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class action litigation); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences may prevent or cause customers to stop using our products, deter new customers from using our products, and negatively impact our ability to grow and operate our business. If the information technology systems of our third-party vendors and other contractors and consultants become subject to disruptions or security incidents, we may have insufficient recourse against such third parties and we may have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring.
Further, remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.
Significant disruptions of our information technology systems or those of our third-party vendors and other contractors and consultants, or security breaches could result in the loss, misappropriation and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property or proprietary business information) and claims by our counterparties that we have failed to comply with legal or contractual obligations, which could result in financial, legal, business, and reputational harm to us.
There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate to protect us from liabilities and damage and we may not have adequate insurance coverage to cover losses, or all types of costs, expenses and losses, we could incur with respect to security breaches or disruptions. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim.
74
We utilize third-party open source software, and any failure to comply with the terms of one or more of these open source software licenses could adversely affect our business, subject us to litigation, or create potential liability.
Our Compass platform utilizes software licensed by third parties under any one or more open source licenses, including the Apache 2.0 License, MIT, BSD variants, and others, and we expect to continue to incorporate open source software in our business in the future. We cannot ensure that we have effectively monitored our use of open source software, or validated the quality or source of such software, or that we are in compliance with the terms of the applicable open source licenses or our current policies and procedures.
Companies that incorporate open source software into their products have, from time to time, faced claims challenging the use of open source software and compliance with open source license terms. We could be subject to similar suits by parties claiming ownership of what we believe to be open source software or claiming non-compliance with open source licensing terms, which could result in litigation that may cause us to be required to disclose our proprietary source code based on our modifications of open source code, incur expenses and be liable for damages and such litigation could distract our personnel from their normal responsibilities.
Furthermore, there are an increasing number of open source software license types, almost none of which have been interpreted by U.S. or foreign courts, and there is a risk that such licenses to which we are subject to could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market or provide our products or services. If we are held to have breached or failed to fully comply with any of the terms and conditions of an open-source software license, we could face claims for breach of contract, intellectual property infringement or misappropriation or other liability, or be required to seek costly licenses from third parties that may not be available on commercially reasonable terms, or at all. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under open source licenses, if we combine our proprietary software with open source software in a certain manner. In the event that portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our Compass platform, or otherwise be limited in the licensing of our Compass platform, each of which could reduce or eliminate the value of our Compass platform. Disclosing our proprietary source code could allow our competitors to create similar products with lower development effort and time, which would materially and adversely affect our business, financial condition, results of operations and prospects. Furthermore, any such re-engineering or other remedial efforts could require significant additional research and development resources, and we may not be able to successfully complete any such re-engineering or other remedial efforts.
Further, in addition to risks related to license requirements, use of certain open source software carries greater technical and legal risks than does the use of third-party commercial software. For example, open source software is generally provided without any representations, indemnity, support or warranties or other contractual protections regarding infringement or the quality of the code, including the existence of security vulnerabilities. In addition, certain open source licenses require that source code for software programs that interact with such open source software be made available to the public at no cost and that any modifications or derivative works to such open source software continue to be licensed under the same terms as the open source software license. To the extent that our Compass platform depends upon the successful operation of open source software, any undetected errors or defects in open source software that we use could prevent the deployment or impair the functionality of our systems and injure our reputation. In addition, the public availability of such software may make it easier for others to compromise our Compass platform. Any of the foregoing risks could materially and adversely affect our business, financial condition and results of operations.
The use of new and evolving technologies, such as AI in our operations may require us to expend material resources and may present risks and challenges that can impact our business, including by posing security and other risks to our confidential information, proprietary information and personal information, any of which may result in reputational harm and liability, or otherwise adversely affect our business.
We incorporate AI solutions, including machine learning, into our Compass platform. There are significant risks involved in utilizing AI and no assurance can be provided that the usage of AI will enhance our business or assist our business in becoming more efficient or profitable. The use of certain AI technology can give rise to intellectual property risks, including compromising the privacy and security of our proprietary technologies and leading to claims of intellectual property infringement, misappropriation or other violation. In addition, AI may have errors or inadequacies that are not easily detectable. If the data used to train AI or the content, analyses, or recommendations that AI applications assist in producing are or are alleged to be deficient, inaccurate, incomplete, overbroad or biased, our business, financial condition, and results of operations may be adversely affected.
75
Additionally, we expect to see increasing government and supranational regulation and ethical concerns related to AI use, which may also significantly increase the burden and cost of research, development and compliance in this area. The rapid evolution of AI will require the application of significant resources to design, develop, test and maintain our technology and products to help ensure that AI is implemented in accordance with applicable laws and regulations and in a socially responsible manner and to minimize any real or perceived unintended harmful impacts. The legal landscape and subsequent legal protection for the use of AI remains uncertain, and development of the law in this area could impact our ability to enforce our proprietary rights or protect against infringing uses. If we do not have sufficient rights to use the data on which AI relies or to the outputs produced by AI applications, we may incur liability through the violation of certain laws, third-party privacy or other rights or contracts to which we are a party.
Our third-party vendors, contractors and consultants may also incorporate AI tools into their own offerings, and the providers of these AI tools may not meet existing or rapidly evolving regulatory or industry standards, including with respect to intellectual property, privacy and data security. Further, bad actors around the world use increasingly sophisticated methods, including the use of AI, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property. Any of these effects could damage our reputation, result in the loss of valuable property and information, cause us to breach applicable laws and regulations, and adversely impact our business.
Our ability to use our net operating loss and certain other tax attributes may be limited.
We have incurred substantial losses during our history and do not expect to become profitable in the near future, and we may never achieve profitability. Unused federal net operating losses generated in tax years beginning after December 31, 2017 will not expire and may be carried forward indefinitely but the deductibility of such federal net operating losses in taxable years beginning after December 31, 2020 is limited to 80% of current year taxable income. In addition, both our current and our future unused losses and other tax attributes (such as research credits) may be subject to limitation under Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, if we undergo, or have undergone, an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in our equity ownership by certain stockholders over a three-year period. As of December 31, 2024, we had a Section 382 study prepared which covered the period from inception through December 2024. The study concluded that several ownership changes occurred since the inception of the Company. However, it was determined that the annual available NOLs under Section 382 will be sufficient to utilize in their entirety prior to their respective expiration years. It is possible that we may undergo additional ownership changes in the future, including as a result of the issuance of common stock pursuant to our initial public offering completed in February 2025 or future transactions or events that may be outside of our control. As a result, even if we attain profitability, our ability to use our pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset our post-change income or taxes may be limited. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result of the foregoing, even if we attain profitability, we may be unable to use all or a material portion of our net operating losses and other tax attributes, which could adversely affect our future cash flows.
We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.
From time to time, we may consider strategic transactions, such as acquisitions of companies, businesses or assets, joint ventures and spin-outs. Additional potential transactions that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may increase our near term or long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and financial risks, including, but not limited to:
• exposure to unknown liabilities;
• incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions;
• write-downs of assets or goodwill or impairment charges;
• increased amortization expenses;
• difficulty and cost in integrating the operations, systems and personnel of any acquired businesses with our operations, systems and personnel;
• impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and
• inability to retain key employees of any acquired businesses.
76
Unfavorable global economic conditions could adversely affect our business, financial condition, results of operations and prospects, which could lead to a decline in our stock price.
Our results of operations and stock price could be adversely affected by general conditions in the global economy and in the global financial markets. For example, a global financial crisis or uncertainty with respect to federal regulations could cause extreme volatility and disruptions in the capital and credit markets. Similarly, increased volatility in interest, inflation and tariff rates and the debt and equity markets, instability in the global banking system, global health crises and pandemics and geopolitical conflict could cause significant instability and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our therapeutic candidates and in our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy also could strain our partners and our suppliers, possibly resulting in development or supply disruption. We cannot anticipate all of the ways in which the foregoing, and the current economic climate and financial market conditions generally, could adversely impact our business.
Risks related to intellectual property
Our success depends in part on our and our partners’ ability to obtain, maintain, enforce and protect our intellectual property and proprietary rights. It is difficult and costly to protect our intellectual property rights and technologies, and we may not be able to ensure their protection. If we are unable to adequately protect our technologies or obtain and maintain patent protection for our technologies and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies and products similar or identical to ours, and our ability to successfully commercialize our technologies and products may be impaired.
Our commercial success will depend in large part on our and our partners’ obtaining, maintaining, enforcing and protecting patent, trademark, trade secret and other intellectual property and proprietary protection in the United States and other countries for our technologies. Our proprietary technologies include our Compass platform, genetic targets identified by our Compass platform, machine learning used by our Compass platform, our methods for developing and testing our therapeutic candidates, our therapeutic candidates themselves, and any therapeutic compounds, molecules or agents related to such therapeutic targets, including their respective components, formulations, combination therapies, methods used to manufacture them and methods of treatment. Our commercial success will also depend, in large part, on successfully defending our trademarks, trade secrets, owned patents and patent applications and other intellectual property rights against third-party challenges. We seek to protect our intellectual property position by, among other methods, filing patent applications in the United States and abroad related to our technologies, inventions and improvements that are important to the development and implementation of our business. We also rely on trade secrets, know-how and continuing technological innovation to develop and maintain our intellectual property position. Our ability to stop unauthorized third parties from making, using, selling, offering to sell, importing or otherwise commercializing our technologies or therapeutic candidates is dependent upon the extent to which we have rights under valid and enforceable patents, trade secrets or other intellectual property or proprietary rights that cover these activities. If we or our current or future partners are unable to secure and maintain patent, trade secret or other intellectual property or proprietary protection for any technologies or therapeutic candidates we or they develop, or if the scope of the protection secured is not sufficiently broad, our competitors could develop and commercialize technologies or therapeutic candidates similar or identical to ours, and our ability to commercialize any technologies or therapeutic candidates we or our partners may develop or to otherwise compete effectively may be adversely affected.
We have filed patent applications, both in the United States and internationally, protecting our inventions related to our MZE829 and MZE782 candidates as well as our out-licensed programs. Our MZE001 patent portfolio has been exclusively out-licensed to Shionogi, who also has the exclusive right to make decisions regarding the prosecution and enforcement of patents or patent applications within that portfolio. Our ATXN2 and UNC13A patent portfolios have been exclusively licensed or assigned, respectively, to other biotechnology companies, who have the exclusive right to make decisions regarding the prosecution and enforcement of those respective portfolios.
77
A provisional patent application is not eligible to become an issued patent until, among other things, we file a non-provisional patent application within 12 months of filing such provisional application. If we fail to do so, we may lose our priority date with respect to the provisional patent application and any patent protection on the inventions disclosed in the provisional patent application. The PCT system allows a single application to be filed within 12 months of the original priority date of the patent application, and for the designation of all of the PCT member states in which national patent applications can later be pursued based on the international patent application filed under the PCT. A PCT application is not eligible to become an issued patent until, among other things, we file one or more national stage patent applications within the applicable time limit, which is generally 30 or 31 months from the PCT application’s earliest priority date, depending on the jurisdiction, in the countries in which we seek patent protection. If we fail to file a national phase application in a PCT member state, we may lose our priority date in that member state with respect to the subject matter disclosed in the PCT application, as well as any patent protection in that member state on the inventions disclosed in the PCT application. While we generally intend to timely file non-provisional and national phase patent applications, as applicable, we cannot predict whether any of our current or future patent applications relating to any therapeutic targets, therapeutic candidates or technologies we have identified or may identify in the future will result in the issuance of patents that effectively protect our therapeutic targets, therapeutic candidates or technologies. If we or our partners do not successfully obtain patent protection, or, even if we or they do obtain patent protection, if the scope of the patent protection obtained with respect to any therapeutic target, therapeutic candidate and technology is not sufficiently broad, we or our partners may be unable to prevent others from using our technology or from developing or commercializing technology and products similar or identical to ours or our partners’.
The patenting process is expensive and time-consuming, and we and our current or future partners may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, we or our partners may not pursue or obtain patent protection in all relevant jurisdictions, particularly in markets where translation costs are high. It is also possible that we or our partners will fail to identify patentable aspects of our or their research and development output before it is too late to obtain patent protection. Although we seek to enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, consultants, independent contractors, advisors, CMOs, CROs, hospitals, independent treatment centers, suppliers, partners and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our current or future patent applications, or that we were the first to file for patent protection of such inventions. Moreover, in circumstances, including with respect to our exclusive out-licensing or assignment of our MZE001, ATXN2 and UNC13A patent portfolios, where we do not have the right to control the preparation, filing, prosecution, maintenance, defense or enforcement of patents or patent applications covering technologies that we currently, or may in the future, license from or license to third parties, we will be reliant on our licensors or licensees to do so. If our partners are not fully cooperative or disagree with us as to the preparation, filing, prosecution, maintenance, defense or enforcement of any licensed patent rights, such patent rights could be compromised.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Our pending and future patent applications, if any, may not result in issued patents. Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if patent applications we license or own currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Any patents that we may own or in -license may be challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether any of our therapeutic candidates or technologies will be protectable or remain protected by valid and enforceable patents. In addition, any future patents we obtain may not be sufficiently broad to prevent others from using our technologies or from developing competing therapeutic candidates in a non-infringing manner. In addition, given the amount of time required for the development, testing, and regulatory review of new therapeutic candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our patent rights may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
78
The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and any patents we may own or in-license in the future may be challenged in the courts or patent offices in the United States and abroad. We may be subject to a third-party pre-issuance submission of prior art to the United States Patent and Trademark Office, or USPTO, or become involved in opposition, derivation, revocation, reexamination, post-grant review, inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, invalidate, or hold unenforceable, our patent rights, allow third parties to commercialize our technologies or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge priority of invention or other features of patentability. Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technologies and products, or limit the duration of the patent protection of our technologies and therapeutic candidates. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us.
Moreover, some of the patents and patent applications we may own or in-license in the future may be co-owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technologies. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biopharmaceutical companies, our success may be heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Changes in either the patent laws or interpretation of the patent laws in the United States or other jurisdictions could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. For example, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, which was signed into law in September 2011, made a number of significant changes to U.S. patent law, affecting the way patent applications are prosecuted, redefining prior art and providing more efficient and cost-effective avenues for competitors to challenge the validity of patents. In addition, the Leahy-Smith Act has transformed the U.S. patent system from a “first-to-invent” system to a “first-to-file” system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. The first-to-file provisions require patent applicants such as us to be cognizant of the time from invention to filing of a patent application and be diligent in filing patent applications. However, circumstances could prevent us from promptly filing patent applications on our inventions. Similar legislation could make it more difficult to obtain patent protection for our inventions and increase the uncertainties and costs surrounding the prosecution of our or our future collaboration partners’ patent applications and the enforcement or defense of our or our future collaboration partners’ issued patents, if any, all of which could harm our business, results of operations, financial condition and prospects.
In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Additionally, there have been recent proposals for additional changes to the patent laws of the United States and other countries that, if adopted, could impact our ability to enforce our intellectual property. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on and weaken our ability to obtain and enforce new patents and patents that we or our collaboration partners might obtain in the future.
79
We may not be able to protect our intellectual property rights throughout the world.
Although we have issued patents in the United States and pending patent applications in the United States and other countries, filing, prosecuting, maintaining, enforcing and defending patents in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our therapeutic candidates, and our patents, the patents of our current and future partners, or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of many foreign countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or our partners’ patents or marketing of competing products in violation of our proprietary rights. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents or the patents of our partners at risk of being invalidated or interpreted narrowly and our patent applications or the patent applications of our partners at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or our partners are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.
If we are sued for infringing, misappropriating or otherwise violating intellectual property or proprietary rights of third parties, such litigation or disputes could be costly and time-consuming and could prevent or delay us from developing or commercializing our therapeutic candidates.
Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our therapeutic candidates and use our technologies without infringing, misappropriating or otherwise violating the intellectual property and other proprietary rights of third parties. If any third-party patents, patent applications or other intellectual or proprietary rights are enforced against us and found to be valid, enforceable and cover our therapeutic candidates or their compositions, methods of use or manufacturing, third parties owning such intellectual or proprietary rights could seek an injunction prohibiting our ability to develop, manufacture, market and sell our therapeutic candidates and technologies, or we may be required to pay damages, which could be substantial, and we would not be free to manufacture, use or market our therapeutic candidates or to do so without obtaining a license, which may not be available on commercially reasonable terms, or at all.
80
We may in the future become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property or proprietary rights with respect to our therapeutic candidates and technologies we use in our business. Our competitors or other third parties may assert infringement, misappropriation or other claims against us alleging, for example, that our therapeutic candidates or technologies we use in our business are covered by their patents. We cannot be certain that we do not infringe existing patents or that we will not infringe patents that may be granted in the future. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for or obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell, if approved, our therapeutic candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, and as we gain greater visibility and market exposure as a public company, the risk increases that our existing therapeutic candidates and any other therapeutic candidates that we may develop or technologies we use in our business may be subject to claims of infringement of the patent rights of third parties. Furthermore, because patent applications can take many years to issue and may be confidential for 18 months or more after filing, and because patent claims can be revised before issuance, there may be applications now pending which may later result in issued patents that may be infringed by the manufacture, use or sale of our therapeutic candidates or technologies we use in our business. If a patent holder believes our therapeutic candidates or technologies we use in our business infr
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.